Commercial entities can adjust their super tax liability against tax credits, rules FCC

The Federal Constitutional Court (FCC) recently ruled that commercial entities can adjust their super tax liability against tax credits. This decision was made after CM Pak Limited, a Chinese telecom operator, appealed the rejection of a similar plea by the Islamabad High Court (IHC) on March 25, 2026. Justice Aamer Farooq, writing for the two-member bench, stated that super tax paid under Section 4C of the Income Tax Ordinance (ITO) can be adjusted where tax credits are available under Section 168 of the ordinance.

The ruling emphasizes that interpreting Chapter X's application to Section 4C's scheme in a limited manner is unwarranted and that the legislature did not impose such a restriction. The court ruled that if Chapter X is applicable, its provisions, including Section 168, must be given effect as intended. The super tax, imposed by the National Assembly on high-earning sectors' income, was upheld as constitutional by the FCC.

Following the decision, the Federal Board of Revenue (FBR) issued a notice for the company to discharge its super tax liability, which the company claimed was offset by excess taxes from a previous tax year. The court affirmed that tax credits under Section 168 are distinct from refunds under Section 170 and that the provisions of Chapter X, including Section 168, should be incorporated in their entirety, not just the procedural aspects.