Court allows tax credit adjustment

The Federal Constitutional Court has ruled in favour of corporate taxpayers by declaring the adjustment of tax credit against super tax legally permissible and setting aside a decision of the Islamabad High Court.

Justice Aamir Farooq authored a six-page detailed judgment while allowing appeals filed by private mobile phone services company Zong. The court held that tax credit arising from filing and deduction could be adjusted against super tax.

It observed that tax credit available under Section 168 of the Income Tax Ordinance constituted a separate and established legal right of the taxpayer. The judgment said that preventing a taxpayer from making an adjustment and forcing it to seek only a refund was contrary to the legislative intent.

It further held that fiscal laws should be interpreted 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 the law, the taxpayer's claim for adjustment submitted in response to the notice issued by the court.

According to the case record, the FBR had issued a notice to the private mobile phone services company for payment of super tax. Zong approached the Islamabad High Court, seeking adjustment of its available tax credit against the super tax. The high court, however, dismissed the petition. Later, the Federal Constitutional Court set aside the high court's judgment and allowed Zong's appeals.