ISLAMABAD: The Supreme Court granted three months to the Sindh government to legislate on levy of tax on annual rental value property by different Cantonment Boards, in the province.

A five-judge special bench, headed by Justice Syed Mansoor Ali Shah, was hearing appeals against the Sindh High Court (SHC)’s judgment. The SHC in December 2023 declared the collection of property tax by cantonment boards as illegal.

The court’s order said that its interim relief granted on March 18 shall continue and the tax rate under Sindh Urban Immovable Property Tax Act, 1958, shall be charged and the recovery of amount shall continue.

Levying tax on annual rental value property: SC questions Sindh govt for not considering matter

The additional advocate general (AAG) of Sindh informed the bench that the provincial government has decided to legislate on the matter. Justice Mansoor welcomed the development, saying “It is a positive development.” He was sanguine that after the legislation, the Cantt Boards’ authority to levy and collect property tax would be settled.

Justice Muhammad Ali Mazhar questioned whether any draft had been placed before the provincial cabinet. The AAG Sindh replied in negative but said that the law would address the constitutional issue of tax whether the Cantt Boards can charge the tax or not.

The advocate general argued that after the 18th Amendment, the subject of levying of property tax rested with the provincial government. He contended that after the omission of the 7th Schedule, there was no need of fresh legislation by the provincial assembly.

The tax demand is based on the annual rental value of property by different Cantonment Boards. The petitioners’ assertion is that it is a kind of tax and levy that taxes remain with the provinces only, whereas, the federal government and the cantonment boards claim such levy to be in their competence.

The attorney general said that due to the order of the SHC, the Cantonments have stopped collecting the tax, adding without funds the Boards cannot function and are unable to provide services to the people in Cantt areas. He said the Cantonment Boards would collect the amount at the rate prescribed in the 1979 order, and keep the differential in the high court. He said under the law out of total tax collection 15 per cent goes to the province and 85 per cent remains with the boards.

The attorney general said after the Cantonments (Urban Immovable Property Tax and Entertainment Duty) Order, 1979, the Sindh Urban Immovable Property Tax Act, 1958 has become ineffective on properties within the cantonment areas, as the 1979 order has been given protection under the 8th Amendment, and it is still continuing because the 18th Amendment has not taken away this protection. Therefore, the said order of 1979 (commonly called Presidential Order 13 of 1979) is then applied to such properties, he added.

He said that sub-clause 3 of Article 270A emphasized that such orders, ordinances, regulations, martial law orders, enactments, notifications and rules etc, which were in force immediately before the date of Article 270A shall continue until repealed, amended or altered by the competent authority, whereas, sub-clause 6 of the Article requires clause 1 amendment by the appropriate legislature.

The SHC’s judgment noted that the 18th Amendment brought a change to and amended Entry 50 in the Fourth Schedule (Federal Legislative List) of the Constitution. As a consequence, thereof, the federation and all Cantonment Boards lack competence, power, and jurisdiction to levy, charge, impose and recover any or all tax(es) on any immovable property, including, but not limited to, tax on the annual rental value of immovable property.

The high court’s judgment also noted that the 18th Amendment, consequently, restored the competence and jurisdiction of the province to levy, charge, recover, and legislate on the subject identified and to pursue it accordingly.

Copyright Business Recorder, 2024

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