Constitutional court overturns Islamabad High Court ruling in Zong case, allowing eligible tax credits to be adjusted against super tax
ISLAMABAD: The Federal Constitutional Court (FCC) has ruled in favour of corporate taxpayers, declaring that eligible tax credits can legally be adjusted against super tax and setting aside an earlier decision of the Islamabad High Court.
Justice Aamir Farooq authored the six-page detailed judgment while allowing appeals filed by private mobile phone operator Zong.
The court held that a tax credit arising from tax filing and deductions could be adjusted against super tax. It observed that the tax credit available under Section 168 of the Income Tax Ordinance, 2001 constituted a separate and established legal right of a taxpayer.
According to the judgment, preventing a taxpayer from adjusting an available tax credit and requiring the taxpayer to seek only a refund would run contrary to the legislative intent.
FCC favours taxpayer facilitation
The FCC further held that fiscal laws should be interpreted while keeping in view the benefit and facilitation of taxpayers.
The court directed the Federal Board of Revenue (FBR) to examine and decide, in accordance with law, the taxpayer’s claim for adjustment submitted in response to the notice issued by the court.
The ruling establishes that where a taxpayer has a legally available tax credit, the credit may be used to offset a super tax liability rather than requiring the taxpayer to pursue a separate refund.
Zong challenged super tax demand
According to the case record, the FBR had issued a notice to Zong seeking payment of super tax.
The mobile phone company subsequently approached the Islamabad High Court, seeking permission to adjust its available tax credit against the super tax liability.
The Islamabad High Court dismissed Zong’s petition, prompting the company to file appeals before the Federal Constitutional Court.
The FCC subsequently set aside the Islamabad High Court judgment and allowed Zong’s appeals, holding that adjustment of the available tax credit against super tax was legally permissible.
Implications for corporate taxpayers
The judgment could have wider implications for corporate taxpayers seeking to utilise eligible tax credits against their super tax liabilities.
The decision may allow taxpayers with qualifying credits to offset their liabilities directly instead of seeking refunds separately, subject to the applicable provisions of the Income Tax Ordinance and verification by the tax authorities.
The ruling also reinforces the principle that tax provisions concerning taxpayer rights should be interpreted in a manner consistent with the legislative intent and taxpayer facilitation.