SERVICE GLOBAL FOOTWEAR LIMITED vs FEDERATION OF PAKISTAN through Secretary Revenue Division Ss

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SERVICE GLOBAL FOOTWEAR LIMITED VS FEDERATION OF PAKISTAN through Secretary Revenue Division Ss. 4C [as inserted by Finance Act, 2022], 120, 122 & First Schedule-Part-I, Division IIB---Super tax on high earning persons---Retrospective effect---Applicability---Amendment of assessment---Appellants / taxpayers were aggrieved of applicability of S. 4C of Income Tax Ordinance, 2001, with retrospective effect---Appellants / taxpayers raised the plea that liability stood fixed on 30-06-2022 (for normal tax year) and what was left merely was furnishing of return of income which by law was deemed an assessment order---Validity---Assessment order was in respect of a taxable income for that year and tax due thereon---Amendment to assessment year could only be made under certain circumstances mentioned in S.122 of Income Tax Ordinance, 2001---Other than that the matters between the revenue and the taxpayer come to a close on filing of return of income and nothing more was required to be done---Issue at the heart of litigation in respect of discrimination was that different rates of taxation were provided in Division IIB of Part-I of First Schedule to Income Tax Ordinance, 2001---Proviso to S. 4C of Income Tax Ordinance, 2001, identified and narrowed down certain sectors of businesses which in the opinion of the Legislature had generated windfall profits and, therefore, must be taxed at a different rate---While doing so, the fact had been ignored that there might be a number of persons who earned income exceeding Rs.300 million and who might also be making windfall profits---Such persons were exempted from payment of tax at the rate of 10% and were happy to be dealt with a lesser rate of tax at 4%---This was discrimination writ large on the face of proviso to S. 4C of Income Tax Ordinance, 2001, and had been rectified by substitution through Finance Act, 2023, where income exceeding Rs.500 million was imposed to a rate of taxation at 10%---Anomaly was corrected by the Legislature and a rate of tax across the board in respect of a particular category of taxpayers was imposed---Such discrimination was unconstitutional and contrary to the rule of law---Certain sectors without any intelligible criteria could not be isolated from rest of the persons similarly placed and be taxed at a higher rate than those persons who earned an income in the same bracket---Division Bench of High Court set aside finding of Judge in Chambers of High Court upholding retrospective application of S. 4C of Income Tax Ordinance, 2001, by the use of the words "for the Tax Year 2022"---Division Bench of High Court declared that rights conferred on appellants / taxpayers for Tax Year 2022 on 30-06-2022 were past and closed transactions and could not be impaired or whittled away by the use of these words---Super tax under S. 4C of Income Tax Ordinance, 2001, could not be imposed on appellants / taxpayers for the Tax Year 2022 and special tax year---Intra Court Appeal was allowed accordingly.

SERVICE GLOBAL FOOTWEAR LIMITED vs FEDERATION OF PAKISTAN through Secretary Revenue Division Ss — 2024 PTD 1271 LAHORE-HIGH-COURT-LAHORE

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