The Lahore High Court has ruled that super tax cannot be imposed on the sale of ancestral property held for more than six years, declaring a tax demand of more than Rs. 11.1 million by the Federal Board of Revenue illegal and without lawful authority.

The ruling was issued by a two-member bench comprising Justice Jawad Hassan and Justice Sardar Akbar Ali in a 17-page written judgment in favor of petitioner Khairullah Khan. The court also declared the verdict to be a judicial precedent, giving it broader relevance for similar tax matters in the future.

According to the judgment, super tax cannot be charged on income that is already exempt from tax or falls under a zero percent tax rate under the existing legal framework. The bench held that the exemption available on the sale of ancestral property remains protected by law and cannot be overridden through additional taxation.

The court observed that super tax is only applicable to taxable income and that no extra tax burden can be imposed unless it is clearly backed by legal authority. It further ruled that applying super tax on exempt or zero-rated income was inconsistent with the principles of taxation under Pakistani law.

The bench also struck down an earlier ruling by the Appellate Tribunal Inland Revenue, which had upheld the FBR’s recovery demand of Rs. 11.15 million against the petitioner.

In its detailed order, the court made it clear that FBR circulars cannot override statutory law or judgments issued by constitutional courts. The judgment also referred to the DG Khan Cement case while interpreting the legal scope and application of super tax provisions.

The ruling is likely to carry significant implications for taxpayers involved in similar disputes over the taxation of exempt income and property-related transactions.