Lahore University of Management Sciences through Syed Sohail Hussain Naqvi etc Vs Director General Military Land and Cantonments Rawalpini etc

Stereo. H C J D A 38.

Judgment Sheet

IN THE LAHORE HIGH COURT AT LAHORE.

JUDICIAL DEPARTMENT

W.P. No. 180995 of 2018

Lahore University of Management Sciences Lahore and another

Versus

Director General, Military Lands and Cantonments, Rawalpindi and 3 others

JUDGEMENT

Date of Hearing 22.10.2025, 28.10.2025, 04.11.2025, 27.11.2025, Petitioners by: Dr. Pevaiz Hassan, Sr. ASC assisted by M/s. Asad Ahmad Ghani, Muhammad Rizwan Rasheed and Barrister Haris Ramzan, Advocates Respondent By For Respondent Nos.2 & 3 Barrister Muhammad Umer Riaz, ASC assisted by M/s. Abdullah Haroon, Saba Shaheen, Ch.

Haseeb Tariq, Barrister Ch. Abubakar, Muhammad Nawas Amin & Muhammad Naeem Beryar, Advocates For Respondent Nos.4 Rana Rehan, Mian Wasim Haseeb, Syed Ali Raza Abbas and Rana Saqib Zulfiqar, Advocates Mr. Fahim Ali, Addl. CEO, W.C.B.

KHALID ISHAQ, J. Through the instant Constitutional Petition, filed under Article 199 of the Constitution of the Islamic Republic of Pakistan (“Constitution”), the Petitioners have called into question orders dated 02.11.2011 and 26.04.2017 (“Impugned Orders”), whereby the claim for exemption from property tax in respect of the buildings comprising Lahore University of Management Sciences (“LUMS”) has been declined under section 99(2)(b) of the Cantonments Act, 1924 (“Cantonment Act”).

2.Succinctly, National Management Foundation (“NMF”) was established 41 years ago; it was registered under the Societies Registration Act, 1860 and has the status of a ‘not-for-profit entity’; it was under the auspices of the NMF that the LUMS was established, NMF owns the land and buildings occupied and used by LUMS for educational purposes. LUMS presently comprises of five schools imparting undergraduate, graduate and doctoral education in the fields of business and management, humanities and social sciences, science and engineering, law and education, besides undertaking research, academic outreach and allied educational activities. As of today, LUMS has more than 5,000 students enrolled approximately, 300 faculty members; it offers twenty one (21) undergraduate majors, twenty nine (29) graduate degrees and has produced a network of approximately 22,794 alumni. LUMS, as contended, has also disbursed approximately Rs.13.3 billion as financial assistance to the students since its inception; presently about 25% of its students are receiving financial support, besides approximately Rs.4.8 billion disbursed under its National Outreach Programme. It is claimed that 70% of total budget is used towards the financial aids disbursed to the meritorious students, who secure admission on merit across Pakistan. Its status as a non-profit educational institution is also recognized under the relevant tax regime. It is of note that the LUMS campus was established and made operational in 1993 but the property tax was never claimed until 14.03.2007, when the first notice was issued by the respondent Cantonment Board, whereby, the property tax was levied upon the buildings occupied and used for the aforesaid educational purposes; LUMS disputed the claim of levy of property tax by filing a detailed reply while claiming exemption under Section 99(2)(b) of the Cantonments Act. The claim eventually came to be declined through the Impugned Orders. Hence this Constitutional Petition.

3.Learned counsel for the Petitioners submits that Section 99(2)(b) of the Cantonment Act, as it stood before its amendment in 2023, grouped “buildings used for educational purposes and public libraries” together, while the words following the comma dealt with “play-grounds and dharmsalas which are open to the public and from which no income is

derived”. The concluding qualifications, it is argued, did not govern buildings used for educational purposes as the mere usage of the buildings for educational purposes was the only test sufficient to attract the exemption from the imposition of property tax due to the disjunctive nature of the second limb of the provision in issue. Learned counsel further submits that even in post amendment scenario of Section 99 of the Cantonment Act, the mere receipt of tuition fees does not establish a commercial or profit-making purpose where the receipts and any surplus remain devoted exclusively to educational purposes and no profit is distributable amongst the founders, members, trustees or persons controlling/governing the institution. Reliance is placed upon the educational objects of NMF and LUMS, the prohibition against private distribution, merit-based admissions, scholarships and financial assistance; the undisputed recognition under the income-tax regime has also been relied upon as an evidence of the institution’s non-profit character. It is further contended that the impugned action of imposition and demand of Property Tax departs from longstanding departmental practice, seek to unsettle earlier periods and cannot be insulated from constitutional scrutiny by insisting upon deposit of the entire disputed demand. Learned counsel additionally maintains that the 2023 amendment cannot retrospectively restrict the earlier exemption. While concluding arguments, placed reliance upon judgments reported as Baz Muhammad Kakar and others v. Federation of Pakistan and others (PLD 2012 SC 923); Syed Mukhtar Hussain Shah v. Mst. Saba Imtiaz and others (PLD 2011 SC 260); Syed Mehmood Akhtar Naqvi v. Federation of Pakistan and others (PLD 2012 SC 1089); Mumtaz Hussain v. Dr. Nasir Khan and others (2010 SCMR 1254); Riaz Hussain and others v. Muhammad Akbar and others (2003 SCMR 181); Cantonment Board, Meerut v. St. John’s School (AIR 2002 All 313); Cantonment Board v. Principal, St. John’s School (2014 (105) ALR 838); Municipal Council, Trichinopoly v. S. Venkatarama Aiyar (AIR 1931 Mad 55); Sama Alana Abdulla v. State of Gujarat (AIR 1996 SC 569); Mohd. Shabbir v. State of Maharashtra (AIR 1979 SC 564); Oxford University Press v. Commissioner of Income Tax, Companies Zone-I, Karachi and others (2019 SCMR 235); Pakistan Cricket Board and others v. Director-General, Excise and Taxation and others (2011 CLC 1894);

Pakistan through the Secretary, Ministry of Defence v. Province of Punjab and others (PLD 1975 SC 37); Rishad Choudri and another v. Cantonment Board, Karachi and another (PLD 2014 Sindh 1); Hashwani Hotels Limited v. Federation of Pakistan and others (PLD 1997 SC 315); Nazir Ahmad v. Pakistan and 11 others (PLD 1970 SC 453); Saghir Ahmed through Legal Heirs v. Province of Punjab and others (PLD 2004 SC 261); State Bank of Pakistan v. Franklin Credit and Investment Company Ltd. and others (2010 SCMR 121); Balochistan Trading Company (Pvt.) Ltd. and others v. National Bank of Pakistan and another (1998 SCMR 1899); Zaigham Imtiaz v. Iqbal Ahmed Ansari and another (2016 CLC 1145); and Yarntex Trading Company and others v. Chief Controller of Buildings and others (PLD 1998 Karachi 11).

4.While maintaining the validity of the Impugned Orders and actions, learned counsel for the Respondents submits that the conditions concerning public access and absence of income apply to the entire enumeration even in the un-amended clause; argues that punctuation cannot override the statutory context; adds that Section 64 of the Cantonment Act expressly contemplates valuation of educational buildings and since LUMS derives substantial receipts from fees, investments, therefore, the exemption envisaged under Section 99 of the Cantonment Act is not attracted. It is argued while alleging that since LUMS is letting out some of its buildings and halls, therefore, it is a commercial activity attracting the imposition and recovery of property tax. Learned counsel contends that the mere fact of a prohibition against distributing profits, does not establish that no income is derived; adds that the recognition of LUMS as non-profit organization, entailing exemption under the Income Tax Ordinance, 2001 (“Ordinance, 2001”) cannot replace the requirements of the Cantonment Act; further contends that exemption provisions require strict construction and heavy burden rests upon the claimant; argues that the amendments brought about in Section 99 of the Cantonment Act in the year 2023, merely clarifies the earlier position rather than changing the same, as contemplated by the petitioners. Learned counsel has vehemently disputed the claim of an enforceable exemption arising merely from past non-recovery; placed reliance upon Sections 65(3) and 80

of the Cantonment Act against the ownership objection and objection to maintainability on account of delay and non-deposit under Section 87(b), read with section 277(2) of the Cantonment Act. In this regard, placed reliance upon Federation of Pakistan v. Durrani Ceramics (2014 PTD 2016), M/s. New Jubilee Insurance Co. Ltd. v. Inquiry Officer, War Risks Insurance (1985 SCMR 1317), P.D.H. Laboratories employees and Workers Union v. Registrar of Trade Unions (1972 PLC 536), Liaquat National Hospital v. Province of Sindh (1985 SCMR 865), Chief Administrator of Auqaf v. Cantonment Board (2021 MLD 346), Chairman Pakistan Railways v. Shah Jahan Shah (PLD 2016 SC 534), M/s. Colony Sugar Mills Ltd. v. Province of Punjab (2017 PTD 406), Ms. Shugfta Hassan v. Federation of Pakistan (2018 PLC (C.S.) 619), Commissioner Inland Revenue, Karachi v. Attock Cement Pakistan Limited (2023 SCMR 279), Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan (1997 PTD 1555); Facebook, Inc. v. Duguid (141 S. Ct. 1163 (2021)); Whirlpool Corporation v. Registrar of Trade Marks (AIR 1999 SC 22); and Sree Durga Distributors v. State of Karnataka ([2007] 5 SCR 1037). Reliance is also placed upon Collector of Custom FBR v. Fitter Pakistan (Pvt.) Ltd. (2020 SCMR 1157) and Iram Ghee Mills Ltd. v. Income Tax Appellate Tribunal (1998 PTD 3835) regarding construction of exemptions. Placed further reliance on Mughal Surgical (Pvt.) Ltd. v. Presiding Officer, Punjab Labour Court No.7 (2006 SCMR 590) and Muhammad Yar Buttar v. Board of Governors, Overseas Pakistanis Foundation, Islamabad (1999 SCMR 819) regarding the statutory right of appeal and Qamaruz Zaman v. Cantonment Board, Rawalpindi (1981 SCMR 623), Shaikh Gulzar Ali & Co. v. Special Judge, Special Court Of Banking (1991 SCMR 590), Syed Match Company Ltd. v. Authority Under Payment Of Wages Act (2003 SCMR 1493) and Kawality Paper Mills (Pvt.) Limited through Managing Director Versus Presiding Officer, Labour Court No.1, Lahore, and 2 others (2005 PLC 6) regarding the deposit requirement. The respondents further attempted to distinguish the Petitioners’ authorities/case laws on the basis of the different statutory language, subject matter and factual circumstances involved.

5.Arguments heard. Record perused.

W.P. No. 180995 of 2018. Page 6

6.The basic question requiring determination in this case relates to the interpretation of Section 99(2)(b) of the Cantonment Act, pre and post amendment of 20231. In a nub, the question of true import of the statutory language in the two regimes is what we are asked to answer. It is the case of the Petitioners that despite amendment brought about in Section 99(2)(b) of the Cantonment Act, LUMS is entitled to exemption of the Property Tax for the mere reason that it fulfills the twin conditions encapsulated in Clause (b) of sub-section (2) of Section 99 of the Cantonment Act as LUMS is open to public on the basis of merit and no income is derived since the amounts of fee charged to the students, who are able to afford the same, is not directed towards the coffers of any of the Promoters, Directors, Trustees of LUMS or NMF and instead, the same is reinvested purely for achieving the education purpose. As regards to the pre-amendment status of the provision in question, it is argued that irrespective of the question of being open to public and deriving of income, if any, the buildings used for educational purposes and public libraries were ipso facto exempt from the imposition of property tax as the second limb of the then existing clause (b) ibid was disjunctive and only pertained to playgrounds and Dharmsalas. Whereas, it is the case of the respondents that even prior to the amendment brought about in 2023, the twin conditions of not deriving income and open to public were attracted towards the building used for educational purposes and libraries.

7.At the outset, the objection founded upon non-deposit requires consideration. Vide order dated 02.11.2011, the statutory appeal filed by LUMS was dismissed on merits, whereas, the revisional order dated 26.04.2017 is predominantly premised on the invocation of Sections 87(b) and 277(2) of the Cantonment Act, holding the challenge as not maintainable for want of deposit, thus, in essence, the demand was sustained. The validity of a statutory condition governing an appeal is distinct from the availability of Constitutional review of a demand challenged as the same falls outside the governing statute. In the case of Balochistan Trading Company,2 the Supreme Court of Pakistan held that Amended vide Act No. XLVII of 2023

Balochistan Trading Company (Pvt.) Ltd. and others v. National Bank of Pakistan and another (1998

SCMR 1899)

the adequacy of a remedy subject to deposit must be examined in its setting; it does not declare every deposit requirement invalid or every tax dispute suitable for Constitutional determination. In the case in hand, the central objection concerns the reach of an express statutory exemption and can be determined without reassessing the quantum of annual rental value. The deposit objection does not, in these circumstances, foreclose examination of that question under Article 199 of the Constitution, therefore, no findings or declaration viz the vires of Section 87(b) is necessary. The lapse of time from the appellate order must also be considered in light of the intervening revision decided in 2017 and the subsequent recovery proceedings. It cannot be treated in its entirety as an unexplained failure to pursue relief. The present determination is confined to the statutory basis of the disputed demands and does not reopen an unrelated assessment merely because the same institution is concerned. For the purpose of completeness, the reliance may also be placed upon a recent judgment of the Supreme Court of Pakistan in the case of Senior Joint Director, Foreign Exchange Operation Division SBP v. Federation of Pakistan and others (PLD 2025 SC 440), whereby, it is held while interpreting the true import of Article 10A of the Constitution that imposition of unreasonable conditions such as the condition of deposit of the entire amount tantamount to stifle the right of appeal, therefore, the same cannot withstand the test of constitutionality, due process and fair trial as the true essence of the access to justice requires an effective opportunity of adjudication before an independent and impartial forum. A statutory remedy must, therefore, be assessed by its practical availability and not merely by its existence on paper. The Supreme Court of Pakistan invalidated the requirement of deposit of the entire penalty or equivalent security which obstructed the opportunity of determination of the case on merits. Needless to observe that every reasonable condition upon an appeal is not unconstitutional by itself. In the present case, the distinction does not reinforce the conclusion that the disputed deposit requirement cannot exclude Constitutional scrutiny of the statutory exemption without examining the nature of the challenge and the remedy available, thus, we are not required to pronounce upon the validity of Section 87(b) of the Cantonment Act as it is not required to be decided for decision of this case

W.P. No. 180995 of 2018. Page 8

following the settled principle of law that "If it is not necessary to decide more to dispose of a case, then it is necessary not to decide more.3"

8.The Impugned Orders and the determinations made by the respondents relates to the pre-amendment regime. The subsequent amendment, however, is relevant for identifying the change in law and the limits of the present determination; it does not dispense with the need to decide earlier liability under the provision, which was in force prior to the amendment of 2023. For the ease of reference, the relevant pre and post amendment provisions are reproduced herein below with the changes highlighted as bold in the post amendment text:

Before the 2023 Amendment After the 2023 Amendment

99.Exemption in the case of 99. Exemption in the case of buildings.—(1) When, in pursuance of buildings.—(1) When, in pursuance of section 98, a Board has fixed a special section 98, a Board has fixed a special rate for the cleansing of any factory, rate for the cleansing of any factory, hotel, club or group of buildings or hotel, club or group of buildings or lands, such premises shall be exempted lands, such premises shall be exempted from the payment of any conservancy from the payment of any conservancy or scavenging tax imposed in the or scavenging tax imposed in the cantonment. cantonment.

(2)The following buildings and lands (2) The Board may exempt following shall be exempt from any tax on buildings and lands from any tax on property other than a tax imposed to property other than a tax imposed to cover the cost of specific services cover the cost of specific services rendered by the Board, namely:— rendered by the Board, namely:—

(a)places set apart for public worship (a) places set apart for public worship and either actually so used or used for and either actually so used or used for no other purpose; no other purpose;

(b)buildings used for educational (b) buildings used for educational purposes and public libraries, play- purposes which are open to public grounds and dharmsalas which are open and from which no income is to the public and from which no income derived;

is derived;

(c)public libraries, play-grounds and dharmsalas which are open to the public and from which no income is derived;

Fozia Mazhar v. Additional District Judge, Jhang and others (PLD 2024 Supreme Court 771); Dobbs v. Jackson Women’s Health Org. (597 U.S. 215 (2022), Jurists Foundation through Chairman v. Federal Government through Secretary, Ministry of Defence and others (PLD 2020 SC 1) Meera Shafi v. Office of the Governor Punjab & others (2019 LHC 3402) / (PLD 2020 Lahore 54), Lahore Development Authority v. Imrana Tiwana’ (2015 SCMR 1739).

9.Adverting to the interpretation of the statutory provision as it existed prior to amendments made in 2023, the position of the ‘comma’ in the un- amended clause (b) of sub-section (2) of Section 99 of the Cantonment Act is of significance. A perusal of the un-amended clause reflects that the ‘comma’ appears after the words “public libraries” and not after “educational purposes”, thus, the words occurring before ‘comma’ forms the group “buildings used for educational purposes and public libraries” while the words occurring after it forms the second part i.e. “play-grounds and dharmsalas”, which category of buildings are immediately followed by the qualifications concerning ‘public access’ and ‘income’. Read together, the conjunctions, punctuation and arrangement leads to an ineluctable division of clause (b) into two different groups and makes it abundantly clear that the concluding qualifications are attached to the latter i.e. “play-grounds and dharmsalas”. This construction gives the educational use identified in the first group its own operation. It does not insert a comma or move one from the place in which the Legislature placed it. The intent of the legislature is also evident from the words employed in the relevant provision from the fact that in the normal course, the libraries and educational institutions cannot, by their operations, be rendered open to public without any qualifications, whereas, on the contrary, the playgrounds and dharmsalas are such establishments by their very genesis, which are rendered open to public.

10.We are mindful of the settled principles of interpretation of statutes that punctuation is an aid to meaning and is not invariably decisive. Equally, it cannot be ignored merely because another construction would benefit the revenue. The grammatical force of a qualification depends upon the actual arrangement of the words and competing canons must be tested against that arrangement. The approach sought to be pressed by the respondents, therefore, requires examination of whether the text constitutes a straightforward parallel series; it cannot itself establish that premise. The un- amended clause (b) ibid reflects that the paired expressions on either side of the comma support the narrower reach of the qualification towards the second and distinct limb of the category(s) of buildings i.e. “play-grounds and dharmsalas”. In this regard, we seek to rely upon the well settled

W.P. No. 180995 of 2018. Page 10

principles of interpretation of statutes i.e. ‘the Last Antecedent Canon’4 (a pronoun, relative pronoun or demonstrative adjective generally refers to the nearest reasonable antecedent). The next principle relevant for the purpose is the interpretive tool of ‘the Nearest-Reasonable-Referent Canon5 (when the syntax involved something other than a parallel series of nouns or verbs, a prepositive or postpositive modifier normally applies only to the nearest reasonable referent)’. Likewise, we also seek to rely upon is ‘the Punctuation Canon6’, which is to the effect that punctuation is a permissible indicator of meaning and the meaning of a statute will typically heed the commands of punctuation. The reliance may be placed upon Syed Mehmood Akhtar Naqvi’s7 case, whereby, the Supreme Court of Pakistan, while interpreting the ‘comma’ as occurring in Article 63(1)(c) of the Constitution, has quoted with approval the meaning and interpretation of ‘comma’ by “the Words and Phrases, Permanent Edition 7A”, which defines that “A ‘comma’ is a point used to mark the smallest structural divisions of sentence, or a rhetorical punctuation mark indicating the slightest possible separation in ideas or construction.”. The Supreme Court of Pakistan held that the use of ‘comma’ before the word ‘or’ manifests the intention of the legislature that “ceases to be a citizen of Pakistan” to be read separately from “holding of citizenship of foreign state”.

11.In this regard we are also fortified by the holding of the Supreme Court of Pakistan in the case of M/s. Standard Printing Press,8 as the Supreme Court declined to extend an expression beyond its grammatical connection by effectively altering the punctuation. The same method requires the separation, which existed prior to the amendment in 2023, to be respected unless the statutory context supplies a sufficient reason to depart from it. This view is also supported by virtue of the amendment and the intended purpose sought to be achieved by the legislature by removing the see pp. 144 | Reading Law: The Interpretation of Legal Texts | Antonin Scalia and Bryan A. Garner | Published by Thomson/West.

see pp. 152 | Reading Law: The Interpretation of Legal Texts | Antonin Scalia and Bryan A. Garner | Published by Thomson/West.

see pp. 161 | Reading Law: The Interpretation of Legal Texts | Antonin Scalia and Bryan A. Garner | Published by Thomson/West.

Syed Mehmood Akhtar Naqvi. v. Federation of Pakistan and others (PLD 2012 SC 1089) Standard Printing Press v. Sind Employees’ Social Security Institution (1988 SCMR 91)

W.P. No. 180995 of 2018. Page 11

‘comma’ from the text of clause (b) ibid. Nonetheless, one must kept it mind that a ‘comma’ is always an evidence of structure and not an independent command that every expression following it must operate disjunctively on all occasions and in all texts, instead, the interpretation concerning disjunctive wording require the text to be examined as a whole. The foregoing is reinforced by the law enunciated by Supreme Court of Pakistan in the case of Pakistan Wapda Foundation,9 wherein, while interpreting the statutory definition of ‘manufacturer’, the Supreme Court identified two categories separated by the enacted syntax and confined the concluding requirement concerning goods intended for sale to the latter category. The significance for the present controversy is that a terminal qualification does not necessarily travel backwards through every preceding category. Here, the paired groups and intervening comma provide the textual basis for confining the public-access and no-income qualifications to play-grounds and dharmsalas under the former clause. We are further enlightened by the majority reasoning of the Supreme Court of Pakistan in Khurshid Soap and Chemical Industries10 case, wherein, the use of the words “in the generation of nuclear energy” were not extended to mineral oil and natural gas merely because those expressions occurred in the same legislative entry. The subject matter and the function of the qualification were decisive. The treatment of Durrani Ceramics11 in that discussion, therefore, supports contextual allocation of a qualification, rather than a mechanical rule that the last words must govern the whole enumeration. Applied here, that approach accords with the distinct statutory grouping of ‘educational buildings and public libraries’.

12.Learned counsel for the respondents has sought to argue that the amendments brought about in Section 99(2)(b) are merely clarificatory, thus, the same, as contended, does not extend any benefit to the Petitioners in either of the two scenarios i.e. the pre or post amendment. We are not persuaded by the argument advanced by learned counsel for the respondents as it is well settled that an amendment purporting to impose a fiscal burden Pakistan Wapda Foundation v. Collector of Customs, Sales Tax, Lahore (2023 SCMR 79) Khurshid Soap and Chemical Industries (Pvt.) Ltd. v. Federation of Pakistan (PLD 2020 SC 641) Federation of Pakistan v. Durrani Ceramics (2014 PTD 2016).

W.P. No. 180995 of 2018. Page 12

or removing an existing protection cannot be carried backwards merely because the authority calls it ‘clarificatory’. The altered grouping and express conditions introduced in 2023 disclose a substantive change and no necessary implication has been demonstrated which makes those new restrictions govern the earlier assessment periods in issue.12

13.The distributive principle, sometimes described as reddendo singula singulis (by referring each to each), directs that expressions be referred to the subjects to which they appropriately relate. It does not permit a Court to rearrange the provision to achieve a preferred result. The rule of the last antecedent is a related, but distinct, aid: a following qualification ordinarily attaches to the immediately preceding expression, subject, always to indications that it governs a wider series. Neither rule is conclusive. Their assistance here lies in testing the respondents’ proposed extension against the actual groups, conjunctions and punctuation in the former clause. Taken together with those features, they support the construction already stated.13

14.The above leads us to hold that in the pre-amendment scenario of Section 99 of the Cantonment Act, the buildings used for educational purposes and public libraries were entitled to an ipso facto exemption and the conditions enumerated in the 2nd limb of clause (b) of Sub-Section (2) of Section 99 i.e. ‘open to public’ and ‘no income being derived’, were not attracted for determining the element of exemption.

15.This brings us to consider the effect of the amendments brought about in 2023. In post amendment scenario, the twin conditions: ‘open to public’ and ‘from which no income is derived’, are clearly the subjective tests, which will be determined by the Cantonment Board for the purpose of issuance of exemption. As evident, there is a sea-change brought about through the Amendment Act, 2023, whereby, the Cantonment Board has been conferred upon the jurisdiction to determine as to whether the exemption sought is attracted or otherwise, however, no unbridled discretion 12 Zila Council Jehlum v. Pakistan Tobacco Company Limited (PLD 2016 SC 398). 13 Koteswar Vittal Kamath v. K. Rangapa Baliga & Co. (AIR 1969 SC 504); Anoop M.S. v. State of Kerala (W.A. No. 1823 of 2016); Classic Builders and Developers v. Union of India ([2001] 251 ITR 492 (MP)); Lockhart v. United States (577 U.S. 347 (2016)); Barnhart, Commissioner of Social Security v. Thomas (540 U.S. 20 (2003)).

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has been conferred upon the Cantonment Board, instead, the decision to grant or decline the exemption is circumscribed by the twin conditions i.e. ‘open to public’ and ‘from which no income is derived’.

16.The 2023 Amendment places educational buildings in a separate clause and expressly attaches the public-access and no-income requirements to them. It also replaces the mandatory formulation “shall be exempt” with “The Board may exempt”. These are material textual changes. The earlier liability cannot be determined by silently reading the later conditions into the former provision. The respondents’ reliance upon the treatment of clarificatory amendments does not establish that this particular substitution is merely explanatory and that conclusion must follow from the amendment itself and its effect upon the earlier text. On the construction adopted above, it changes the requirements governing educational buildings and must not be used retrospectively to withdraw the earlier exemption. The non-profit argument requires separate treatment. An institution may receive fees and retain a surplus without distribution of profit to its owners or controllers. In the instant case, not an iota of evidence has either been considered while dismissing LUMS’s appeal and revision or produced to suggest that any amount generated by charging of fee by LUMS is channelized towards the promoters of the institution. In this regard, we seek guidance from the judgment rendered by the Supreme Court of Pakistan in the case of Oxford University Press14, which explains the distinction in relation to clause (86) of the Second Schedule to the Income Tax Ordinance, 1979 and it was held that retention of receipts within the institution, and the absence of distributable private gain, was central to the interpretation of the words “solely for educational purposes and not for purposes of profit”. This reasoning flowing from Oxford University Press case answers the unfounded suggestion that ‘the mere existence of substantial receipts necessarily converts LUMS into a commercial enterprise’. The charging of fee does not establish that the phrases “not for purposes of profit” and “from which no income is derived” are interchangeable. The same distinction explains the Oxford University Press v. Commissioner of Income Tax, Companies Zone-I, Karachi and others (2019

SCMR 235)

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limited assistance available from the authorities concerning public purpose and commercial activity. Charging a fee does not necessarily deprive a use of its public character. The receipt of fees does not, by itself, negate the public or charitable character of the use to which property is put. Its exemption arose under a different enactment and its conditions cannot be substituted for those of the Cantonment Act.15 It nevertheless supports rejection of the respondents’ inference that fee collection alone proves commercial operation. The inquiry must address the relevant statutory criterion and the evidence concerning use and purpose. In the amended regime, the conclusion leaves the express no-income requirement to be separately examined; it does not erase it. The particular statutory requirements must nonetheless be satisfied. In this respect we seek guidance from a Supreme Court Judgment, whereby, while speaking for the Bench, Hamoodur Rahman, CJ proceeded to hold: . . . and if a property is really used for a public purpose then the fact that a fee is levied for the user of such property would not render the user a non-public purpose, Thus, for instance, the provision of slaughter houses at which a fee is charged for slaughtering cattle will not render the slaughter-house a merely profit- making concern. It would still remain a premises used for a public purpose.16

17.The recognition of LUMS or NMF under the income-tax regime, and the historical guidance in CBR Circular No. 2 of 1996, are relevant to the Petitioners’ explanation of their institutional character. They do not independently confer an exemption under the Cantonment Act. For the earlier period, the exemption follows from educational use within Section 99(2)(b), as construed above; income-tax recognition is neither its source nor a substitute for proof of that use. The respondents’ distinction between the two fiscal regimes may have some substances but does not sustain their extension of the concluding qualifications to the first group in the un- amended clause. The post-amendment inquiry must be individualized and Ziauddin Hospital Trust v. Director-General/Commissioner, Excise and Taxation, Sindh, Karachi (PLD 2001 Karachi 52)

Pakistan through the Secretary, Ministry of Defence v. Province of Punjab and others (PLD 1975 SC 37), Pakistan Cricket Board and others v. Director-General, Excise and Taxation and others (2011 CLC

based upon evidence, rather than a label attached merely because tuition fees are charged. The Cantonment Board was required to consider the relevant building and assessment period, its actual use, the nature and source of the receipts attributed to it, the arrangements for public access, and the institution’s governing instruments and accounts, which has not been done and the mere charging of fee has been labeled as deriving of income for denying the exemption from property tax. The application of funds to education and the prohibition against private distribution are relevant to the allegation of commercial operation. Nevertheless, those matters cannot, by themselves, establish compliance with the amended requirement that no income be derived. The scope and application of that requirement must be addressed expressly. The change to “may exempt” also requires a lawful and reasoned exercise of the statutory power. In case the Cantonment Board is able to confront LUMS that funds generated from charging of fee are directed towards the promoters as dividends, the Cantonment Board may proceed to withdraw the exemption, if such pursuit is evidenced by tangible material.

18.The respondents’ allegation that buildings or halls have been let to third parties also requires precision. The exemption concerns buildings used for the stipulated purpose; it is not a blanket immunity attached to every asset because it belongs to a university. Any distinct non-educational use must be identified with reference to the property, period and supporting material. An allegation of receipts elsewhere in the institution’s accounts cannot automatically establish that the entire building used for educational purposes has ceased to qualify for the exemption.

19.The controversy having been examined to the aforesaid extent, the next aspect requiring consideration relates to connotation of the term ‘income’ as occurring in clause (b) of sub-section (2) of Section 99 of the Cantonment Act, which must also be settled in its statutory setting. The Cantonment Act does not define the expression ‘income’; its absence does not, however, require the definition in another fiscal enactment to be incorporated automatically, nonetheless, since the subject matter provision of the Cantonment Act also relates to the imposition of exemption of

W.P. No. 180995 of 2018. Page 16

property tax, therefore, the assistance may also be sought from the similarl terms used in other fiscal statutes e.g. Income Tax Ordinance, 2001. Section 2(29) of the Ordinance, 2001 contains an inclusive definition extending to amounts chargeable to tax, specified amounts subject to collection or deduction of tax, amounts treated as income under the Ordinance, 2001 and loss of income. Those inclusions serve its own charging and computation provisions; they are not a general definition enacted for every fiscal statute. Section 2(36) of the Ordinance, 2001 separately deals with a non-profit organization, addresses its constitution, approval and the restriction against private benefit. The two provisions accordingly distinguish the character of a receipt as income from the question whether private benefit is conferred. The distinction is further apparent from Section 100C of the Ordinance, 2001, which provides, subject to its applicable conditions, relief in respect of income of qualifying charitable and educational institutions. Such relief presupposes that a non-profit institution can itself derive income. Likewise, the judgment in Oxford University Press case distinguishes the making and retention of income or surplus from a purpose of distributing profit to owners or stakeholders.

20.An inextricable question, which also requires determination is rooted in the submissions made by the learned counsel for the respondents that since the provision in question i.e. Section 99 of the Cantonment Act, is in the nature of an exemption provision, therefore, the same has to be construed strictly. We are mindful of the settled principles of law viz the contours of interpretation of an exemption clause, which mandates that the claimant is required to establish that it squarely falls within the spheres of exemptions; nonetheless, it is also well settled that strict construction of an exemption clause does not permit the Court to introduce an additional restriction or deny a benefit which the provision, if properly understood, confers. The Supreme Court has expressly disapproved the introduction of an unexpressed condition into an educational exemption.17 Likewise, strict interpretation cannot justify isolating a fiscal concession from the statutory Oxford University Press v. Commissioner of Income Tax, Companies Zone-I, Karachi and others (2019

SCMR 235).

W.P. No. 180995 of 2018. Page 17

scheme or defeating its operation through an assumed legislative intention.18 It is also well settled principle of fiscal statutes that where a fiscal provision reasonably admits of two interpretations and doubt remains concerning its true import, the construction favourable to the taxpayer is to be preferred.19 It is vouched by the respectable authority that exemption clause to be liberally construed once the subject squarely falls within its ambit.20 This furnishes an additional ground supporting the construction already reached from the language and arrangement of the un-amended Section 99(2)(b); it does not dispense with establishing that the property falls within the exempted category.

21.For the foregoing reasons, the Constitutional Petition is allowed in the following terms:

i. The Impugned Orders dated 02.11.2011 and 26.04.2017 and any consequent demand raised on the basis thereof, are declared to be without lawful authority and of no legal effect.

ii. The demand of property tax in respect of the buildings occupied and used by LUMS for educational purposes, insofar as it relates to the period preceding the amendment of 2023, cannot be sustained, being contrary to the exemption available under the then existing Section 99(2)(b) of the Cantonment Act.

Consequently, recovery founded upon that demand shall not be pursued.

iii. As regards the post-amendment period, the amended Section 99(2)(b) of Cantonment Act cannot itself be construed as imposing property tax upon LUMS. The words “The Board may exempt” confers discretion qua exemption, which

Commissioner Inland Revenue, Zone-II, Large Taxpayers Unit, Lahore v. Messrs Coca Cola Export Corporation (PLD 2026 Lahore 90).

Capital Development Authority, CDA through Chairman, CDA, Islamabad v. Ahmed Murtaza and another (2023 SCMR 61), Government of Sindh through Secretary and Director General, Excise and Taxation and another v. Muhammad Shafi and others (PLD 2015 SC 380), M/s. Mehran Associates Limited v. The Commissioner of Income Tax, Karachi (1993 SCMR 274), The Commissioner Inland Revenue v. Mekotex (Pvt) Limited & others (2024 SCP 316), Collector of Customs v. Waseef Ullah (2023

SCMR 503)

Collector of Customs v. Waseef Ullah (2023 SCMR 503), Pakistan Television Corporation v. Commissioner Inland Revenue (2019 SCMR 282), Pakistan Match Industries v. Assistant Collector (2019

SCMR 906)

discretion must be exercised lawfully upon consideration of the stipulated conditions and the relevant material. The mere charging of tuition fees is inconsequential, without examining the nature and connection with the relevant property, to conclude that income is derived from the buildings for declining exemption on that ground alone. Consequently, any determination for a subsequent assessment period shall be made through a reasoned order in accordance with the findings rendered above.

(Hassan Nawaz Makhdoom) (Khalid Ishaq) Judge Judge

The judgment in this case was reserved on 03.07.2026, which was the last day before summer vacation, 2026 and announced in open Court today i.e. on 06.10.2026.

(Hassan Nawaz Makhdoom) (Khalid Ishaq) Judge Judge

APPROVED FOR REPORTING.

(Hassan Nawaz Makhdoom) (Khalid Ishaq) Judge Judge

Awais!