ISLAMABAD: Former Law Minister Farogh Naseem stated that though the legislature has power and jurisdiction to pass laws retrospectively, but a retrospective law cannot impair or destroy vested rights. Farogh argued that before a three-judge bench of the Federal Constitutional Court, which on Thursday heard the FBR appeals against the judgments of Sindh, Lahore and Islamabad High Courts regarding levy of Super Tax under Section 4C, inserted in the Income Tax Ordinance, 2001 through Finance Act 2015.The ex-law minister, representing the Karachi based taxpayers, maintained that the settled jurisprudence succinctly states that the vested rights are created through a contract, statute or by operation of law. “As a general principle, the legislature has the power, authority and jurisdiction to legislate laws retrospectively, but the general principle is subject to strong exceptions i.e. a retrospective law cannot impair or destroy vested rights,” he further said and added that only through a section 31-A of the Customs Act, 1969 type of legislation vested right can be eroded through a retrospective legislation.” However, in the Income Tax Ordinance, 2001 no section 31-A of the Customs Act type of legislation exists. Therefore, any vested rights acquired under the ITO, 2001 cannot be destroyed. He emphasised that even a Section 31-A type of retrospective legislation cannot destroy transactions which are already past and closed. Farogh submitted that the decision of the Supreme Court in Mekotex (PLD 2024 SC 1168) is per incuriam as it is in violation of the binding precedents rendered by earlier larger bench in Molasses (1993 SCMR 1905). He asked the bench that the judgment need to be reviewed and declared ultra vires the constitution, adding that the FBR is relying on this judgment. He said that even if we apply Mekotex, past and closed transactions cannot be undone through retrospective legislation, adding that as per Mekotex the accrual of past and closed transactions vary from statute to statute. The taxpayers counsel contended that it is true that in matters of customs duty under the Customs Act, 1969 in view of Section 31-A, past and closed transactions are fixed upon the filling of the Bill of Entry, which is now called Goods Declaration. He stated that FBR is totally incorrect in stating that past and closed transactions in income tax matters are fixed upon the filling of the tax returns, adding that the past and closed transactions cannot be taken away by the legislature fiat. As per settled law, in income tax matters past and closed transactions accrue on the last date of the accounting period or before, but definitely not on any date after the last date of the accounting period. Farogh submitted that the FBR is only vociferously badgering the general principle, which are totally incorrect. He stated that as per Shahnawaz 2011 PTD 1558 at p 1573 rights become vested rights and finally are translated into past and closed transactions, which attain the highest status. They constitute fundamental rights under Article 10-A, 18, 23, 24 and 25 of the Constitution. Thus they cannot be destroyed through retrospective sub-constitutional legislation. The case is adjourned until Friday (Jan 16). Copyright Business Recorder, 2026