I. Background (BG)

1. This refers to the related Important QCs in trail, blue, italic and double Line (a) 3289 of 30.9.25 about 4C Super Tax: Experts & Chambers were not involved as per Advocate Khalid Javed & KC Views (b) 3285 of 26.9.25 about 4B & 4C Super Tax: Constitutions Articles 47 VS 52 discussed & KCV (c) 3284 of 25.9.25 about 4B & 4C Super Tax: Parliament’s Authority to impose questioned 

2.   We also refer to several Other TLQC including (a) 3278 of 22.9.25 about 4C Super Tax: SCP questioned fair tax to encourage taxpayers to stay in Pakistan (b) 3277 of 20.9.25 about SC questions legality of Super Tax on PF (c) 3273 of 18.9.25 about Super Tax u/s 4C: Informed SCP of CA & Chambers Consultation and KC Views & Recommendations 

II. Updated Commentary

A. Super tax: Constitution doesn’t permit arbitrary legislation, Taxpayers Legal Counsel submitted

1. Further to matters in BG & KQU 3567 of 23.9.25, being an important matter, we would inform you about Super tax: Constitution doesn’t permit arbitrary legislation, Taxpayers Legal Counsel submitted before SC (Attachment 3295.1) in the ensuing paragraph, in Italic with emphasis in bold & Underline, heading ours for quick reading.

2. The Constitutional Bench of the SCP was informed on 22.9.25 that Super Tax u/s 4C of the ITO, 2001, was imposed for raising Rs 215 billion for the fiscal space that the federal government desperately needed.

3. A five-judge larger bench, headed by Justice Mr Amin-ud-Din Khan, heard the appeals of the FBR and the industries against the judgments of the SHC, LHC, and IHC regarding the levy of Super Tax u/s 4C.

4. Advocate Mr Sirdar Ahmed Jamal Sukhera, representing the taxpayers, argued that the Constitution, seen as a whole, does not permit an arbitrary action, including any arbitrary legislation.

5. Sukhera argued that it is a fact that the Super Tax was imposed to raise Rs 215 billion for the fiscal space that the federal government needed, adding that the factors taken into consideration were two.

5.1 Firstly, last year the government had imposed taxes of Rs 350 billion as sales tax, which was levied even on a matchbox, which led to an inflationary impact. 

5.2 Secondly, the high-earning persons have made windfall profits, and Super Tax could be imposed on them to raise the additional Rs 215 billion. No other factor was taken into consideration as per the policy statement submitted by the government in the pleadings.

6. The taxpayers’ counsel contended that, as per the reports of the Cabinet and the World Bank, fiscal space could be created to the tune of Rs 1.7 trillion in a year just by aligning the spending of the federal government with the constitutional and legal provisions.

7. He stated that the state-owned enterprises incur losses between Rs 600 and Rs 800 billion every year, so Rs 215 billion can be raised by curtailing those losses. He said that after the 18th Amendment, several subjects were devolved to the provinces. However, the federal government continues to spend on devolved subjects, adding, as per the World Bank’s report, Rs 328 billion could be saved. He further said that according to the World Bank report, another Rs 404 billion could be saved by having a treasury single account.

8. Sukhera said that, as per the admitted figures by the federal government, Rs 600 billion is attributable to electricity thefts. By reducing theft or losses of Rs 215 billion, the existing high-earning taxpayers’ money could be spared.

9. He further informed that in terms of the Fiscal Responsibility and Debt Limitation Act, 2005 (FDRLA), the federal fiscal deficit should not go beyond 3.5 percent of GDP, and the debt to GDP ratio should not exceed 60 percent. In both cases, it is an admitted position that since 2016, these ratios have been blatantly breached.

10. He submitted that there is a continuing trend by successive governments to ignore the choices and to persist with only the option of increasing the tax rates on existing taxpayers or imposing new taxes on existing taxpayers. This trend is arbitrary, oppressive, manifestly unjust, and as such, violative of due process under Article 10-A, and falls foul of Article 23, which guarantees the property right.

11. It was argued that ignoring the choices is violative of the ambit of reasonable restrictions. It is unreasonable to persist with this trend and to completely ignore the choices available to the government. The existing taxpayers are already paying 29 percent income tax, 15 percent tax on their dividends, and people who are not in the tax net should be brought into the tax net, and the additional burden of taxes should be proportionately shifted upon them.

12. He submitted that the federal government has been unable to achieve its targets of tax collection from the retailers. As such, the shortfalls are either shifted to the salaried class or to the high-earning individuals. This is arbitrary, unreasonable, unjust, oppressive, and as such, violates fundamental rights.

13. At that, Justice Mr Muhammad Ali Mazhar remarked that this point of alternative choices has never been argued before, and this needs consideration in terms of the Constitution.

14. Sukhera further argued that income determination is a process that requires expenses to be deducted from the revenue earned by a taxpayer. Carry forward of business losses and depreciation are acknowledged deductions permissible under the Ordinance for the determination of income, but the definition of “income” for Super Tax u/s 4C of the ITO does not permit these deductions. Consequently, these expenses in the shape of depreciation and losses also get included in the amount on which Super Tax is imposed. This amounts to taxing the expenses of the taxpayers and not the income of the taxpayers, and as such, it violates the Constitution.

B. Top court grills windfall profit policy in super tax case (KC Attachment 3295.2  & has deleted duplicate part)

1. At this juncture, Justice Mr Muhammad Ali Mazhar remarked that this point of alternative choices has never been argued before and this needs consideration in terms of the Constitution. During the proceedings, Justice Hasan Azhar Rizvi questioned whether rising petrol prices from Rs 150 to Rs 200 or sugar prices from Rs 160 to Rs 170 would also constitute a “windfall profit.”

2. Justice Mr Jamal Khan Mandokhail noted that the counsel could have argued who should be taxed and at what rate, to which Sukhera replied that the government’s policy statement itself contained contradictions. Justice Mr Muhammad Ali Mazhar observed that the petitioners seemed dissatisfied only with the tax ratio.

3. Sukhera argued that the “windfall profit” policy unfairly benefited a handful of individuals while causing losses to the majority, raising questions on the legitimacy of such taxation. He contended that fundamental rights were at stake, relying on Article 10 of the Constitution.

4. Justice Mr Mazhar, however, remarked that Article 10-A pertained to the right to a fair trial and asked what its connection was with taxation. Sukhera maintained that taxpayers were entitled to public hearings before such levies. Justice Mazhar pointed out that while such provisions existed in municipal taxation, the income tax law contained no requirement for public hearings. Later, the bench deferred hearing of the case until 23.9.25 (today).

C. SC grills 'windfall profit' logic in super tax case (KC Attachment 3295.3 and has deleted duplicate part)

1. Justice Mr Hassan Azhar Rizvi asked: "If petrol rises from Rs 150 to Rs 200, would that be windfall profit? If sugar goes from Rs 160 to Rs 170, would that still count?"

2. Sukhera argued that the tax unfairly targeted a few sectors. "If three or four people benefit while the majority incur losses, how can tax be imposed?" he said, noting contradictions in government policy and that the measure was driven solely by the "windfall profit policy."

3. Justice Mr Muhammad Ali Mazhar reminded him that constitutional safeguards have limits: "Article 10-A is about fair trial - what does that have to do with taxation?"

4. Sukhera insisted taxation should involve public participation, arguing that the tax violated Entry 47 of the Constitution, which governs Parliament's taxation powers.

5. Justice Mr Mazhar responded that while some municipal taxes include such provisions, "income tax law has no clause about public hearing."

6. During proceedings, Sukhera remarked, "Simplicity too can be a captivating charm," prompting Justice Mazhar to quip, "Perhaps this is your kind of simplicity?" - drawing laughter.

7. Referencing his age, Sukhera said, "I am old now; my children are barristers and they are sitting here."

8. Justice Mr Jamal Khan Mandokhail asked his age, and upon hearing "57," remarked, "You consider 57 old?" - prompting further laughter.

9. Sukhera concluded, "One day, none of us will be here, but this judicial decision will remain."

10. The bench noted that autonomous government institutions, including PIA and steel mills, were running at a loss yet were included in the super tax list.

11. Justice Mr Mandokhail observed that overseeing these institutions is the government's responsibility, not Parliament's. The hearing was adjourned until 23.9.25.

D. SC Adjourns Hearing on Super Tax Petitions Until Tuesday (KC Attachment 3295.4 and has deleted duplicate part)

1. Justice Mr Jamal Khan Mandokhail noted that the counsel could have argued who should be taxed and at what rate, to which Sukhera replied that the government’s policy statement itself contained contradictions. Justice Mr Muhammad Ali Mazhar observed that the petitioners seemed dissatisfied only with the tax ratio.

2. Sukhera argued that the “windfall profit” policy unfairly benefited a handful of individuals while causing losses to the majority, raising questions on the legitimacy of such taxation. He contended that fundamental rights were at stake,

relying on Article 10 of the Constitution.

3. Justice Mr Mazhar, however, remarked that Article 10-A pertained to the right to a fair trial and asked what its connection was with taxation. Sukhera maintained that taxpayers were entitled to public hearings before such levies. Justice Mazhar pointed out that while such provisions existed in municipal taxation, the income tax law contained no requirement for public hearings.

4. After hearing initial arguments, the bench adjourned further proceedings until 23.9.25, when Sukhera will continue his arguments.

C. Further Details & Services

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Statement, Advisory, Return Filing or Review services, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com, asif.s.kasbati@professional-excellence.com.

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Asif S Kasbati (FCA, FCMA & LLB)

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