FCC Allows Tax Credits to Offset Super Tax

ISLAMABAD: The Federal Constitutional Court (FCC) has ruled that companies are legally entitled to use eligible tax credits to offset their super tax liabilities, overturning an earlier decision of the Islamabad High Court (IHC) that had rejected such adjustments.

According to media reports, Justice Aamir Farooq authored the six-page detailed judgment while deciding appeals filed by mobile operator Zong.

The FCC held that tax credits generated through tax deducted at source can be adjusted against super tax. It observed that the credit available to taxpayers under Section 168 of the Income Tax Ordinance represents an independent statutory entitlement and cannot simply be denied.

The court noted that forcing taxpayers to pay the super tax first and then pursue a refund, instead of allowing an available credit to be adjusted, would be inconsistent with the intention of the legislature.

The judgment further stated that fiscal legislation should generally be interpreted in a way that enables taxpayers to benefit from concessions and rights expressly granted under the law, rather than creating unnecessary barriers to their use.

The FCC directed the Federal Board of Revenue (FBR) to review and determine Zong’s request for adjustment in accordance with the applicable legal provisions and the notice issued in the matter.

The dispute arose after FBR issued a notice to Zong demanding payment of super tax. The telecom company subsequently moved the Islamabad High Court, requesting permission to offset its available tax credits against the outstanding super tax liability.

The IHC rejected Zong’s petition, prompting the company to challenge the decision before the Federal Constitutional Court.

The FCC has now overturned the IHC judgment and allowed Zong’s appeals, clearing the way for the company’s eligible tax credits to be considered for adjustment against its super tax liability.