The Lahore High Court has ruled that super tax cannot be imposed on the sale of ancestral property held for more than six years, declaring an FBR tax demand of over Rs. 11.1 million illegal and without lawful authority.
A two-member bench comprising Justice Jawad Hassan and Justice Sardar Akbar Ali issued the 17-page written judgment in favor of petitioner Khairullah Khan. The court also declared the ruling a judicial precedent, giving it wider legal significance for similar tax disputes.
According to the judgment, a super tax cannot be levied on income that is already exempt from taxation or subject to a zero percent tax rate under existing law. The court held that the tax exemption available on the sale of ancestral property remains protected under the legal framework.
The bench observed that the super tax could only be imposed on taxable income and that no additional tax burden could be created without clear legal authorization. It further ruled that imposing a super tax on exempt or zero-rated income was contrary to the principles governing taxation under Pakistani law.
The court also struck down the earlier decision of the Appellate Tribunal Inland Revenue, which had upheld the Federal Board of Revenue’s recovery demand of Rs. 11.15 million.
In its detailed observations, the court stated that FBR circulars could not override statutory law or constitutional court judgments. The ruling also referenced the DG Khan Cement case while interpreting the legal scope and applicability of super tax provisions.