IHC Upholds Super Tax In Meezan Bank Case

The Islamabad High Court (IHC) has rejected a petition filed by Meezan Bank Limited challenging the constitutional validity of Section 4C of the Income Tax Ordinance, 2001, upholding the imposition of super tax in a case involving nearly Rs11 billion.

According to media reports, a division bench also withdrew the interim stay orders and dismissed all pending applications, ruling that Parliament has the constitutional authority to impose the super tax while reaffirming the taxation framework applicable to banking companies.

Represented by senior counsel Farogh Naseem, Meezan Bank argued that Section 4C was unconstitutional, discriminatory, and effectively resulted in double taxation because income already taxed under Section 4 of the ordinance was being taxed again through the super tax provision.

The bank also challenged the retrospective increase in the levy, contending that income generated from Islamic financing agreements signed before the introduction or enhancement of Section 4C should not be subjected to the higher tax.

Appearing on behalf of the Federation and the Federal Board of Revenue (FBR), Advocate Hafiz Ehsaan Ahmad Khokhar opposed the petition, arguing that it was not maintainable because the bank had already exercised its statutory remedy by filing an appeal before the Appellate Tribunal Inland Revenue (ATIR) in Karachi and therefore could not seek relief through the IHC's constitutional jurisdiction.

He further argued that the Islamabad High Court lacked territorial jurisdiction since the tax assessment proceedings had been carried out in Karachi.

The court accepted the federation's arguments, ruling that liability under Section 4C is determined by income earned during the relevant tax year rather than the date on which financing agreements were executed.

The bench also held that the Seventh Schedule draws no distinction between conventional and Islamic banks and concluded that Section 4C does not violate any constitutional provisions.