ISLAMABAD  -    Supreme Court of Pakistan yesterday ruled that tax exemption could not be claimed by the market committees in Punjab after amendment in the Punjab Urban Immovable Property Tax Act.

The top court ruled that market committees were liable to pay taxes after amendment in the said Act through an Ordinance. Justice Syed Mansoor Ali Shah issued a three-page judgment on an appeal filed by Excise and Taxation Department against Lahore High Court (LHC) order, wherein it was held that market committees had exemption from the chargeability of tax.

The market committees Multan and Sahiwal had challenged demand of tax raised by the Excise and Taxation Department under the Punjab Urban Immovable Property Tax Act, 1958 for a period, before and after, the year 2002.

The market committees had argued that they stood exempted from tax under section 4(b)(ii) of the Act and they also referred to a top court’s judgment of 2011 regarding similar matter. The case of the department was limited to the period after the amendment brought about in section 4 of the Act through Punjab Finance Ordinance 2002 when the said exemption was no more available. Before the amendment through ordinance in 2002, the Section 4(b)(ii) of the Act stated, “The tax shall not be leviable in respect of the buildings and lands other than those leased in perpetuity; owned or administered by a local authority when used exclusively for public purposes and not used or intended to be used for purposes of profit.”

The judgment stated that market committees enjoy exemption from tax under the above un-amended section 4(b)(ii) of the Act as has already been settled by this court’s July 21, 2011 judgment, wherein it was held that the market committee falls within the definition of ‘local authority,’ and is, therefore, exempted from tax under section 4(b)(ii) of the Act.

In the instant judgment, the top court observed that the Lahore High Court (LHC) judgment correctly followed the 2011 judgment of this court to hold that the market committee was exempted from the chargeability of tax prior to the amendment brought through the ordinance.

“The impugned judgment, however, does not discuss the liability of tax after the said amendment,” Justice Shah observed.

The 2002 ordinance amended section 4(b) of the Act and stated, “The tax shall not be leviable in respect of the buildings cafe/lands other than those leased in perpetuity, owned and administered by the government of the Punjab or a local government as defined in section 2 clause (xvi) of the Punjab Local Government Ordinance, 2002 (XIII of 2001).”

The top court observed that after the amendment the term ‘local authority’ had been deleted and exemption was only available to government of the Punjab or to a local government as defined under the Local Governments Ordinance, 2001. “Market committee does not fall into either of the two.”

Therefore, the top court ruled, Multan and Sahiwal committees were liable to pay tax under the Act after the amendment in section 4(b) of the Act brought about through the Ordinance on June 25, 2002.

Counsel for the committees had submitted that the department should have filed an intra court appeal before the high court under section 3 of the Law Reforms Ordinance, 1972 instead of approaching this court directly.

On this, the top court observed that this argument had little force in the light of section 10 of the Act, which provides for an appeal before the authority, especially when the name of the respondents is wrongly included in the valuation list, prepared for the purposes of collection of tax.