TaxHelpline Case No. 135 of 2004

Supreme Court of Pakistan

Civil Petitions Nos.860, 976, 993, 994 of 2004, 1419-L, 1618-L, 1665-L, 1676-L; 1677-L, 1678-L, 1705-L, 17.06-L, 1707-L-, 1721-L to 1724-L, 1728-L to 1789-L, 1794-L, 1795-L, 1797-L, 1798-L, 1800-L, 1807-L to 1813-L, 1829-L to 1831-L, 1844-L, 1845-L, 1853-L to 1860-L of 2004, decided on 4th June, 2004.

(On appeal from the judgment of Lahore High Court, Lahore, dated 8-3-2004 passed in W.Ps. Nos.6738, 7416, 7753, 7754, 19351, 18018 of 2002, 15476, 2420, 5131, 9581, 2678, 16548, 16549, 320 of 2003, 16544, 16545, 16547, 573, 5889, 17788, 14498, 5769, 5715, 5893, 17843, 19033, 576, 17608, 17839, 5765, 6218, 5700, 17787, 17786, 6216, 6220, 5894, 5675, 17840, 5709, 5770, 5711, 6215, 5706, 5716, 6221, 5717, 17785, 17795, 17789, 5713, 5707, 17793, 5771, 17844, 5895, 14502, 5712, 5701, 17794, 17609, 17738, 5703; 5888, 5777, 5718, 17790, 6219, 5710-M, 17844, 5891, 6222, 5778, 17611, 5704, 17792, 5676, 17610, of 2002, 7528 of 2003, 6223, 21094, 12232, 6944, of 2002, 9145 of 2003, 17612, 6585 of 2002, 7178 of 2003, 17841, 5674 of 2002, 12760 of 2003, 5892 of 2002, 4655, 5087, 4184 of 2003, 85 of 2004, 16572, 17856 of 2002, 6099 of 2003, 19038 of 2002, 6098 of 2003, 17497, 17498 of 2002, 6264 and 6265 of 2003).

Present: Iftikhar Muhammad Chaudhry, Rana Bhagwandas and Khalil-ur-Rehman Ramday, JJ

Dr. Sohail Akhtar, Advocate Supreme court and Mehr Khan Malik, Advocate-on- Record for Petitioners (in C.Ps Nos.860, 976, 993 and 994 of 2004).

Sheikh Masood Akhtar, Advocate-on-Record for Petitioners (in C. Ps. Nos. 1676-L to 1678-L of 2004).

Irshad Ahmad Qureshi, Advocate Supreme Court for Petitioners (in C. Ps. Nos. 1706-L, 1707-L, 1722-L to 1724-L of 2004).

Alamgir, Advocate Supreme Court for Petitioners (in C.Ps. Nos.1728-L to 1788-L 1794-L, 1795-L, 1807-L to 1813-L, 1855-L, 1857-L to 1860-L of 2004).

Amir Alam Khan, Advocate Supreme Court and Mushtaq Ahmad Tahirkheli, Advocate Supreme Court for Petitioners (in C. P. No. 1795-L of 2004).

Hamid Khan, Advocate Supreme Court for Petitioner (in C.P. No. 1800-L of 2004).

Chaudhry Muhammad Amin Javed, Advocate Supreme Court for Petitioner (in C. Ps. Nos. 1829-L to 1831-L and 1844-L of 2004).

Mr. Muhammad Qamar Sarwar, Advocate Supreme Court for Petitioner (in C. Ps. Nos. 1854-L and 1856-L of 2004).

Nemo for Petitioners (in C.Ps. Nos.1419-L, 1618-L to 1665-L, 1705-L, 1721-L, 1789-L, 1897-L, 1798-L, 1845 and 1853-L of 2004).

Messrs METROPOLE CINEMA (PVT.) LTD. and others---Petitioners Vs GOVERNMENT OF THE PUNJAB through Secretary Excise and Taxation Department and others---Respondents

JUDGMENT IFTIKHAR MUHAMMAD CHAUDHRY, J.------In above noted petitions, judgment passed by the Lahore High Court, Lahore dated 8th March, 2004 has been assailed in pursuance whereof 495. Constitution petitions filed by owners of the immovable properties situated in the different urban areas of the Province of the Punjab have been dismissed As questions of facts and law are common in all the matters, therefore, we propose to dispose them of by means of instant order.

2. Precisely stating background of the case, giving rise to dispute regarding levy/chargeability of tax on immovable urban properties cropped up in view of the insertion of section 5-A in the Punjab Urban Immovable Property Tax Act, 1958 (hereinafter referred to as "the Act, 1958"). Initially, after the promulgation of section 5-A in the Act. 1958 vide amendment by means of Punjab Act VII of 1958, the Excise and Taxation Department, Government of Punjab assessed the annual value of land and buildings on the basis of valuation tables which have been prepared by the Deputy Commissioners of the various Districts in the Province for the purpose of determining the minimum sale price of the properties located in their respective Districts to charge stamp duty etc. As such, value of the lands/buildings in different rating areas of the Province was ascertained on the basis of said valuation table to levy property tax. The tax-payers agitated their grievance before the Lahore High Court, by invoking its Constitutional jurisdiction. Writ petitions so preferred by some of the aggrieved persons were allowed including the judgments in the cases of Mst. Amina Jabeen v. Government of Punjab, and others NLR 2001 Tax 189, and Jamshed Waheed v. Government of Punjab PLD 2001 Lah. 395. For sake of convenience following paras. From the latter judgment are reproduced herein below:--

"(5) The procedure adopted by the respondent-Department is not in accordance with the provision of sections 5 and 5-A of the Act. It is true that section 5-A empowers the relevant authority of the Provincial Government to determine gross annual rental value on the basis of valuation tables. However, the said provision does not empower the Government to prepare those valuation tables on the basis of capital value of the properties involved, as has been done by the Government. It is clear from the written statement submitted by the respondents that the valuation tables, which have been used by the Provincial Government in determining the gross annual rental value of properties for the purposes of the Act, admittedly, have no nexus whatsoever with the rental value of the properties in question.

(6) In this view of the matter the use of valuation tables, prepared by Deputy Commissioners of various Districts in the Province for the purpose of Stamp Act and Registration Act cannot be treated as valuation tables for the purposes of section 5- A of the Act. In the circumstances, the demand raised against the petitioner, which is based on valuation tables prepared on the basis of the capital value of properties, is declared to be illegal.

(7) This order, however, shall not prevent the Provincial Government from preparing valuation tables which are based on the annual rental value of properties within different rating areas, provided such valuation tables otherwise comply with the provisions of section 5-A and the other provisions of the Act.".

3. It seems that in pursuance of the observation made by the learned High Court in the case of Jamshed Waheed (ibid), the Government of Punjab issued letter No.SC Tax(E&T)3-38/91/P-1, dated 13th October, 2001 to Director-General Excise and Taxation Department, for the purposes of preparation of valuation of tables based upon rentability of immovable properties for the assessment of property tax. It may be noted that along with the letter dated 13th October, 2001, following format for reassessment of urban immovable properties throughout the Punjab for the preparation of uniform formula, was also transmitted to Director¬ General, Excise and Taxation Department, Government of Punjab, Lahore with direction to him to forward the same to the District Officer (Directors Excise and Taxation/Excise and Taxation Officer") for carrying out survey operation in the rating areas under their respective jurisdiction:--

"Valuation Table based upon rentability of immovable Properties in the Rating Areas of Punjab

General Residential and Commercial Properties

The figures recorded in the respective column of the valuation table shall be multiplied with the total land area (sq. yard) and covered area (sq : feet) of the building the figure arrived at shall be multiplied by 12 to determine the reasonable annual rent.

Since the rentability of following properties is different from that of general residential and commercial properties, therefore, at the time of determining their rentability, the figure recorded in the valuation table shall be adopted after following subtraction and addition.

I. Plazas and Rented out Reduction of 10% for each floor above and multistorey buildings below ground floor/inter-floor subject to maximum of 50% of the rate specified in valuation table.

II 20 years old properties Reduction of 10% of the rate specified in the valuation table subject to condition that there is no addition/alteration in the building during this period.

III. Seasonal use of Reduction of 50% of the rate specified in properties like cotton valuation table. ginning factories, rice husking mills oil Mills.

IV Buildings and lands Addition of 50% in the residential rates (self used as offices or rented as the case may be) specified in educational the valuation table. institutions.

V Hotels In case of buildings and lands used for hotels, the rentability shall be made as per following:

(i) The rentability of land areas under commercial use excluding parking places shall be calculated on the basis of self ¬commercial rates.

(ii) The rentability of covered area of such building other than lodging units, lobbies, dinning halls, kitchens other than the Banquet Hall, Business Halls etc., shall be assessed on the basis of self-commercial rates prescribed in the valuation table.

(iii) The renability of covered area let out to different organization will be assessed on the basis of commercial rates prescribed in the valuation table.

(iv) The portions of these units being let out, as lodging units shall be assessed on the basis of existing formula based upon rack rates giving allowance on account of vacancy/service change and machinery as the case may be according to the existing procedure.

VI Hospitals and Marriage Commercial rates self or rented as the case Halls Cinemas, Petrol may he specified in valuation table. At the Pumps etc. time of calculation of land area and covered area, the doctors rooms patient rooms, wards operation theatres, waiting rooms/bridal rooms, make-up-rooms etc. shall be accounted for.

VII Industrial units Residential rates (self or rented as the case may be) prescribed in the valuation table with following conditions: --¬

Up to 1 ACRE - Above rate. Next 4 ACRE - Reduction of 20% in the above rate.

Exceeding 5 ACRE - Further reduction of 20% in the above rate.

VIII Agricultural Land as per existing procedure of fixed rates per Kanal.

Note: Any modification in the valuation table if so required will be notified by the Government."

4. It seems that in pursuance of above formula and deliberations, latter on Excise and Taxation Department prepared valuation table dated 31st October, 2001, for levying property tax.

5. At this juncture, we consider it appropriate to point out that prior to insertion of section 5-A in the Act, 1958, section 5 has provided a formula for ascertainment of the annual valuation of the property for the purpose of tax on the urban properties, as per the requirement of section 3 of the Act, 1958. Similarly, Urban Immovable Property Tax Rules, 1958 were promulgated for carrying out the purpose of Act, 1958, which prescribed the mode of preparation of draft valuation list, according to its rule 6. However, it seems that for the purpose of assessing the valuation of the lands/buildings without adhering to the rules but following the formula contained in format reproduced hereinabove, prepared the valuation table, and demanded tax on the basis of the same, which was found to be on the higher side by the tax- payers/petitioners, being not based on the rental value of the lands/buildings but on the land value of the property. As such they instituted writ petitions before the Lahore High Court, but without any success as the same have been dismissed by means of impugned judgment.

6. After hearing learned counsel for some of the petitioners, as well as learned Assistant Advocate-General Punjab and having gone through the impugned judgment carefully, following questions emerge for consideration:--

(a) As to whether insertion of section 5-A in the Act, 1958 is ultra vires of the Constitution and suffers from excessive legislative delegation without any guideline?

(b) As to whether valuation table has been prepared contrary to the provision of sections 3, 5 and 5-A of the Act, 1958? If so to what effect?

(c) As to whether Provincial Government has competently legislated/inserted section 5-A of the Act, 1958?

(d) As to whether valuation table has been prepared after conducting any survey and inviting objections from the tax-payers situated in different rating areas or on the basis of format formula received from the Government by the Excise and Taxation Department vide letter dated 13th October, 2001.

(e) As to whether the petitioners, before approaching the High Court, had availed alternate remedy by way of filing appeal or revision before the Authorities under the Act, 1958. If not, what would be its effect?

7. Thus, inter alia, to examine the above questions, leave to appeal is granted.

8. As far as the question of suspension of impugned judgment and restraining the respondents from recovering property tax from the petitioners is concerned, it is declined in view of the fact that on the basis of deposit of the property tax with the Excise Department, no irreparable loss will occur to the petitioners. However, it is made clear that the deposit of the tax by the petitioners shall be subject to final decision of the appeals, arising out of these petitions.

9. Taking into consideration hardships expressed by some of the petitioners, during hearing of the petitions for leave to appeal, concerning the payments of huge amount of tax, we direct the office to fix the appeals for hearing in the month of October, 2004, subject to soliciting necessary approval from Honourable Chief Justice.

10. Petitions Nos. 1732-L, 1736-L, 1739-L, 1743-L, 1744-L, 1740-L, 1751-L, 1758- L, 1763-L, 1765-L, 1767-L, 1771-L, 1772-L, 1774-L, 1776-L, 1777-L, 1786-L, 1787-L, 1788-L, 1810-L, 1855-L, D 1857-L, 1858-L, 1859-L and 1860-L of 2004 are time-barred, therefore, subject to limitation, leave to appeal is granted.

.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.--.-.-.-.-.-.-.-.-.--.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.- Disclaimer /Note: We have reproduced the judgment for facilitation of readers; however, the readers must study the original or certified copy of the above said judgment before referring it in any Court of Law. The judgment as reproduced above is a reported judgment available in law magazines and journals namely 2004 SCMR 1927. -.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.--.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-

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