SC suspends PHC verdict on levy of property tax on ETPB properties

ISLAMABAD: The Supreme Court Friday suspended the operation of Peshawar High Court (PHC) judgment, upholding the Cantonment Board’s authority to levy property tax on the properties, managed by the Evacuee Trust Property Board (ETPB).

A five-member constitutional bench of the Supreme Court, headed by Justice Aminuddin Khan, heard the appeals filed by the ETPB challenging the imposition of property tax on properties vested in and managed by the federal government through the Board.

The Peshawar High Court had issued a judgment dated 10 March 2020, which upheld the authority of the Cantonment Board to levy property tax on the ETPB-managed properties.

The ETPB, aggrieved by the decision, filed three civil appeals with the Supreme Court, seeking suspension of the impugned judgment and protection of its constitutional immunity from local taxation.

Counsel for the ETPB Hafiz Ehsaan Ahmad Khokhar submitted that the levy of property tax on federal properties was unconstitutional and violative of Article 165 of the Constitution, which categorically barred the imposition of any provincial or local tax on the property of the Federation without its consent. He emphasized that no such consent was ever accorded by the federal government, rendering the impugned notices void ab initio.

The counsel further argued that under Section 6 of the Evacuee Trust Properties (Management and Disposal) Act, 1975, all evacuee trust properties stood vested in the federal government, with the ETPB serving merely as its statutory instrumentality.

Accordingly, he submitted that any attempt by a Cantonment Board to impose property tax on such properties amounted to taxing the federation itself — a measure expressly prohibited by the constitutional scheme.

Referring to Article 265 of the Constitution, the ETPB counsel contended that no tax could be levied or collected except by the authority of law, and any levy inconsistent with the Constitution or imposed without legislative competence was null and void.

“Since the Cantonment Board derives its powers solely from delegated legislation and lacks constitutional competence to tax federal property, its imposition constitutes a clear usurpation of federal fiscal authority,” the counsel added.

He further submitted that the ETPB properties were federal in nature as per Section 6 of ETPB Act 1975, dedicated to religious, charitable, and welfare purposes, and maintained through federal resources without availing local municipal services.

Therefore, he contended that the levy was not only without lawful authority but also lacked quid pro quo, violating the constitutional principle of fiscal fairness and proportionality embedded in Articles 165 of the Constitution.

Meanwhile, after hearing the matter, the court issued an injunctive order in favour of the ETPB, suspending the operation of the impugned property tax notices.

The court will continue to examine the constitutional questions relating to the tax immunity of federal properties managed through statutory federal institutions. The court adjourned the matter for date-in-office (indefinite period).