Pakistan’s Supreme Court Rules Against Government on Tax Law Changes
Islamabad [Pakistan], September 21: Pakistan’s Supreme Court has ruled that national and provincial assemblies cannot pass laws that violate fundamental rights enshrined in the Constitution. This decision was made by Justice Syed Mansoor Ali Shah, who led a three-judge bench, while hearing appeals against the 2019 amendments to Section 65B of the Income Tax Ordinance (ITO), 2001.
Justice Shah highlighted that Article 8 of the Constitution restricts the legislative powers of parliament and provincial assemblies, preventing them from making any law that affects the constitutional rights of people. The court found that neither parliament nor the provincial assemblies could exercise their legislative powers in a manner prohibited by this article.
Before the 2019 budget, the ITO provision granted a tax credit of 10% to industries that bought and installed new machinery between July 1, 2010, and June 20, 2021. However, the 2019 amendments changed the ending year to 2019 and decreased the tax credit rate from 10% to 5%. Several firms challenged this amendment in the Sindh High Court, which struck down the provision reducing the tax credit to 5% in February 2023. The decision was then challenged by the Inland Revenue Commissioner in the Supreme Court.
Justice Shah emphasized that the decrease in the tax credit rate was a violation of the prohibition against discrimination and against Article 25, which states that all citizens are equal before the law and are entitled to equal protection of the law.
Doubts Revealed
Supreme Court -: The Supreme Court is the highest court in a country. It makes important decisions about laws and can overrule other courts.
Tax Law Changes -: Tax law changes are adjustments made to the rules about how much money people and businesses have to pay to the government.
National and Provincial Assemblies -: These are groups of elected people who make laws for the whole country (national) or for specific regions (provincial).
Fundamental Rights -: Fundamental rights are basic freedoms and protections that everyone should have, like the right to speak freely or to be treated fairly.
Constitution -: A constitution is a set of rules that explains how a country is governed and what rights the people have.
Justice Syed Mansoor Ali Shah -: Justice Syed Mansoor Ali Shah is a judge in Pakistan’s Supreme Court who made the decision in this case.
Income Tax Ordinance -: The Income Tax Ordinance is a set of rules in Pakistan that tells how much tax people and businesses need to pay on their income.
Tax Credits -: Tax credits are amounts that reduce the total tax a person or business has to pay. They can be given for various reasons, like investing in certain industries.
Discriminatory -: Discriminatory means treating some people unfairly compared to others. In this case, it means the tax changes were unfair to certain industries.
Unconstitutional -: Unconstitutional means something that goes against the rules set out in the constitution.
Legislative Powers -: Legislative powers are the abilities of elected groups to make and change laws.