Islamabad’s Supreme Court is currently deliberating on the definition of “tax” as it appears in Pakistan’s Income Tax Ordinance (ITO) and whether it aligns with the definition provided in Article 260 of the Constitution. Justice Aminuddin Khan, heading a five-member Constitutional Bench, raised this question while hearing appeals from 354 taxpayers against the implementation of Section 4B of the ITO, introduced in 2001.
Justice Amin noted that Article 260 defines “tax on income” to include taxes on excess or business profits. In contrast, Section 2(63) of the ITO defines “tax” more broadly, encompassing any tax under Chapter II, as well as penalties, fees, and other charges.
Representing numerous taxpayers, Makhdoom Ali Khan argued that traditional taxes are for general revenue and public welfare, while fees are typically linked to specific services or classes. He contended that the super tax under Section 4B, intended for the rehabilitation of temporarily displaced persons (TDPs), does not fit the definition of a general tax on income. He also pointed to previous Supreme Court judgments that he believes were not followed in the imposition of this super tax.
Justice Jamal Khan Mandokhail questioned the Parliament’s decision to legislate on the matter despite earlier apex court rulings. The court also discussed the potential implications for the distribution of funds collected under Section 4B between the federal and provincial governments, particularly in light of the 18th Amendment. The case has been adjourned for further hearing.
