ISLAMABAD: A two-member division bench of the Islamabad High Court (IHC) on Wednesday suspended the decision of a single-member bench that had set aside the recent increase in property tax and called for holding local government elections in the federal capital.

The division bench comprising Justice Arbab Mohammad Tahir and Justice Raja Inaam Ameen Minhas issued the interim order while hearing an intra-court appeal filed by the Metropolitan Corporation Islamabad (MCI) through its counsel, Advocate Kashif Ali Malik.

The appeal, filed under Section 3 of the Law Reforms Ordinance, 1972, challenged the judgement of the single bench, which had ruled that the notification revising property tax in Islamabad was “without lawful authority” and had also instructed the Election Commission of Pakistan (ECP) to immediately conduct local government polls in the capital.

In its September 24 verdict, the single-member bench had held that the MCI administrator could not exercise the power of an elected local government to revise or levy taxes.

Interim order issued while hearing intra-court appeal of MCI

The IHC single member bench of Justice Mohsin Akhtar Kayani further observed that the impugned notification was issued without following mandatory procedures under sections 88 and 89 of the Islamabad Capital Territory Local Government Act, 2015 (ILGA 2015), including prior publication, public objections and government approval. The judge also noted the absence of statutory rules governing the tax mechanism and directed the federal government to ensure compliance with the law before imposing any future taxation measures.

Challenging the decision, the MCI argued in its appeal that the impugned judgement was legally flawed and had caused administrative paralysis. The appellant contended that the learned single judge misinterpreted the provisions of the ILGA 2015 by treating the lawful revision of an existing tax as a new levy.

Advocate Malik argued that Section 88(5) of the ILGA 2015 empowers the local government to revise, increase or reduce existing taxes without repeating the procedural steps required for introducing a new tax. It further submitted that the property tax notification, S.R.O. 404(I)/2024, had been duly issued and published in the official gazette on March 14, 2024, giving it full legal effect.

The MCI also disputed the finding that the Urban Immovable Property Tax Act, 1958, applied to Islamabad, pointing out that the Supreme Court had categorically ruled in Bilquis Anwar Khan vs Pakistan (2001 SCMR 809) that the 1958 law was never extended to the Islamabad Capital Territory.

According to the appellant, halting property tax collection would cause fiscal instability and jeopardise essential municipal services such as sanitation, water supply, waste management and road maintenance. It noted that the federal government provided limited financial assistance to the MCI, and the property tax constituted the corporation’s main source of revenue.

After hearing preliminary arguments, the two-member division bench suspended the operation of the single bench’s September 24 judgement and issued notices to the respondents — including petitioner Mohammad Anwar Mughal, the Capital Development Authority (CDA) and the Federation of Pakistan — for their replies.

The court observed that the matter raised significant questions about the scope of administrative authority during the interim period between the dissolution and reconstitution of local governments. Further hearing was adjourned.

Published in Dawn, October 23rd, 2025