LHC quashes super tax on sale of inherited land

A two-judge bench of Justice Jawad Hassan and Justice Sardar Akbar Ali announced the judgement in an income tax reference filed by Khairullah Khan against the Appellate Tribunal Inland Revenue and other tax authorities. The court set aside an Rs114.7 million super tax demand raised over the sale of ancestral property held since 1980. The judges observed that where no income tax is payable on capital gains, no super tax can be levied either. According to the judgement, Mr Khan declared an income of over 1.14 billion rupees for the 2024 tax year from the sale of ancestral property. The return was deemed finalised under the Income Tax Ordinance. However, the assessing officer initiated proceedings under Section 4C and imposed the super tax through an order dated Feb 28, 2025. Mr Khan challenged the demand before the tribunal, which upheld the levy, prompting his high court appeal. Counsel for the applicant argued that Mr Khan, a private individual not engaged in property dealing, profited solely from disposing of inherited immovable property. Under Section 37(1A), this carried a zero percent tax rate because the property was held for more than six years. The counsel maintained that without taxable income, the basis for imposing a super tax ceased to exist, and taxing income already subjected to a nil rate amounted to indirectly taxing income that the legislature had expressly exempted. FBR defended the levy, arguing that Section 4C is an independent provision applicable to all high-incom