IHC Super Tax Verdict: Court Rejects Meezan Bank’s Rs11 Billion Challenge

Islamabad – (Staff Reporter/Web Desk) – The IHC super tax verdict has settled a major tax dispute involving one of Pakistan’s largest Islamic banks. The Islamabad High Court has thrown out a petition filed by Meezan Bank against Section 4C of the Income Tax Ordinance, 2001. The case involved a tax demand of nearly Rs11 billion.

A two-member bench heard the matter and gave a clear ruling. The judges said Parliament had every right to bring in this tax law. They also lifted the earlier stay orders that had paused the tax recovery. All pending requests linked to the case were closed as well.

Meezan Bank had hired top lawyer Dr Farogh Naseem to argue its side. The bank’s main point was that Section 4C was unfair. Its lawyers said the same income was being taxed twice, once under normal rules and again under the super tax. They called this double taxation and said it went against the constitution.

The bank raised another issue too. It said many of its Islamic financing deals were signed before the super tax law came into effect or before it was later increased. So, the bank argued, income from those older deals should not fall under the new tax rate at all.

On the other side stood the Federal Board of Revenue and the federal government. Their lawyer, Hafiz Ehsaan Ahmad Khokhar, pushed back hard. He said the bank had no right to come to the Islamabad court in the first place. According to him, Meezan Bank had already gone to the Appellate Tribunal Inland Revenue in Karachi. Once a case is filed there, he argued, the bank cannot also ask a High Court to step in on the same issue.

He raised a second objection as well. The actual tax assessment work had happened in Karachi, not Islamabad. Because of this, he said, the Islamabad High Court simply did not have the authority to hear the case in the first place.

The judges agreed with the government’s side on almost every point. They explained that what matters for tax purposes is the income earned during a particular tax year. The date when a financing agreement was signed does not change that. So even older Islamic banking contracts fall under the current tax rules if income was recorded during the relevant year.

The bench also looked closely at the Seventh Schedule, which lays out tax rules for banks. It found no separate treatment for conventional banks versus Islamic banks. Both types of banks are treated the same way under this schedule, the court noted. Because of this, the argument of unfair or discriminatory treatment did not hold up.

In the end, the court found no constitutional flaw in Section 4C. The tax remains valid, and Meezan Bank’s stay orders were removed. This means the bank may now need to move forward with tax recovery proceedings tied to the disputed Rs11 billion amount.

This ruling could shape how other banks respond to similar tax challenges in the coming months, especially those relying on older financing agreements as a defence against the super tax.