PESHAWAR, Feb 27: The Peshawar High Court on Wednesday ruled that the Pakistan Telecommunication Company (PTCL) was not a successor to the defunct Pakistan Telecommunication Corporation (PTC), and was liable to pay taxes.

A two-member bench comprising Justice Khalida Rachied and Justice Abdur Rauf Lughmani dismissed a writ petition of the PTCL and declared the imposition of property tax on the company, by the NWFP government, in accordance with law.

The bench observed that the property and income of the PTCL did not belong to the federal government, therefore, the company could not be exempted from payment of property tax in terms of article 165 of the Constitution.

The PTCL had challenged the levy of tax, under the West Pakistan Urban Immovable Property Tax Act, 1958, on the property of the company, and had claimed that it was illegal. 

The company had further claimed that the PTCL was a corporate body, created, controlled and owned by the federal government.

The bench had reserved its judgment on Dec 17, 2002, after completion of arguments, and announced it on Wednesday.

Advocates, Hamid Khan and Salman Aslam Butt, had appeared for the  petitioner.

NWFP advocate-general Barrister Jehanzeb Raheem represented the provincial government, whereas advocate Syed Shoukat Hussain appeared for the Excise and Taxation department.

The petitioner stated that under the provisions of section four of the  West Pakistan Immovable Property Tax Act, and article 165 of the Constitution, the property of the PTCL was exempted from tax. Secondly, the petitioner contended that the Peshawar High Court had decided in the case of PTC  versus Peshawar Municipal Corporation, and the Lahore High Court, in the case, PTC versus Punjab Government, that the PTC was created under the   PTC Act, 1991, and was exempted from the payment of octroi charges, etc.

It was stated by the petitioner that under section 12 of the PTC Act, all the assets and liabilities of the erstwhile telephone and telegraph department were transferred and vested in the PTC, which had been declared immune from payment of taxes. The petitioner stated that   under section 35 of the PTC (Re-Organisation) Act, 1996, the property, rights and liabilities of the defunct PTC were vested in the PTCL. The petitioner company, being a successor of the PTC was also entitled to the same exemptions and protections, the petitioner added.

The Excise and Taxation department stated that the PTCL was registered under the Companies Ordinance, 1984, and its property was not exempted from the taxes. It was added that under section 34 of the Re-Organisation Act, the PTCL was formed to be incorporated  under the Companies Ordinance, 1984, and was limited by shares.

The bench observed that the board of directors of the petitioner company consisted of seven directors, who were to be elected in accordance with the provisions of the Companies Ordinance. It was observed that although the federal government was the major shareholder in the company, but it could not be said that the income of the company was claimed by the shareholders.

The shareholders were only entitled to dividend approved by the board of directors, in the annual general meeting of the share-holders, the court ruled. In such a situation, the court ruled, the company could not be exempted from payment of taxes, under Article 165.