The Lahore High Court has ruled that a super tax cannot be imposed on the sale of ancestral property held for more than six years, declaring a tax demand of over Rs11.1 million raised by the Federal Board of Revenue (FBR) illegal and without lawful authority.
A two-member bench comprising Justice Jawad Hassan and Justice Sardar Akbar Ali issued the 17-page written judgment, which has also been declared a judicial precedent.
The court allowed the petition filed by citizen Khairullah Khan and ruled in his favour.
According to the verdict, a super tax cannot be levied on income that is already exempt from taxation or carries a zero per cent tax rate under the law. The court observed that the tax exemption available on the sale of ancestral property would remain protected in accordance with existing legal provisions.
The judgment further stated that the super tax could only be imposed on taxable income and that no additional tax burden could be created without explicit legal authorisation.
The court also declared void the decision of the Appellate Tribunal Inland Revenue, which had upheld the tax demand earlier.
The bench dismissed the FBR’s demand for recovery of Rs11.15 million and held that imposing super tax on zero-rated income was contrary to the law.
In its detailed observations, the court maintained that FBR circulars could not override statutory law or constitutional court rulings. The verdict also referred to the judgment in the DG Khan Cement case while interpreting the legal scope of super tax provisions.
The court ruled that the imposition of a super tax on exempt or zero-rated income lacked legal justification and violated the principles governing taxation under Pakistani law.
