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LAHORE: The Lahore High Court has ruled that the State Bank of Pakistan (SBP) enjoys exemption from property tax on its immovable properties situated in cantonment areas.
Justice Jawad Hassan issued the ruling allowing a petition of the SBP challenging the levy of property tax by the Chaklala Cantonment Board, Rawalpindi and seeking an exemption under Section 99(2)(f) of the Cantonments Act, 1924.
The SBP through a counsel pleaded that it was a corporation but not a commercial entity like the National Bank of Pakistan or any other commercial/scheduled bank or financial institution.
The counsel argued that by granting property tax exemption to the SBP, no discrimination will be caused to any entity. He said over the years there have been many amendments in the functions of the SBP which justify its claim for grant of exemption from payment of property tax under the Cantonments Act.
He contended that the SBP, by virtue of its powers and functions, was wholly owned by the federal government and performed functions on behalf of the government and was also mentioned in the Fourth Schedule, Part I, Federal Legislative List at Item No. 28 of the Constitution and these functions have been given to the central bank through an amendment made in the act as well as other applicable laws.
Besides questioning the maintainability of the central bank’s petition, a counsel for the board argued that the SBP was a corporation, hence, it was not entitled to property tax exemption. He also said that the bank estopped by its own conduct to claim exemption because payment of tax had already been made by its other office.
In his 23-page judgement, Justice Hassan observed that the functions of the SBP are functions of the federal government because the regulatory powers conferred on it, through the SBP Act as well as other laws, cover a broad range of areas which play a vital role in the country’s economy.
Looking into the ownership of share capital of the SBP, the judge noted that since promulgation of the bank’s act in 1974, 49 per cent shares were vested in the general public, therefore, no exemption was earlier claimed and practice of payment of property tax was continued.
Thereafter, he said, in 2015 certain amendments were made in the law and the entire share capital was vested in the federal government and was also non-transferable.
The judge observed that tax on immovable properties is a provincial subject and Article 165 of the Constitution is relevant in context of determining the application of property tax on the SBP.
Most importantly, he noted, the contesting respondents nowhere denied or brought on record any law, rules or regulations that the federal government cannot own property through a corporation.
“The exercise of sovereign powers by the petitioner (SBP) and performance of public service in the premises owned by it makes out a perfect case for grant of exemption from payment of property tax,” Justice Hassan maintained.
The judge held that the question that the SBP had been paying property tax previously is immaterial and does not even arise because if a right originates by provision of a law then such right cannot be withheld simply on the basis of estoppel.
The judge ruled that the title of the property in occupation of the SBP indeed vests in the federal government and the cantonment board has no authority to levy and demand property tax from the bank.
Allowing the petition, the judge set aside the notices/challan forms laying a demand for payment of property tax from the SBP for being without lawful authority and of no legal effect.
Published in Dawn, November 10th, 2022
