Supreme Court Told Double Taxation Not Permitted in Super Tax Case

The Supreme Court was informed on Wednesday that, as a general principle, taxpayers cannot be subjected to double taxation and have the right to choose under which of two similar tax laws they wish to pay.

A five-member constitutional bench, headed by Justice Amin-ud-Din Khan, took up a case challenging the imposition of super tax under Section 4B of the Income Tax Ordinance 2001. The bench also included Justices Jamal Khan Mandokhail, Muhammad Ali Mazhar, Syed Hassan Azhar Rizvi, and Shahid Bilal Hassan.

Representing several taxpayer companies, Barrister Farogh Naseem argued that the language of tax laws from 1922 and 1976 differed significantly, and that the current legal framework does not allow for the imposition of a super tax as an additional levy. He explained that while super tax or surcharges can be applied when income is assessed, the law does not permit taxing the same income twice.

Justice Jamal Khan Mandokhail questioned how a super tax could be imposed on income that has already been taxed, to which Naseem responded with an example: if an account is opened in January 2021 and closed by December 31, 2021, tax is imposed even if the taxpayer has already fulfilled their obligations. He emphasized that Section 4C of the Income Tax Ordinance does not explicitly mention an additional tax, and that taxpayers should have the option to pay under either Section 4 or Section 4C.

Justice Mandokhail pressed further, asking where this legal option originated. Naseem replied that it is a well-established principle that, when two similar laws apply, the taxpayer can choose the more favorable one. Drawing a parallel with criminal law, Justice Mandokhail noted that when two sections apply to a crime, the punishment is typically given under the section with the lesser sentence—a principle that, according to Naseem, should also apply to tax law.

Justice Mandokhail, noting Naseem’s experience as a former Member of Parliament, inquired about the drafting of Section 4C. Naseem clarified that he was not involved in its drafting.

The hearing was adjourned until Thursday (today), with Barrister Farogh Naseem set to continue his arguments before the bench. The case is being closely watched by the business community, as its outcome could have significant implications for the interpretation and application of super tax provisions in Pakistan.