Articles 23 and 24 of the Constitution protect against unlawful deprivation of property. Retention of excess tax and denial of its adjustment against super tax under explicit statutory provisions is nothing but unlawful exaction
Dr. Ikramul Haq
The gravest error in the FCC’s order lies in its implicit acceptance that the term ‘income’, as envisaged under the Constitution of the Islamic Republic of Pakistan (“the Constitution”), itself can be varied through sub-legislative sleight of hand. 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, and legitimate legal fiction for income, place, person, and time under the doctrine of nexus, but not in violation of any provision of the Constitution—When Income Is Taxed Twice: Constitutions Limits And The Super Tax Debate , Friday Times, February 7, 2026
Pakistan’s tax jurisprudence is at a critical inflection point. The recent judgment of Islamabad High Court in M/s CM Pak Limited v. Federation of Pakistan has done more than uphold the levy of super tax under section 4C of the Income Tax Ordinance, 2001—it has, by endorsing the Federal Constitutional Court’s short order, effectively redrawn the constitutional boundaries of taxation. At stake is not merely the validity of a fiscal measure, but whether the Constitution permits multiple taxes on the same taxable event (income) without limit as non-adjustment of advance taxes and established refunds against super tax.
A holistic reading of the Islamabad High Court (IHC) judgment reveals a deeper legal infirmity. While adopting the reasoning of Federal Constitution Court (FCC) of Pakistan on constitutional validity, the Court failed to examine the statutory framework governing adjustment of taxes already paid which are refundable—if more than admitted liability. In doing so, it has not merely endorsed a controversial constitutional interpretation—it has overlooked binding provisions of the Income Tax Ordinance itself.
The petitioner had expressly pleaded that the amount of Rs. 89,640,124, paid under protest, be refunded or adjusted against future tax liabilities. The Court reproduced this prayer but declined to adjudicate upon it, not to speak of allowing it as a right of the taxpayer. This omission is not procedural—it is foundational.
Sections 4C(5A), 147(10) and 170(3)(a) of the Income Tax Ordinance, 2001 [“Ordinance”] form an integrated statutory scheme that governs the fate of excess tax payments. Section 4C(5A) explicitly applies section 147 (advance tax payment) to super tax.
Section 147(10) mandates that excess tax shall be refundable or adjustable. Section 170(3)(a) reinforces this command by requiring the Commissioner to refund or adjust any excess payment. The statutory language is unequivocal and admits no discretion.
The IHC judgment does not even advert to these provisions. This silence is striking, particularly when the petitioner’s claim was squarely based on them. Such omission renders the judgment vulnerable to the doctrine of per incuriam, as courts are bound to consider relevant statutory provisions before deciding a matter.
The problem, however, runs deeper than statutory omission. It lies in the conceptual framework adopted by FCC and followed by IHC. By declaring super tax an “independent” levy, FCC has effectively opened the door to multiple income taxes on the same taxable event. This issue was examined in detail in earlier writings. In “Income taxed twice? Constitutional limits in super tax debate” (Friday Times, February 7, 2026), it was argued that Entry 47 of the Federal Legislative List permits taxation of income, not repeated taxation of the same income under different labels.
Similarly, in “Super tax, Senate bypass, and the FCC’s constitutional misreading” (Friday Times, January 31, 2026), the argument was advanced that the FCC’s validation of super tax under section 4B of the Income Tax Ordinance, 2001 reflects a fundamental misreading of constitutional structure, bypassing bicameral safeguards and diluting fiscal federalism.
These concerns are no longer theoretical. They now stand judicially entrenched. The FCC’s short order rests on the premise that Parliament has plenary power under Entry 47 to impose “taxes on income.” From this, it derives the conclusion that multiple taxes on income are constitutionally permissible even when composition of income itself is changed. This interpretation stretches Entry 47 beyond recognition. A constitutional entry is not an open-ended fiscal licence.
It is a structured grant of power, subject to inherent limitations. If the FCC’s reasoning is accepted, there is no logical stopping point. Income tax may be followed by redefining “income” for the purpose of super tax, additional super tax, reconstruction levy, or any number of fiscal imposts, all on the same income by giving it different meanings. The doctrine of limitation imposed by a fiscal field—central to constitutional interpretation of legislative entries—collapses entirely.
This transforms Entry 47 from a taxing power into a fiscal vacuum. The IHC has compounded this problem by accepting FCC’s short order without waiting for reasoning, without examining statutory consequences of not allowing available advance tax credits. Its conclusion in paragraph 36—that no adjustment is permissible in the absence of express provision—is particularly problematic.
The Court, with utmost deference, has overlooked that express provisions already exist. Sections 4C(5A), 147(10) and 170(3)(a) are not optional or contextual—they are mandatory. They apply across the Ordinance. Section 4C does not exclude them. To hold otherwise is to read into the statute a limitation that does not exist. Equally problematic is the Court’s interpretation of section 4C(3), which provides that “all provisions of Chapter X shall apply.” The Court restricts this to procedural aspects. This interpretation is untenable. The legislature used the word “all.” Courts cannot reduce “all” to “some.” Such reading amounts to judicial legislation.
The distinction drawn between procedural and substantive provisions is also misplaced. Refund and adjustment in terms of section 147(10) of the Ordinance are not concessions—they are statutory rights. Once tax is paid in excess, the State cannot retain it without lawful authority [section 170(3) of the Income Tax Ordinance, 2001]. This principle is embedded not only in statutory law but also in constitutional guarantees of right to property.
Articles 23 and 24 of the Constitution protect against unlawful deprivation of property. Retention of excess tax without statutory basis is nothing but compulsory exaction. It is taxation beyond law. The IHC’s reasoning effectively allows the State to retain excess tax merely because the levy is labelled “independent.” This is a dangerous precedent. Independence of levy cannot override statutory safeguards. A tax may be independent in its charge, but it cannot be independent of the law that governs its collection, adjustment and refund.
By conflating the two, IHC has extended FCC’s ruling beyond its logical scope. This approach has serious implications for fiscal governance. It introduces uncertainty into the tax system, undermines taxpayer confidence, and weakens predictability of fiscal policy. Investors do not merely look at tax rates—they look at legal certainty. A regime where taxes can be imposed multiple times and retained without adjustment is inherently unstable.
Another serious flaw in the judgment is the treatment of FCC’s short order as conclusively determinative of all issues. FCC decided the constitutional validity of section 4C. It did not decide whether taxes paid under section 4C are adjustable or refundable. These are distinct questions. Constitutional validity does not extinguish statutory rights.
The detailed order of FCC has not been issued even after lapse of 80 days (till the time of writing these lines)—for which legal position elaborated in Shahtaj Sugar Mills Limited v Government of Pakistan (2024) 130 TAX 528 (Supreme Court) is worth mentioning: “It would be most regrettable if the Supreme Court tells other courts to decide cases within a particular time-frame but does not do so itself. Fairness and the fundamental right and equality principle embedded in Article 25(1) of the Constitution cannot countenance this”.
The stakes, therefore, go far beyond super tax. The issue is not merely whether section 4C is valid. It is whether the constitutional and statutory limits on taxation still exist in any meaningful sense. The constitutional design of taxation in Pakistan is not accidental. It is structured through legislative entries, procedural safeguards, and judicial oversight. FCC’s short order, with due respect, has disrupted this design by expanding the scope of Entry 47 beyond its intended limits. The IHC judgment compounds the disruption by ignoring statutory safeguards.
Together, they create a fiscal environment where the State’s power to tax risks becoming indistinguishable from the power to extract. It is also important to recall that super tax was introduced through the Finance Act, 2022 as a targeted levy on high-earning sectors, justified on the grounds of redistributive equity and fiscal necessity. Over time, however, it has evolved into a recurring instrument of revenue mobilisation. FCC’s validation now risks transforming it into a permanent feature of the tax system, unconstrained by constitutional or statutory limits.
This raises a fundamental question: can a temporary fiscal measure be judicially converted into a permanent structural tax without re-examining its constitutional foundations? The IHC judgment does not engage with this question. Nor does it engage with the broader implications of allowing multiple income taxes. Its focus remains confined to adopting the FCC’s short order and dismissing the petition, which was on merit, strictly as per law. The result is a judgment that resolves little and unsettles much.
The controversy is far from over. Issue raised before IHC was restrictive in nature—applicability of adjustment/refund provisions against super tax. It would soon reach the Supreme Court, which should answer it as soon as possible, until then the super tax debate will remain unresolved.
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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 an 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.