National Fertilizers Vs Govt of Pakistan etc

JUDGMENT SHEET

PESHAWAR HIGH COURT, PESHAWAR

JUDICIAL DEPARTMENT

W.P No.6445-P/2024 with I.R

National Fertilizers Marketing Ltd. Through General Manager Vs Federation of Pakistan & 7 others

For Petitioner: Wilayat Khan Advocate.( on video link) For Respondents: Mr. GoharRehmanKhattak, DAG for federation, MianIftikhar Jan, Advocate for Respondents No 2 to 4, Mr. Furqan Ahmad Advocate for respondents No 5 and 6.

Date of Hearing: 20.01.2026 Date of announcement: 31.03.2026

JUDGMENT

MUHAMMAD NAEEM ANWAR, J:-The Petitioner has invoked the constitutional jurisdiction of this Court under Article 199 of the Constitution of the Islamic Republic of Pakistan 1973 (“the Constitution”), seeking the following prayers:- (1). The impugned levy of tax on the petitioner by the respondents under the Cantonment Act 1924 may kindly be declared to be ultra vires the provisions of articles 165 of the constitution of pakistan’1973 and provision of urban immovable property tax Act 1958 and Cantonment Act (2). Any other relief that this honourable court deems fit and proper may also kindly be granted.

Interim Relief: - It is also prayed that this honourable court, during the pendency of the titled writ petition, may graciously be pleased to safe guard the rights and interest of the petitioner by directing respondents not to initiate recovery proceedings till final disposal of this writ petition.

2.The petitioner, National Fertilizers Marketing Limited (NFML), Risalpur, through its General Manager, has invoked the constitutional jurisdiction of this Court under Article 199 of the Constitution, assailing the levy and demand of tax raised by the Cantonment authorities, including the Cantonment Board, Risalpur, in respect of the property and premises owned by Pakistan Railways at Risalpur. It is contended that the petitioner has

been utilizing the said land under a lease agreement executed in the year 2002, which has been extended from time to time, and that the property in question admittedly falls within the territorial jurisdiction of the Cantonment Board, Risalpur. It is further averred that the petitioner had earlier been proceeded against through a complaint instituted under Section 259 of the Cantonments Act, 1924, which proceedings were contested by filing a detailed reply and raising legal objections; however, the said objections were declined vide order dated 15.06.2015, and the criminal revision preferred thereagainst was dismissed through order dated 23.06.2016. Thereafter, Writ Petition No. 3833 of 2016 was disposed of on 24.11.2022 with a direction to avail the statutory remedy of appeal. Despite the said direction, the respondents have again issued the impugned demand notice dated 23.10.2024, coupled with a threat of coercive recovery proceedings. On merits, the petitioner asserts that, by virtue of Article 165 of the Constitution, it is not liable to pay the impugned taxes; that the property in question is exempt from taxation under Section 99 of the Cantonments Act, 1924; that exemption is also available in respect of Federal Government properties under the Urban Immovable Property Tax Act, 1958; and that the impugned action is the result of misreading and non-reading of the relevant law, failure to redress the petitioner’s grievance, and arbitrary and high- handed exercise of authority. It is further contended that any unlawful levy of tax would ultimately impose an additional financial burden upon farmers, as the petitioner is engaged in the distribution of fertilizers at subsidized rates. Accordingly, the petitioner prays that the impugned levy and demand of tax be declared to be without lawful authority and of no legal effect, being ultra vires the Constitution and the governing statutory provisions, and further seeks grant of any other appropriate relief deemed just and proper by this Court, along with interim protection during the pendency of the petition by restraining the respondents from

initiating or proceeding with recovery measures until final adjudication of the matter.

3.Respondents No. 2 to 4, in their written reply, have contended that the petitioner is engaged in commercial business activities within the cantonment limits and, therefore, does not fall within the ambit of any statutory exemption from the levy of taxes. It has further been asserted that, in terms of Section 12 of the Cantonments Rent Restriction Act, the tenant in occupation of the premises is legally liable to pay the applicable taxes and municipal dues, thereby placing the statutory burden squarely upon the petitioner. Respondents No. 5 and 6, in their written comments, have acknowledged that the petitioner is a tenant of Pakistan Railways under a lease agreement dated 25.04.2002; however, they have maintained that, under the constitutional framework of Pakistan, Pakistan Railways, being a Federal Government entity, enjoys exemption from payment of taxes in respect of its property.

4.Arguments heard; record perused.

5.In the present writ petition, the following questions require determination.

1.Whether the petitioner is entitled to exemption from taxes under Article 165 of the Constitution of the Islamic Republic of Pakistan, Section 99 of the Cantonments Act, 1924, and Section 4 of the West Pakistan Urban Immovable Property Tax Act, 1958?”

2.Who is primarily liable to pay property tax under the relevant statute, the owner or the occupier/licensee?

6.Before adverting to the questions involved in the present petition, it would be advantageous to briefly recount the genesis of the controversy. The matter originated when the Cantonment Board, Risalpur, through its Executive Officer, initiated proceedings under Section 2591 of the Cantonments Act, 1924 by

259.Method of recovery. (1) Notwithstanding anything elsewhere contained in this Act, arrears of any tax and any other money recoverable by a Board under this Act may be

filing an application before the Court of the Judicial Magistrate, Nowshera on 03.09.2014, seeking recovery of house tax and water tax for the assessment periods 2011–2012 and 2012–2013 in the aggregate sum of Rs. 620,626. The petitioner submitted objections to the said claim; however, vide order dated 15.06.2015, the learned Senior Civil Judge/Cantonment Magistrate, Nowshera, directed the petitioner to deposit the assessed amount of tax on or before 29.06.2015. Feeling aggrieved by the said order, the petitioner preferred a revision petition before the Court of Sessions, Nowshera, which was dismissed by the learned Additional Sessions Judge-III, Nowshera, vide order dated 23.06.2016, inter alia holding that, in view of Section 12 of the Cantonments Rent Restriction Act, 1963, the liability to pay municipal taxes rests upon the tenant, and that the petitioner, being in occupation of the premises as a tenant of Pakistan Railways, could not lawfully evade such statutory liability.

7.The petitioner thereafter invoked the constitutional jurisdiction of this Court through Writ Petition No. 3833-P of 2016, asserting exemption from the impugned taxes on the strength of Article 165 of the Constitution, Section 99 of the Cantonments Act, 1924, and the West Pakistan Urban Immovable Property Tax Act, 1958; however, vide order dated 24.11.2022, this Court declined to entertain the petition on the ground that an adequate and efficacious alternate remedy was available under Section 84 of the Cantonments Act, 1924, which had not been availed, while directing the petitioner to approach the competent statutory forum. In compliance with the said direction, the petitioner preferred an recovered together with the cost of recovery either by suit or on application to a Magistrate having jurisdiction in the cantonment or in any place where the person from whom such tax or money is recoverable may for the time being be residing. by the distress and sale of any moveable property, or by sealing, attachment and sale of immovable property of], such person which is within the limits of such Magistrate’s jurisdiction, and shall, if payable by the owner of any property as such, be a charge on the property until paid: Provided that the tools of artisans shall be exempt from such distress or sale.(2) An application to a Magistrate under sub‐section (1) shall be in writing and shall be signed by the President or Vice President of the Board or by the Executive Officer, but shall not require to be personally presented.

appeal before the Director, Military Lands and Cantonments, Peshawar; nevertheless, the appellate authority, vide order dated 23.10.2024, dismissed the appeal against the assessment, observing that properties situated within cantonment limits are generally held on lease and that the lessees or occupants thereof are liable to pay the assessed property tax in accordance with law. The petitioner has now, once again, invoked the constitutional jurisdiction of this Court through the present writ petition.

8.Insofar as Question No. 01 is concerned, the petitioner has placed reliance upon Article 165 of the Constitution, Section 99 of the Cantonments Act, 1924, and Section 4 of the West Pakistan Urban Immovable Property Tax Act, 1958, in support of its claim to exemption from the levy of the impugned taxes. It is, therefore, both necessary and appropriate to first examine the true scope, object, and legal import of the aforesaid constitutional and statutory provisions in order to determine the nature and categories of property that may legitimately qualify for exemption from the imposition and recovery of such taxes.It is by now a well-settled proposition of constitutional law that Article 165 of the Constitution embodies the principle of inter-governmental tax immunity, providing that the property and income of the Federation shall not be subject to taxation under any law enacted by a Provincial Assembly, and correspondingly, the property and income of a Province shall not be liable to taxation under any Act of Parliament or of another Province, subject, however, to the limited exception where a Province carries on any trade or business outside its territorial limits. The provision further clarifies that the constitutional immunity does not extend to the levy of fees in consideration of services rendered.Furthermore, Article 165A of the Constitution, inserted ex abundanti cautela for removal of doubt and clarification of legislative competence, unequivocally declares that Parliament has always possessed, and continues to possess, the authority to impose and recover tax on the income of

any corporation, company, or other body established under a Federal or Provincial law, or owned or controlled, wholly or partly, by the Federal Government or a Provincial Government, irrespective of the manner in which such income is applied or the ultimate destination thereof. The said provision also operates to validate all past levies and recoveries of such taxes and to neutralize the legal effect of any judgment, decree, or order inconsistent with the constitutional mandate.In this context, this Court, in the case concerning the State Bank of Pakistan2, authoritatively expounded the governing principle in the following terms: “19. It can, therefore, be seen from the aforesaid judgments that for the Court(s) to make use of the doctrine of lifting the veil of incorporation, there must exist justifiable reasons to ascertain the real ownership and control of a corporation for the purpose of Article 165 of the Constitution. Moreover, a corporation or instrumentality of the Federal Government having a monopoly in the area of its operation being solely performing sovereign functions of the state, will be deemed a department of the Government and hence entitled to the exemption under Article 165 of the Constitution from payment of property tax. Similarly, the Court(s) would resort to the doctrine of lifting the veil of incorporation in the cases where a corporation whose entire shareholding is owned by Federal Government whereas a corporation which is not wholly owned by the Federal Government and part of the shareholding vests in other entities and persons as well, will not be extended the benefit of Article 165 of the Constitution. The Court(s) have extended the benefit of Article 165 of the Constitution to property owned directly by the Federal Government but the said benefit has also been extended to properties owned by the Federal Government through its instrumentalities and body corporates, however, a Government Corporation conducting commercial activities in the normal course of business and competing with similar entities has not been given the benefit of Article 165 for seeking exemption from property tax. It must, however, be noted that The Associated Cement case (supra), has set the tone for future jurisprudence, therefore, principles laid down in it must be considered carefully in respect of the applicability of the exemption under Article 165 of the Constitution to instrumentalities and corporations claiming to be owned by the Federal Government.”

State Bank of Pakistan Vs Federation of Pakistan (PLD 2022 Peshawar 46)

9.This view has been further affirmed by this Court in a recent judgment titled “ZTBL through Regional Business Head, ZTBL, Zonal Office, Peshawar v Government of Khyber Pakhtunkhwa through Chief Secretary, Peshawar etc.,”3wherein the scope of Article 165 of the Constitution, in a matter of similar nature, has been clarified. The relevant paragraphs are reproduced below for ready reference:

“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 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 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), Writ Petition No.287-P/2025, Decided on 22.10.2025. (2025 PHC 8761)

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 vs. 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 duty, some of which or all of which may partake of the function of the government both sovereign and not sovereign. In the 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 ofsales 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, 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.”

10.The crux of the above-referred judgment is that even where a corporation is wholly owned or substantially controlled by the Government, it does not, for purposes of taxation, assume the legal character of the Federation. Where such an entity operates as a commercial or business undertaking, its distinct corporate personality remains intact, and the constitutional immunity contemplated under Article 165 of the Constitution is not attracted, as fiscal exemptions cannot be claimed by disregarding or lifting the corporate veil4 merely on account of governmental ownership or control. Article 165 protects the property and income of the Government as such, and not the property or income of incorporated companies, notwithstanding that such companies may be owned, managed, or controlled by the Government. Only property that truly vests in the Federation, or in an entity discharging sovereign or essential governmental functions in its own right, may qualify for the protection envisaged under the said provision.It is a settled principle of corporate and constitutional law that corporations incorporated under the company law possess a separate juristic personality distinct from that of the Government, and their assets cannot, merely by reason of governmental shareholding, supervision, or administrative control, be treated as Once a company is incorporated, it becomes a distinct juristic person, separate from those who control or own it.The corporate veil refers to the legal principle under which a company is recognized as a separate and independent legal person, distinct from its shareholders, directors, or owners. Under this concept, the property, rights, and liabilities of the company belong to the company itself, and not to the individuals behind it, thereby shielding them from personal responsibility for the acts and obligations of the company. This separation is called the “veil” between the company and its owners.

property of the Federation. The constitutional immunity under Article 165 is thus confined to property genuinely belonging to the Government and does not extend to government-owned or government-controlled commercial bodies functioning as independent corporate entities. The jurisprudence developed in this regard, particularly following the ratio laid down in Associated Cement5 and subsequently reinforced through the constitutional clarification embodied in Article 165-A, affirms that the corporate veil cannot ordinarily be pierced for the purpose of claiming fiscal exemptions, save in exceptional and narrowly circumscribed circumstances justified by compelling legal grounds.Consequently, mere governmental ownership or control is not the determinative factor; rather, the decisive consideration is the true nature and character of the functions performed by the entity—namely, whether it is engaged in the discharge of sovereign or essential governmental functions, or whether it operates in the ordinary course of trade or commerce as a commercial undertaking. Where an entity participates in the marketplace, carries on business activities, and generates revenue in a manner comparable to private commercial concerns, it cannot legitimately invoke constitutional tax immunity under Article 165 of the Constitution. In the light of the foregoing settled principles, the precise legal status and functional character of the present petitioner fall to be examined in order to determine the availability, or otherwise, of the claimed exemption.

11.The Federal Government, for purposes of the executive authority of the Federation, is constitutionally defined under Article 90 of the Constitution as comprising the Prime Minister and the Federal Ministers, collectively constituting the Federal Cabinet. Article 98 further provides that Parliament (Majlis-e-Shoora), on the recommendation of the Federal Government, may by law confer functions upon officers or authorities subordinate to the Union Council Ali Wahan v. Associated Cement (Pvt.) Ltd. (1993 SCMR 468)

Federal Government, while Article 99 mandates the Federal Government to frame rules for the allocation, transaction, and conduct of its business6. The constitutional import of the expression “Federal Government” has been authoritatively settled by the august Supreme Court in the case of Mustafa Impex7, wherein it was held that the term “Federal Government” denotes the collective Federal Cabinet, namely the Prime Minister acting together with the Federal Ministers, and not any individual functionary or administrative entity acting independently. This interpretation also finds statutory reinforcement in Section 3(8ab) of the General Clauses Act, 1897, which provides the definitional framework for the expression “Federal Government.” In pursuance of the aforesaid constitutional scheme, the Rules8 of Business, 1973 have been framed under Articles 90 and 99 of the Constitution to regulate the allocation, distribution, and transaction of the business of the Federal Government. Schedule9 I to the said Rules contains an exhaustive enumeration of Ministries and their corresponding Divisions, wherein, at Serial No. 13, the Ministry of Industries and Production is specified along with the Industries and Production Division. Schedule10 II deals with the distribution of business among the respective Divisions, and under the Industries and Production Division, the National Fertilizer Corporation, Lahore, is mentioned as one of the subjects or items of business assigned to that Division. The mere inclusion of the National Fertilizer Corporation, Lahore, in Schedule II signifies only that its affairs fall within the administrative supervision and policy domain of the Industries and Production Division; such reference does not, in Business" means all work done by the Federal Government. (Rule 2(iii) of Rules of Business, 1973).

Messrs Mustafa Impex Vs the Government of Pakistan (PLD 2016 Supreme Court Rule 3(1) of the Rules, ibid. (List of Ministries and Divisions) Rule 3 (3) of the Rules, ibid. (Distribution of Business Among the Divisions) Rule-4(4) of Rules ibid. (List of Attached Departments Declared as Such by The Federal Government)

law, elevate the Corporation to the status of a Ministry, Division, or Department of the Federal Government. Schedule III to the Rules of Business, 1973, on the other hand, contains the list of Attached Departments formally declared as such by the Federal Government. Significantly, neither the National Fertilizer Corporation nor the National Fertilizers Marketing Limited finds mention in Schedule III. The inescapable and legally sound conclusion, therefore, is that under the constitutional and statutory framework of the Rules of Business, 1973, the National Fertilizer Corporation and the National Fertilizers Marketing Limited do not constitute Ministries, Divisions, or Attached Departments of the Federal Government; rather, the former is merely reflected as an item of business falling within the administrative purview of the Industries and Production Division, while the latter does not find any recognition or classification within the said Rules.

12.The material placed on record, read with the information available on the official website of NFML, shows that National Fertilizer Corporation of Pakistan (Private) Limited (“NFC”) was incorporated on 11.08.1973 under the Companies Act, 1913 vide Certificate No. 15 AR/RD (1973 to 1974), and, under its Memorandum, its principal object is to manufacture, buy, sell, import, export and deal in chemicals and chemical fertilizers, including allied chemical and agricultural products. NFML is described as a State Owned Enterprise, established in July 1976 as a public limited company, unlisted, as a subsidiary12 of NFC, and functioning under the administrative control of the Ministry of Industries and Production, Government of Pakistan. NFML itself was incorporated under the Companies Act, 191313 vide Certificate https://www.nfml.com.pk/

A subsidiary company is one that is controlled by another company, either by Controlling its board, or Owning more than half of its voting power, whether directly or indirectly. (Section 2(68) of Companies Act 2017).

The Companies Act, 1913 was repealed and replaced by the Companies Ordinance, 1984, which, under section 508 thereof, formally repealed the earlier enactment. Subsequently, the Companies Ordinance, 1984 was itself repealed and replaced by the Companies Act, 2017.

No. C-192 LR (1975 to 1976) issued on 30.06.1976, and its Certificate for Commencement of Business was issued on 27.07.1976 after compliance with section 103(1)(a) to (d) of the said Act; and, as per its Memorandum and Articles of Association, its principal object is to carry on the business of marketing, distributing, selling, importing and exporting fertilizers and allied chemical products, and to act as agents, stockists, wholesalers and retailers for such products, including establishing branches and undertaking ancillary activities necessary for that business.These details clearly demonstrate that the petitioner is a subsidiary company of National Fertilizer Corporation, which is its holding company.14 The petitioner, therefore, is neither the Federation nor a department thereof; rather, it is a separate corporate entity. Its Memorandum and Articles of Association further disclose that it has been constituted as a company to carry on commercial activities, and not as a governmental department. Accordingly, the petitioner cannot be treated as an instrumentality of the Federal Government for purposes of claiming constitutional tax immunity.

13.As regards the second defence raised by the petitioner, it has been contended that, in terms of section 99 of the Cantonments Act, 1924, the petitioner is exempt from payment of taxes. Section 99 of the Act provides a specific exemption from taxation, stipulating that buildings belonging to the Federal Government or a Provincial Government shall not be liable to the levy of taxes. The applicability of this exemption, therefore, hinges upon two considerations: first, whether the property in question can legally be regarded as a building of the Federal or Provincial Government within the meaning of section 99; and second, whether the tax sought to be imposed falls within the scope of taxation contemplated under the Act.For ease of reference, section 99 is reproduced below:

A company is called a holding company if it has one or more subsidiary companies. (Section 2(37) of Companies Act 2017).

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

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

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

(b)buildings used for educational purposes which are open to public and from which no income is derived;

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

(d)hospitals and dispensaries maintained wholly by charitable contributions;

(e)burning and burial grounds, not being the property of the Government or a Board, which are controlled under the provisions of this Act; (f) buildings or lands vested in a Board; and

(g)buildings which are the property of the Federal or Provincial Government.”

The above provision makes it clear that certain public, charitable, religious and Government-owned buildings may be exempt from property tax; however, such properties remain liable to pay charges in respect of specific services rendered by the Cantonment Board. Admittedly, the property in question is owned by Pakistan Railways, and the petitioner is merely a tenant/licensee under a lease agreement dated 25.04.2002, which fact is not disputed. The petitioner is neither the Federal Government nor a Provincial Government, nor a department or attached department of the Federal Government. Therefore, it cannot claim the benefit of exemption under section 99. As already discussed, the petitioner is a subsidiary company of NFC and is a distinct juristic entity. consequently, it is not entitled to invoke the exemption available to Government property under the said provision.

14.Adverting to the third defence raised by the petitioner, it is contended that under section 415 of the West Pakistan Urban

4.Exemptions.—The tax shall not be leviable in respect of the following properties, namely: (a) buildings and lands, other than those leased in perpetuity, vesting in the Federal Government; (b) buildings and lands other than those leased in perpetuity (i) vesting in Government of West Pakistan and not administered by a local authority ; (ii) owned or administered by a local authority when used exclusively for public purposes

Immovable Property Tax Act, 1958, the petitioner is exempt from payment of property tax. However, a plain reading of section 4 shows that it provides exemption only to specified categories of properties, such as Government-owned properties (subject to conditions), properties used exclusively for charitable, religious or public purposes, and certain low-value properties. As already discussed in the preceding paragraphs, the petitioner is a subsidiary of NFC and is a separate juristic entity. It does not fall within the category of the Federal or Provincial Government, nor is it a department or attached department thereof. Consequently, the petitioner cannot claim the benefit of exemption under section 4, and this defence is likewise without merit.In light of the foregoing discussion, the answer to Question No. 1 is that the petitioner is not entitled to any exemption under Article 165 of the Constitution, nor under section 99 of the Cantonments Act, 1924, nor under the West Pakistan Urban Immovable Property Tax Act, and not used or intended to be used for purposes of profit ; (c) (i) buildings and lands the annual value of which does not exceed two hundred and sixteen rupees ; or (ii) one building occupied by an owner for his residence, the annual value of which (1) does not exceed four hundred and eighty-six rupees in the rating areas of a municipality of the first class ; or (2) does not exceed three hundred and seventy-eight rupees in other rating areas, Subject to the condition that the owner or any member of his family does not own any other property in that rating area and such other conditions as may be prescribed : Provided that if such building or land is in the ownership of a person who owns any other building or land in the same rating area, the annual value of such building or land shall, for the purposes of this clause, be deemed to be the aggregate annual value of all buildings or lands owned by him in that area : (d) buildings and lands or portions thereof used exclusively for educational purposes including schools, boarding houses, hostels and Libraries; (e) public parks and playgrounds ; (f) buildings and lands or portions thereof used exclusively for public worship or public charity including mosques, temples, churches, dharmsalas, gurdwaras, hospitals, dispensaries, orphanages, alms houses, drinking water fountains, infirmaries for the treatment and care of animals and public burial or burning grounds or other places for the disposal of the dead: Provided that the following buildings and lands or portions thereof shall not be deemed to be used exclusively for public worship or for public charity within the meaning of this section, namely : (i) buildings in or land on which any trade or business is carried on unless the rent derived from such buildings or lands is applied exclusively to religious purposes or such public charitable institutions as may be prescribed; (ii) buildings or lands in respect of which rent is derived, and such rent is not applied exclusively to religious purposes or to public charitable institutions; and (g) buildings and lands the annual value of which does not exceed one thousand rupees, belonging to widows and minor orphans.

15.Turning to the second question, section 6516 of the cantonment Act 1924, makes it clear that where a property tax is assessed on the annual rental value, it shall be primarily payable by the person actually occupying the property, provided that such occupier is either the owner or holds the property under a Government lease, a Board lease, or a building lease.Under section 2 of the Cantonments Act, 1924, the term “occupier” includes an owner who is in occupation of, or otherwise using, his own land or building. Likewise, “owner” includes any person who receives or is entitled to receive rent in respect of a building or land, whether on his own account, as agent, or as trustee, and even a person who would be so entitled if the property were let. Accordingly, if the building is occupied by the owner himself, he is treated as the occupier and bears the liability. If the building is occupied by a tenant, then liability will be determined in accordance with section 65, depending upon the nature of occupation and lease.In the present case, the petitioner, being in occupation of the property under a lease, falls within the ambit of “occupier” and, in terms of the scheme of section 65 of the Cantonments Act, 1924, is primarily liable to pay the tax. Furthermore, as the leased property is situated within Risalpur Cantonment, the relationship between landlord and tenant is governed by the Cantonments Rent

65.Incidence of taxation. (1) Save as otherwise expressly provided in the notification imposing the tax, every tax assessed on the annual rental value of buildings or lands or of both shall be leviable primarily upon the actual occupier of the property upon which the said tax is assessed, if he is the owner of the buildings or lands or holds them on a building or other lease granted by or on behalf of the Government or the Board or on a building lease from any person. (2) In any other case, the tax shall be primarily leviable as follows, namely: (a) if the property is let, upon the lessor; (b) if the property is sub-let, upon the superior lessor ; (c) if the property is unlet, upon the person in whom the right to let the same vests. (3) On failure to recover any sum due on account of such tax from the person primarily liable, there may be recovered from the occupier of any part of the buildings or lands in respect of which the tax is due such portion of the sum due as bears to the whole amount due the same ratio which the rent annually payable by such occupier bears to the aggregate amount of rent so payable in respect of the whole of the said buildings or lands, or to the aggregate amount of the letting value thereof, if any, stated in the authenticated assessment list. (4) An occupier who makes any payment for which he is not primarily liable under this section shall, in the absence of any contract to the contrary, be entitled to be reimbursed by the person primarily liable for the payment, and, if so entitled, may deduct the amount so paid from the amount of any rent from time to time becoming due from him to such person.

Restriction Act, 1963. Section 1(2) of the said Act provides that it extends to all cantonments in Pakistan. Moreover, section 12 stipulates that the tenant shall be liable to pay the taxes in the manner provided therein. For ease of reference, section 12 is reproduced below:

“12. Tenant to pay taxes. Notwithstanding anything contained in any other law for the time being in force or in any agreement, the tenant shall be bound to pay the taxes due in respect of the building to the Cantonment Board, as required by section 65 of the Cantonments Act, 1924 (II of 1924), by making deductions from the rent payable by him.”

16.A cumulative reading of section 65 of the Cantonments Act, 1924 and section 12 of the Cantonments Rent Restriction Act, 1963 makes the legal position clear. Section 65 determines the primary incidence of taxation and provides that, where tax is assessed on the annual rental value, it shall be primarily leviable upon the actual occupier in the circumstances specified therein. Section 12 of the Cantonments Rent Restriction Act, 1963, which begins with a non-obstante clause (“Notwithstanding anything contained in any other law...”), further mandates that the tenant shall be bound to pay the taxes due in respect of the building to the Cantonment Board, in accordance with section 65 of the Cantonments Act, 1924, by making deductions from the rent payable by him. The combined effect of these provisions is that, in cases falling within their scope, the tenant is statutorily obligated to discharge the tax liability to the Cantonment Board, subject to the scheme of section 65.Consequently, the answer to the second question is that the petitioner, being the occupier and tenant of the premises, is liable to pay the taxes in accordance with the applicable statutory provisions.

17.As to the objection raised during arguments that, after the 18th Constitutional Amendment,17 the Cantonment Board lacks authority to impose or recover property tax and that such tax can only be recovered under the West Pakistan Urban Immovable The Constitution (Eighteenth Amendment) Act, 2010 (Act No. X of 2010).

Property Tax Act, 1958, the same is misconceived and untenable in law.This is because, under Section 3(1)(a)18 of the Cantonments (Urban Immovable Property Tax and Entertainments Duty) Order, 1979(“Presidential Order No. 13 of 1979”), the tax leviable under the West Pakistan Urban Immovable Property Tax Act, 1958 ceased to be leviable within cantonment areas. Instead, under Section 3(1)(b), the Cantonment Board is to continue to levy and collect tax under the Cantonments Act, 1924 on the annual value of buildings and lands. Furthermore, under Section 3(3) of the Order, fifteen per cent of the net proceeds of the tax collected by the Cantonment Board, on or after the commencement of the Order, is payable to the Provincial Government. Importantly, Section 219 of the Presidential Order provides that the Order shall have effect notwithstanding anything contained in the Constitution or any other law for the time being in force. Therefore, the provisions of this Order override any inconsistent law. Moreover, Article 270A of the Constitution of the Islamic Republic of Pakistan protects and validates Presidential Orders made during the relevant constitutional period, including President’s Order No. 13 of 1979, thereby granting it constitutional protection.This Court, in the case of State Bank of Pakistan,20 observed that after the 18th Amendment, particularly in view of the exclusion of “taxes on immovable property” from Entry No. 50 of the Federal Legislative List, the Presidential Order No. 13 of 1979 ought to be read down.

3.Urban Immovable Property Tax to cease to be leviable in cantonments.

(1)As from the commencement of this Order,-

(a)the tax leviable under the West Pakistan Urban Immovable Property Tax Act, 1958 (W.P. Act No. V of 1958), shall cease to be leviable in a cantonment; and (b) the Cantonment Board of a cantonment shall continue to levy and collect, in accordance with the provisions of the Cantonments Act, 1924 (II of 1924), the tax assessed on the annual value of buildings and lands.

(2)Eighty-five percent of the net proceeds of the tax referred to in paragraph (a) of clause (1), collected on or after the commencement of this Order, shall be paid by the Provincial Government to the Cantonment Board concerned.

(3)Fifteen percent of the net proceeds of the tax referred to in paragraph (b) of clause (1), collected on or after the commencement of this Order, shall be paid by the Cantonment Board concerned to the Provincial Government.

Section 2. Order to override other laws. —This Order shall have effect notwithstanding anything contained in the Constitution or any other law for the time being in force.

PLD 2022 Peshawar 46 (decided on 10.12.2020 by two-member Bench)

The cumulative effect of the President’s Order No. 13 of 1979, read with the Cantonments Act, 1924 and Articles 270-A and 270- AA of the Constitution, manifestly empowers Cantonment Boards to levy and collect urban immovable property tax on lands and buildings situated within cantonment limits, and such authority enjoys constitutional protection and continuity unless expressly altered, repealed, or amended by the competent legislature; the Court held that the Eighteenth Amendment did not invalidate this taxing power, that cantonments constitute federally administered territories possessing distinct municipal and fiscal autonomy, and that redistribution of legislative competence or omission of the Seventh Schedule cannot operate as an implied repeal of a constitutionally validated law, with the result that the levy and collection of property tax by Cantonment Boards remain lawful, intra vires the Constitution, and enforceable in accordance with the statutory framework governing cantonment administration.The dispute essentially revolved around the question of entitlement to exemption from taxation under Article 165 of the Constitution. Subsequently, in State Life Insurance Corporation of Pakistan vs. Cantonment Board, Peshawar,21 a learned Division Bench of this Court specifically examined this very issue of taxation by Cantonment Board. The Court placed reliance upon the judgment of the Honourable Supreme Court reported as PLD 2004 SC 743 (Sargodha Textile Mills Ltd. vs. Federation of Pakistan) and held that Presidential Order No. 13 of 1979 is protected under Article 270-A of the Constitution. It was observed that Article 270-A expressly affirms and validates Presidential Orders and other laws made during the specified constitutional period, thereby insulating them from challenge on the ground of legislative incompetence. Consequently, the writ petition was dismissed, and it was held that Presidential Order No. 13 of 1979 continues to hold the field.It is pertinent to observe that where conflicting views are expressed by (W.P. No. 6586-P/2018, decided on 31.05.2022 by two-member Bench)

two Division Benches of a High Court, the procedure for resolving such inconsistency has been authoritatively laid down in the case of Multiline Associates22 in the following words:- “18. In such circumstances, legal position which emerges is that the second Division Bench of the High Court should not have given finding contrary to the findings of the 1st Division Bench of the same Court on the same point and should have adopted the correct method by making a request fog constitution of a larger Bench, if a contrary view had to be taken. In support reference can be made to the cases of the Province of East Pakistan v Dr. Azizul Islam (PLD 1963 SC 296) and SindheswarGanguly v. State of West Bengal (PLD 1958 SC (Ind.) 337), which is a case of Indian jurisdiction. We therefore, hold that the earlier judgment of equal Bench in the High Court of the same point is binding upon the second Bench and if a contrary view had to be taken, then request for constitution of a larger Bench should have bee made.”

It is a settled principle of law that an earlier judgment of a Division Bench of a High Court on the same point is binding upon a subsequent Division Bench of the same Court. However, in the present case, a careful examination of the judgment in State Bank of Pakistan(Supra) and that in State Life Insurance Corporation of Pakistan(Supra) reveals that the later judgment dealt with the issue of the Cantonment Board’s power of taxation in the post– Eighteenth Amendment era, whereas the earlier judgment was confined to the question of exemption from taxation under Article 165 of the Constitution.Furthermore, in the earlier case, neither the vires of the Cantonments Act, 1924 nor those of Presidential Order No. 13 of 1979 were challenged, nor were they declared ultra vires the Constitution.The subject-matter and legal questions involved in the two cases being materially distinct, the later judgment is clearly distinguishable on facts as well as on law. This Court, therefore, respectfully concurs with and endorses the view taken therein. Therefore, in view of the latest pronouncement of this Court referred above, the binding judgment of the Supreme Court, and the constitutional protection afforded under Article 270-A of the Constitution to the Presidential Order No 3 of 1979, the objection Multiline Associates Vs ArdeshirCowasjee(PLD 1995 SC 423).

that the Cantonment Board lacks authority to impose or recover property tax after the 18th Amendment is hereby repelled. Before parting with this judgment, we deem it appropriate to place on record our appreciation for the valuable legal assistance rendered by Mr. Riaz Aslam Daavi, Senior Research Officer (SRO) of this Court, which has greatly facilitated the just and effective adjudication of the matter.

18.Having examined the record in its entirety and considered the submissions of the petitioner, it is manifest that the instant petition is wholly devoid of merit. The petitioner has failed to establish any legal or constitutional foundation warranting exemption or privilege. It is well-settled that claims of privilege under Article 165 of the Constitution and statutory exemptions under Section 99 of the Cantonments Act, 1924 are subject to strict scrutiny and are only available where a clear and unambiguous entitlement is established. In the absence of such demonstration, reliance on these provisions cannot be sustained. In this context, and following the principles laid down in relevant jurisprudence, the petitioner is not entitled to the claimed exemptions or privileges. Consequently, the petition stands dismissed.

Announced.

JUDGE

JUDGE

(DB)Hon’ble Mr. Justice Muhammad Naeem Anwar and Hon’ble Mr. Justice Kamran Hayat Miankhel.