Islamabad: Islamabad High Court (IHC) approved petitions filed by various companies and organisations and declared section 4C (Super Tax on High Earning Persons) of Income Tax Ordinance 2001, "As it stands now", ultra-vires Constitution.

Verdict which could potentially dent government's tax revenue target was delivered by Justice Sardar Ejaz Ishaq Khan. "Section 4C, as it stands now falls to be ultra vires fundamental rights under Articles 18, 23 and 24, read with Article 4 of Constitution," read verdict.

Verdict read that Section 4C is "Held to be against scheme of Constitution and should either be read down or declared ultra vires for reasons given" in this judgment".

However, "With preference to save rather than destroy, Section 4C is to be read down in calculating income taxable to super tax so as to (a) exclude all classes of income enumerated therein tax on which is final under other provisions of Ordinance and (b) sever exclusions of brought forward depreciation, brought forward business losses and brought forward amortisation allowances available to taxpayers under other extant provisions of Ordinance.

Verdict read "Section 4C, as read down will have prospective application only and will not apply to any transactions or events past and closed on or before June 30, 2022.

"Section 4C, as read down will not apply to benevolent funds holding exemptions from tax under other provisions of Ordinance. "Section 4C, as read down will not apply to petroleum and exploration companies to extent its application results in taxation of such companies exceeding thresholds stipulated in Rule 4 of Fifth Schedule to Ordinance.

Moreover, "All notices of demand or recovery impugned in petitions are set aside, without prejudice to revenue's right to issue fresh notices not inconsistent with this judgment."