ZTBL through Regional Business Head Peshawar Vs KP Govt

Judgment Sheet

IN THE PESHAWAR HIGH COURT,

PESHAWAR.

JUDICIAL DEPARTMENT.

JUDGMENT

Writ Petition No.287-P/2025.

Date of hearing 22.10.2025.

ZTBL through Regional Business Head, ZTBL, Zonal Office, Peshawar.

Vs Government of Khyber Pakhtunkhwa through Chief Secretary, Peshawar etc.

Petitioner (s) by: Mr. Taimoor Noor Advocate.

Respondent(s) by: M/s Taimur Haider AAG and Yasir Ali Advocate.

WIQAR AHMAD, J:-. The petitioner, Zarai Taraqiati Bank Limited, has invoked the constitutional jurisdiction of this Court under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 (“Constitution”), seeking a declaration that the imposition and recovery of Urban Immovable Property Tax in respect of its premises situated on GT Road, Peshawar, as well as the consequential sealing of the said premises by the respondents, are without lawful authority, illegal, and of no legal effect. The petitioner further prays for a direction restraining the respondents from interfering with or

sealing the bank’s premises, and for an order directing that the building be permanently de-sealed.

2.As narrated in the petition, the Excise and Taxation Department, acting under the provisions of the Khyber Pakhtunkhwa Urban Immovable Property Tax Act, 1958 (“Act of 1958”), issued a demand notice dated 29.06.2016 assessing property tax in the sum of Rs.20,73,600/- in respect of the premises occupied by the petitioner-bank. Upon the petitioner’s failure to comply with the said demand, further coercive measures were undertaken, eventually resulting in the sealing of the building. Prior to invoking the constitutional jurisdiction of this Court, the petitioner had instituted a civil suit before the learned Civil Judge–III, Peshawar, challenging the assessment and seeking a declaration of exemption from the levy. The learned Civil Court, however, vide judgment dated 06.01.2025, dismissed the suit on the ground of lack of jurisdiction in view of Section 24 of the Act of 1958, which explicitly bars civil courts from entertaining matters arising under the said Act. The learned Civil Court further held that the petitioner, being a corporate entity engaged in commercial banking, could not claim exemption as it was neither a department nor an WP No.287-P/2025.

office of the Federal Government within the contemplation of the relevant statutory provisions.

Aggrieved by the assessment of tax as well as the sealing of its premises, the petitioner has now approached this Court through the instant writ petition.

3.The respondents have filed their para-wise comments, wherein it has been asserted that the petitioner, being a corporate body incorporated under the Companies Act, possesses a distinct legal personality separate and independent from the Federal Government and, therefore, cannot invoke the immunity contemplated under Article 165 of the Constitution. It has further been contended that an adequate and efficacious statutory remedy is available to the petitioner under the appellate and review mechanism provided in Section 10 of the Act of 1958, and, consequently, the exercise of constitutional jurisdiction by this Court is barred.

4.Arguments heard and record gone through.

5.Perusal of the record reveals that the premises of the petitioner-bank were duly assessed under the provisions of the Act of 1958. The Act prescribes a comprehensive statutory framework for assessment of tax and provides corresponding remedies of review and WP No.287-P/2025.

appeal. The petitioner, however, has bypassed the statutory mechanism and has directly invoked the constitutional jurisdiction of this Court. It is a well-settled principle of law that where an adequate and efficacious alternate remedy is available under a special enactment, the constitutional jurisdiction is ordinarily not to be exercised, save in cases of patent illegality, mala fides, or lack of jurisdiction, none of which is demonstrated in the present matter. In this regard, reference may be made to Syed Masood Ali v. Mst. Feroza Begum and another (PLD 2025 SC 339) & Muhammad Safeer and others v.

Muhammad Azam and others (PLD 2024 SC 838).

6.The contention advanced on behalf of the petitioner regarding immunity under Article 165 of the Constitution cannot be appreciated in view of the consistent and evolved jurisprudence of the superior Courts on this subject. Historically, earlier High Court judgments, such as Association Cement (State Cement Corporation of Pakistan (Pvt.) Limited) v. Government of Sindh, through the Secretary, Local Government and 2 others (1992 MLD 1730); Messrs Rice Export Corporation of Pakistan Ltd. v. Karachi Metropolitan Corporation through Director Octroi and another (PLD WP No.287-P/2025.

1990 Karachi 186) and Sind Industrial Trading Estate Ltd. Karachi v. Central Board of Revenue and 3 others (PLD 1975 Karachi 128) had extended the benefit of Article 165 to corporations wholly owned by the Government, on the premise that the substance of ownership rested in the Federation and the corporate veil could be pierced to treat the assets as those of the Government. This approach, however, underwent a fundamental re-examination by the Hon’ble Supreme Court in Union Council Ali Wahan v. Associated Cement (Pvt.) Ltd. (1993 SCMR 468), which became a watershed in redefining the limits of Article 165. In that case, the Supreme Court categorically held that mere ownership or control by the Government does not entitle a corporation engaged in ordinary commercial activities to claim constitutional tax immunity, and further held that lifting the corporate veil to grant tax exemptions is impermissible except in narrowly justified circumstances.

7.Subsequent judgments of the Supreme Court have reaffirmed this restrictive approach. In Water and Power Development Authority through General Manager and Project Director v. Administrator District Council Swabi (2005 SCMR 487), the Court reiterated WP No.287-P/2025.

that after Associated Cement (supra), unveiling the corporate veil to extend Article 165 protection is no longer permissible. This principle was elaborated further in Province of N.W.F.P. v. Pakistan Telecommunication Corporation (PLD 2005 SC 670), where a distinction was drawn between statutory corporations performing sovereign functions and commercial entities incorporated under company law; only the former may, in exceptional circumstances, attract Article 165 protection. The jurisprudential culmination of this line of reasoning is reflected in Central Board of Revenue v. WAPDA (PLD 2014 SC 766), wherein the Supreme Court declared that, after the insertion of Article 165-A, lifting the corporate veil for fiscal exemptions stands conclusively barred. The same view was adopted in Collector of Sales Tax and Central Excise v. WAPDA (2007 SCMR 1736). In this background, the position was succinctly summed up by the Apex Court in Karachi Development Authority v.

Central Board of Revenue (2005 PTD 2131), wherein it was held:

“6. We find that by statutory dispensation, a juristic personality is created which is distinct from that of the Government. Such a juristic personality is then entrusted with a statutory duties, some of which or all of which may partake of the function of the government both sovereign and not sovereign. In the WP No.287-P/2025.

case in hand, we are concerned with the welfare activity of the Government which has been passed on through the K.D.A. It is not wholly for the discharge of sovereign function, as such. Nevertheless, the distinction that was sought to be established on the strength of Article 165 of the Constitution for the purpose of taxability between the property and income of the Government under statutory veil and the property and income of the Government under no such veil has been brought to an end. The ultimate ownership of the property or the destination of the income has ceased to be the test. The statutory veil holds good for the purposes of determining the ownership of the property as well as its income.

7.It is true that what is mention in Article 165(A) of the Constitution is limited to the levy of income tax. Nevertheless, the purpose, the object and the field of Article 165-A of the Constitution is to fix the legal ownership of the property and the identity of the receipt of the income. This has been achieved by reinforcing the statutory corporate veil for all fiscal purposes. The lifting of the corporate veil as such is no longer permissible and the distinct juristic personality of the incorporated or statutory body has been recognized notwithstanding the control, the destination and the functioning of such bodies. Such a declaratory law would certainly stand in the way of the appellant because the same distinction which was sought to be created by lifting the veil in the matter of income tax is sought to be achieved in the matter of sales tax.”

8.Applying the above principles, the petitioner- bank cannot be treated as an instrumentality of the Federal Government for purposes of Article 165. Though initially established under the Agriculture Development Bank of Pakistan Ordinance, 1961, it was later reorganized and converted into a public limited company under the Companies Ordinance, 1984 through the Agricultural Development Bank of Pakistan (Reorganization and Conversion) Ordinance, 2002. Its legal character is, WP No.287-P/2025.

therefore, that of a company incorporated under company law, possessing a separate juristic personality distinct from the Federation. Since, it has been a consistent view that corporations engaged in commercial activities, competing in the open market, and earning profits like any other private or public-sector entity, cannot avail constitutional tax immunity reserved for property truly belonging to the Federation. Even 100% government ownership does not, by itself, qualify such entities for exemption, nor does government control over management or appointments. The determinative consideration is the nature of functions: where the entity conducts ordinary commercial business rather than performing essential or sovereign governmental functions, Article 165 does not apply.

9.The petitioner-bank’s functions fall squarely within this category. It operates as a commercial financial institution, competes in the banking sector, earns profits, and does not perform sovereign functions of the State. Its corporate veil cannot be lifted to deem its assets as those of the Federation, particularly in light of the strict bar on veil-piercing reiterated in the case law referred above.

WP No.287-P/2025.

Consequently, the petitioner cannot claim immunity from provincial taxation under Article 165 of the Constitution.

10.This conclusion is fortified by the dictum of the Lahore High Court in National Bank of Pakistan v. EDO (Revenue), Multan (2015 CLC 1618), where the issue of Article 165 immunity was raised by NBP, a bank whose statutory nexus with the Federal Government was almost the same as that of the present petitioner. NBP was created under the National Bank of Pakistan Ordinance, 1949; later fell within the sweep of the Banks (Nationalization) Act, 1974; and for decades its ownership, management and control vested in the Federal Government by express statutory command. Yet, despite this deep federal ownership and control, the Lahore High Court held while applying the ratio laid down in Associated Cement (supra), PTC (supra) , and WAPDA (supra) that NBP could not be treated as a government department, as it was engaged in ordinary commercial banking, competed with other banks, and paid taxes like any other business entity. Consequently, it was denied immunity under Article 165.

11.Viewed in the totality of the foregoing discussion, the petitioner’s claim of constitutional WP No.287-P/2025.

immunity under Article 165 stands wholly misconceived.

The Act of 1958 provides a complete and self-contained mechanism for assessment, objection, appeal and revision, culminating in the appellate remedy under Section 10, which enables any aggrieved person to assail the assessment order before the Collector, and further allows revisional oversight by the Commissioner. These remedies are adequate, efficacious and specifically designed to address all questions relating to valuation, assessment, levy and collection of Urban Immovable Property Tax. The petitioner, instead of availing the statutory appellate framework, has prematurely invoked constitutional jurisdiction without demonstrating any patent illegality, jurisdictional defect or mala fides in the assessment proceedings. Where the Legislature has expressly constituted an appellate hierarchy and provided a remedy capable of addressing the very grievance raised, this Court cannot be persuaded to bypass such mechanism. The constitutional jurisdiction under Article 199 is not intended to supplant statutory forums, particularly in fiscal matters, and must yield where an effective alternative remedy exists. Accordingly, the availability of the statutory appellate and revisional WP No.287-P/2025.

remedies under Section 10 of the Act of 1958 supplement the conclusion that the present petition is not maintainable.

12.In light of what has been discussed above, instant writ petition stands dismissed and interim order already passed by this Court dated 15.01.2025 is hereby vacated.

Announced.

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JUDGE

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JUDGE

“A.Qayum PS” (DB) Hon’ble Mr. Justice Syed Arshad Ali and Mr. Justice Wiqar Ahmad.

WP No.287-P/2025.