ISLAMABAD  -  The Islamabad High Court (IHC) issuing notices to the respondents (Pakistan Oilfields Limited and others) has said that the respon­dents shall continue to pay the tax liability under section 4C as amended by the Finance Act, 2023. 

A division bench compris­ing Chief Justice Aamer Farooq and Justice Tariq Mehmood Je­hangri conducted hearing of the Intra-Court Appeals (ICAs) of the Commissioner Inland Revenue. The bench clarified that its earli­er order in the POL case is to have prospective effect. 

The appeal was directed against the verdict of the IHC single bench dated 15-03-2024 whereby the writ petition filed by the respond­ent No. 1 (Pakistan Oilfields Limit­ed) was allowed. 

Asma Hamid, representing the Commissioner Inland Revenue, contended that the reasons which prevailed with the judge-in-cham­bers are erroneous. It was submit­ted that the issue raised in the writ petition was different from the one raised in the earlier writ peti­tion ie W P No 4027 if 2022 titled “Fauji Fertilizer Company Limited and another Versus Federation of Pakistan and others.”

A single judge bench of Justice Sardar Ejaz Ishaq Khan on March 15 had rejected the applications of the Federal Board of Revenue (FBR) and ruled that it has juris­diction to hear the pleas of the tax­payers, who are not assessed to tax in Islamabad. 

He maintained that IHC has ju­risdiction to hear the petitions of the taxpayers who are not as­sessed to tax in Islamabad. He said detailed judgment will be passed subsequently.

A number of taxpayers chal­lenged the constitutional vires of the amended Section 4C for the tax year 2023, before the Islama­bad High Court (IHC). Even those taxpayers that were not assessed to tax in Islamabad approached the IHC in its writ jurisdiction un­der article 199 of the Constitution as the Federal Board of Revenue (FBR) and seat of federal govern­ment are in Islamabad. 

The IHC had granted interim re­lief wherein it directed that the maximum rate of super tax that can be charged is 4% (the tax rate applicable before the amendment made vide Finance Act 2023) and that no demand inconsistent with the judgment titled Fauji Fertilizer Company Limited and another vs Federation of Pakistan and others (W P 4027 of 2022 earlier passed by IHC shall be raised by the FBR. As such, one of the key principles, emerging from the interim order of the IHC in the Fauji Fertilizer judgment was that income falling under the Final Tax Regime shall not be taken into account for the purposes of computing super tax under section 4C of the Income Tax Ordinance 2001. 

The FBR through applications had requested the IHC to dismiss the petitions of the respondents, who were not assessed to tax in Islamabad on grounds that since they were assessed to tax in dif­ferent provinces, therefore, IHC lacked territorial jurisdiction to entertain the said writ petitions. 

The IHC after hearing the argu­ments of both sides at length on this issue dismissed the FBR ap­plications vide short order dated 08/12/2023. It decided; “to pro­ceed to hear the case on merits on 26.01.2024.”