Dr. Ikramul Haq
In Durrani Ceramics v Federation of Pakistan (2014 SCMR 1630), the Court held that fiscal legislation must conform to the constitutional distribution of powers and that Parliament cannot, through ordinary financial statutes, disturb the constitutional balance inherent in federalism…Indian judgments upholding Union surcharges rest entirely on Article 271. Pakistan’s Constitution contains no such provision. Where the constitutional text diverges, comparative reliance collapses —Fiscal Federalism & Taxation, Minute Mirror, January 16, 2026
The short order of January 27, 2026 by the Federal Constitutional Court (FCC) of Pakistan, established under the controversial Constitution (Twenty-seventh Amendment) Act, 2025 [27th Constitutional Amendment], validating super tax under sections 4B and 4C of the Income Tax Ordinance, 2001 has unsettled established constitutional jurisprudence governing the limits of parliamentary power to impose “taxes on income.”
Paras 9 (v) and (vii) of the short order seek to justify super tax imposed under section 4C of the Income Tax Ordinance, 2001 by invoking Entry 47, Part I, Federal Legislative List, Fourth Schedule to the Constitution, while simultaneously conceding that section 4 of the Income Tax Ordinance, 2001 already exhausts the field of “taxes on income.”
The following paragraph alone collapses under the weight of its own internal contradiction. One cannot, in constitutional logic, exhaust a legislative entry and yet continue to derive further taxing power from the very same entry by merely altering nomenclature. It reads as under:
“Super tax is a tax on income independent of the tax levied under section 4 of the Income Tax Ordinance, 2001. Entry 47, of Part I of the Fourth Schedule of the Constitution, Parliament is competent to levy “taxes on income”. Therefore, section 4C is a self-contained provision insofar as this levy is concerned and is thus, a standalone tax on income. As such, section 4C as applies to capital gains under section 37A and Rules of the Eighth Schedule, Income Tax Ordinance, 2001 is held to be applicable thereto, being within the ambit of section 4C(2)(i) and (iv), Income Tax Ordinance 2001”.
Entry 47 authorizes the Parliament to levy “taxes on income”. Once Parliament has exercised Entry 47 through section 4 of the Income Tax Ordinance, 2001, which is the charging section for income tax, the entry stands exhausted in respect of income as a constitutional subject.
Para 9(vii), however, attempts to perform a doctrinal sleight of hand: it first acknowledges exhaustion of Entry 47 through section 4, but then resurrects the same entry to validate super tax under section 4C claiming that it is “…a self-contained provision insofar as this levy is concerned and is thus, a standalone tax on income. This proposition, while superficially attractive, is constitutionally unsustainable.
Fallacy of Equating “Nature of Tax” with “Nature of Income”
There is a fundamental distinction—long settled in tax jurisprudence—between the nature of a tax and the nature of the subject taxed. A tax on income may indeed take different forms: proportional, progressive, surcharge-based, or excess-profit oriented. But all such variants must operate on income as constitutionally understood, not on a legislatively manipulated construct that departs from real income.
Sections 4B and 4C do not merely impose a higher rate on income; they alter the very concept of income by introducing artificial thresholds, selective application, and targeted classes, divorced from the integrated charging mechanism of section 4 of the Income Tax Ordinance, 2001. This is not a case of surcharge on income; it is a case of re-characterizing income itself for fiscal expediency.
A surcharge (with any other nomenclature) presupposes a valid, existing tax. It rides piggyback on a lawful charge. Sections 4B and 4C do not piggyback on section 4; they stand apart, with independent charging language, distinct computation, and separate legislative intent. If section 4 of the Income Tax Ordinance, 2001exhausts Entry 47, then sections 4B and 4C cannot draw sustenance from the same entry unless they are demonstrably ancillary to section 4—which they are not.
‘Excess Profits Tax’ and Limits of Historical Analogy
The reliance of proponents of section 4B and 4C on historical forms such as excess profits tax is also misplaced. Excess profits tax regimes, wherever constitutionally upheld, were premised on extraordinary wartime conditions, narrowly tailored, time-bound, and—most importantly—anchored in real profits exceeding a normal benchmark. They did not proceed by redefining income through arbitrary classifications or by selectively targeting taxpayers without a uniform constitutional principle.
Sections 4B and 4C lack all these safeguards. They do not measure “excess” against any economic baseline; they simply impose an additional impost on a subset of taxpayers deemed fiscally convenient. This is not taxation jurisprudence; it is fiscal opportunism dressed up as constitutional power.
Income Variation by Legislative Fiat
The gravest error in Para 9(v) and Para 9(vii) lies in its implicit acceptance that income itself can be varied through legislative creativity. This proposition strikes at the heart of tax jurisprudence. Income is not whatever Parliament declares it to be for revenue purposes. It is a juridical and economic concept with settled contours: real accrual, real receipt, and real capacity to pay. The legal fiction also has constitutional limitations as elaborated in Legal fiction versus legal farce, MinuteMirror, January 7, 2026.
By permitting income to be “varied” through sections 4B and 4C, the short order endorses a doctrine that allows Parliament to escape constitutional limits by semantic engineering. Today it is super tax; tomorrow it may be solidarity levy, stability contribution, or resilience charge etc.—all imposed on “income,” yet none constrained by the discipline of main charging section 4 of the Income Tax Ordinance, 2001.
Such an approach converts Entry 47 from a defined constitutional power into an open-ended fiscal licence, something the framers of the 1973 Constitution explicitly rejected.
Exhaustion of Entry 47
Para 9(vii) of short order of FCC itself concedes that section 4 of the Income Tax Ordinance, 2001 exhausts Entry 47. This admission is not a passing remark; it is a constitutional conclusion with serious consequences. Once exhaustion is acknowledged, any further impost on income must either:
- Be ancillary to section 4; or
- Derive authority from a different legislative entry.
Sections 4B and 4C satisfy neither condition. They are not ancillary; they are parallel. And there is no alternative entry under the Federal Legislative List that authorizes Parliament to levy selective, purpose-driven imposts on income outside the National Finance Commission (NFC) framework.
The attempt to keep Entry 47 alive indefinitely, merely by invoking different labels, renders the doctrine of exhaustion meaningless.
Fiscal Federalism and the Silent Casualty
What Para 9(vii) entirely ignores is the fiscal-federal architecture of the Constitution. Taxes on income fall within the divisible pool, subject to Article 160 and the NFC Award. Sections 4B and 4C, by design and operation, create a ring-fenced federal revenue stream, undermining provincial shares without constitutional amendment or NFC consent.
To permit Parliament to re-engineer income taxation through super taxes is to allow a backdoor erosion of provincial fiscal autonomy, something the Constitution does not permit even through explicit legislation, let alone through interpretive shortcuts.
A Dangerous Precedent
If Para 9(v) and Para 9(vii) are allowed to stand as precedent, it is going to establish a deeply troubling principle: Parliament may exhaust a legislative entry and yet continue to exploit it indefinitely by altering labels, structures, and targets. This is not constitutional interpretation; it is constitutional dilution.
Courts are meant to act as guardians of constitutional boundaries, not facilitators of fiscal overreach. The short order, particularly Para 9 in totality fails this test by conflating form with substance, rate with base, and power with convenience.
Conclusion
Para 9 does not merely misapply Entry 47; it empties it of constitutional meaning. By treating income as a mutable concept and exhaustion as a reversible condition, it unsettles foundational principles of tax law, legislative competence, and fiscal federalism.
In detail judgement of FCC, we are going to see some kind of self-assumed role of a reviewer as highest constitutional court not bound by precedents set by Supreme Court and even other courts having the same taxation powers. It will be a disaster path.
Judicial review does not mean to unsettle and/or rewrite supreme law of the land, but to interpret the Constitution to harmonize its various provisions and/or restore doctrinal coherence.
Taxes on income [Entry 47] may take many forms, but income itself is not infinitely malleable. Once this distinction is lost, constitutional taxation becomes indistinguishable from confiscation by statute.
The Constitution deserves better treatment.
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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.