FCC overturns IHC ruling on super tax credit adjustment

ISLAMABAD: The Federal Constitutional Court (FCC) has ruled in favour of corporate taxpayers, declaring the adjustment of available tax credits against super tax liabilities legally permissible and overturning a decision of the Islamabad High Court.

The court allowed appeals filed by private mobile operator Zong, setting aside the IHC judgment that had rejected the company’s plea seeking adjustment of its available tax credits against super tax payable to the Federal Board of Revenue (FBR).

The FBR had issued Zong a notice for payment of super tax. The company subsequently approached the Islamabad High Court, seeking permission to adjust its available tax credits against the liability.

The high court had dismissed the petition, prompting Zong to challenge the decision before the FCC.

In its six-page detailed judgment authored by FCC Judge Justice Amir Farooq, the court held that tax credits available to a taxpayer through filing and deductions could be adjusted against the amount payable as super tax.

The court observed that a tax credit available under Section 168 of the Income Tax Ordinance constitutes a separate and recognised legal right.

It held that preventing a taxpayer from adjusting such a credit and requiring them to seek a refund instead would run contrary to the intent of the law.

The judgment further stated that financial laws should be interpreted while keeping the benefit and convenience of taxpayers in view. A right granted under the law cannot be restricted merely on procedural grounds, the court ruled.

The court also directed the FBR to examine Zong’s adjustment claim in accordance with the law and take a decision on it.

The ruling could have wider implications for corporate taxpayers with available tax credits who seek to adjust those credits against their super tax liabilities rather than claim refunds separately.