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Petitioner: MUHAMMAD FIAZ VS Respondent: GOVERNMENT OF THE PUNJAB and others
Court Name: Lahore High Court Judge(s): Muhammad Ghani Title: MUHAMMAD FIAZ vs GOVERNMENT OF THE PUNJAB and others Case No.: Writ Petition No,5700 of 2002 Date of Judgment:2004-03-08 Reported As: PLD 2004 Lahore 599 Result: Petition dismissed
JUDGMENT
JUDGMENT By this single judgment. I propose to dispose of Writ Petitions Nos.5700 of 2002 and 494 other similar petitions (of which list is at Annex `A'), as questions of facts and law, broadly speaking, are common in all of them. 2. The petitioners are owners of immovable properties, located within urban areas of the ,Province of Punjab. By Punjab Finance Act (No,V11of 1998), section 5-A was added to the Urban Immovable Property Tax Act (No,V of 1958), which authorized determination of annual value of buildings and lands for the purpose of levy of tax, commonly known as property-tax, "on the basis of such valuation tables and for each localities as may be notified by or under the authority of the Government". It is a common ground between the parties that the Government of the Punjab, in its Excise and Taxation Department, had earlier framed valuation tables, in the purported exercise of power under the aforementioned newly-added section 5-A, primarily on the basis of valuation tables prepared by the Deputy Commissioners of various Districts in the Province, for the purpose of determining the minimum sale price of properties located in their respective Districts. Pursuant to such valuation tables, tax was levied by the Assessing Authorities and when demands were raised, the same were challenged in this Court. Challenge to the levy of tax was thrown mainly on the ground that the valuation tables in question determining the gross rental value of the properties, prepared as they were, on the basis of the capital value of the properties, did not qualify the requirements of section 5-A. The contention raised against the validity of the valuation tables found favour with a learned Judge of this Court, consequently the Writ Petitions were accepted and the demands raised, based on valuation tables prepared on the basis of the capital value of the
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properties, were declared to be illegal. Nevertheless, it was further observed in the order recorded in Writ Petition No, 1799 of 2004 as follows:- "This order, however, shall not prevent the Provincial Government from preparing valuation tables which are based on the annual rental value of properties within different rating areas, provided such valuation tables otherwise comply with the provisions of section 5-A and the other provisions of the Act." ' The judgment rendered in the aforementioned Writ Petition is reported as Jamshed Waheed v. Government of Punjab (PLD 2001 Lahore 395). Another owner, namely Mst. AmeenaJabeen of the same house had also filed Writ Petition No, 682 of 2001 which too was accepted and the judgment is reported as Mst. AmeenaJabeen v. Government of Punjab NLR 2001 Tax 189. Government of the Punjab, through the Secretary, Excise and Taxation, challenged the aforementioned decision (in Writ Petition No, 4799 of 2001) through Civil Petition No, 1435 of 2001 which was dismissed by the Hon'ble Supreme Court of Pakistan on the 14th of June 2001. 3. Then, on the 13th of October, 2001, the following communication was sent by a Section Officer of Excise and Taxation Department, Government of the Punjab, to the Director-General, Excise and Taxation, Punjab, Lahore, with copy along with its enclosures to District Officers (Directors, Excise and Taxation/Excise and Taxation Officers) in the Punjab, for information and compliance:- "No, S.0 TAX (E & T) 3-38/91/P-I Government of the Punjab Excise and Taxation Department Dated: Lahore, the 13th October, 2001 To The Director-General, Excise and Taxation, Punjab, Lahore. Subject: VALUATION TABLES BASED UPON RENTABILTY OF IMMOVABLE PROPERTIES FOR THE ASSESSMENT OF PROPERTY TAX . I am directed to forward herewith the format for the reassessment of urban immovable properties throughout the Punjab as a uniformed formula. 2. It is requested that the same may kindly be forwarded to all the District Officers ("Directors Excise and Taxation/Excise and Taxation Officer") for carrying out survey operation in the rating areas under their respective jurisdiction. It is clarified that D.Os/DDOs will not be authorised to change the figures recorded in the valuation tables, since it will remain the same throughout Punjab. However, the appellate authority/assessing authority will select combination of classes referred to in column I of the valuation table for grouping the various localities of rating areas under their respective jurisdiction. 3. It is re-affirmed that the valuation lists, based upon the valuation tables will take effect from 1-1- 2002. Encl. As above (Sd.) (Imran Aslam) Section Officer No& Date: Even A copy alongwith its enclosures is forwarded to the District Officers (Director Excise and Taxation/Excise and Taxation Officer) in the Punjab for information and compliance. (Sd.) (Imran Aslam) Section Officer"
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The "uniformed formula" mentioned in the above-quoted communication was in the following terms:- "VALUATION TABLE BASED UPON RENTABILITY OF IMMOVABLE PROPERTIES IN THE RATING AREAS OF PUNJAB GENERAL RESIDENTIAL AND COMMERCIAL PROPERTIES. The figures recorded in the respective column of the valuation table shall be multiplied with the total land area (Sq. Yard) and covered area (Sq. Feet) of the building the figure arrived at shall be multiplied by 12 to determine the reasonable annual rent. Since the ratability of following properties is different from that of general residential and commercial properties, therefore at the time of determining their rent ability, the figure recorded in the valuation table shall be adopted after following subtraction and addition. ' I PLAZAS AND RENTED OUT MULTI-STOREY BUILDINGSReduction of 10 % for, each floor above and below ground floor/inter-floor subject to a maximum of 50% of the rate specified in valuation table. II 20 YEARS OLD PROPERTIESReduction of 10 % of the rate specified in the valuation table subject to condition that there is no addition/alteration in the building during this period. III SEASONAL USE OF PROPERTIES like cotton ginning factories rice husking mills oil mills, ice factories etc.Reduction of 50% of the rate specified in valuation table IV Buildings and Lands Used as Offices, Educational InstitutionsAddition of 50 % in the residential rates (self or rented as the case may be) Specified in the valuation table. V Hotels In case of buildings and lands used for hotels, the rentability shall be made as per following; (i) The rentability of land area under commercial use excluding parking places shall be calculated on the basis of self-commercial rates. (ii) The rent ability of covered area of such building other than lodging units, lobbies, dining halls, kitchens other than the Banquet Hall, Business Halls etc., shall be assessed on the basis of self-- commercial rates prescribed in the valuation table. (iii) The rentability of covered area let out to different organization will be assessed on the basis of commercial rates prescribed in the valuation table. (iv) The portions of these units being let out, as lodging units shall be assessed on the basis of existing formula based upon rack rates giving allowance on account of vacancy/service change and machinery as the case may be according to the existing procedure.
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VI HOSPITALS & MARRIAGE HALLS CINEMAS, PETROL PUMPS ETC.Commercial rates self or rented as the case may be specified in valuation table. At the time of calculation of Land Area and covered area, the doctors rooms, patient rooms, wards, operation theatres, waiting rooms/bridal rooms, Make-up rooms etc. shall be accounted for. VII INDUSTRIAL UNITS Residential rates (self or rented as the case may be) prescribed in the valuation table with following conditions: Up to 1 ACRE - Above rate. Next 4 ACRE - Reduction of 20 % in the above rate Exceeding 5 -Further Reduction of 20 % in the above rates VIII AGRICULTURAL LAND As per existing procedure of fixed rates per kanal. Note: Any modification in the valuation table if so required will be notified by the Government." Two "Proposed Valuation Tables" one for "Commercial" and the other for "Residential" properties were sent with the afore-quoted communication. The same at Annexes 'B' and 'C' respectively. The record made available to this Court shows that a Conference of all the Directors of Excise and Taxation in the Province of Punjab was held on the 27th of October, 2001 wherein it was decided that for the localities which could not be covered by categories 'A' to `E' of the two tables (Annexes 'B' to 'C' to this judgment) two more categories i,e,, 'F' and `G' be added to the valuation tables. Accordingly, the Excise and Taxation Department of the Government of the Punjab prescribed for the assessm ent of "Property Tax" rates for the two additional categories, and communicated the same to the concerned officers vide corrigendum, dated the 31st of October, 2001 issued to the earlier communication, dated the 13th of October, 2001, reproduced above. The two categories added to the earlier valuation tables are at Annexes 'D & `E' to this Judgment. 4. The common grievance of the petitioners in all the petitions is that on the basis of the aforementioned tables, property tax determined by the Department, and being demanded from them, is many times more than what they were actually paying before and, therefore, approached this Court in its Constitutional jurisdiction, challenging the aforementioned communication, dated the 13th of October, 2001 and corrigendum thereto, dated the 31st of October, 2001, the valuation tables prepared and issued by the Government of the Punjab, as well as the demands of property tax based on the said valuation tables. The petitions which had been filed by then, were pending when on the 19thof March, 2003, Government of the Punjab sent out the following communication:- - "NO. S.O.TAX (E&T)3-38/91(P- I ) GOVERNMENT OF THE PUNJAB EXCISE AND TAXATION DEPARTMENT Dated Lahore, the 19th March, 2003 To 1. The Director General, Excise and Taxation Punjab, Lahore. 2. All Assessing Authorities/Appellate Authorities Under UIP Tax Act, 1958 in the Punjab. Subject: VALUATION TABLES BASED UPON RENTABILITY OF IMMOVABLE PROPERTIES FOR THE ASSESSMENT OF PROPERTY TAX. Please refer to this department's notification of even number dated 13-10-2001 on the above subject.
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2. Instances have come to the notice of the department where some of the localities as a whole have been assigned a particular category as per valuation table by the Assessing Authority, but such localities have pocket areas which due to their peculiar conditions may have lesser rentability than the one determined on the basis of the category of that locality. It is clarified for the removal of doubt that the Assessing Authority/Appellate Authority may assign a different category to such pocket areas depending on their rentability as was envisaged in the letter under reference. (Sd.) (IMRAN ASLAM) SECTION OFFICER (TAX)." Yet another Notification, dated the 19th of March, 2003 was issued. For facility of reference, relevant part thereof is also extracted below:-- "GOVERNMENT OF THE PUNJAB EXCISE AND TAXATION DEPARTMENTDated Lahore, the 19th March, 2003 NOTIFICATION NO. SOTAX (E&T) 3-38/91(P-1).In continuation of this Department's Notification No, SO. Tax (E&T) 3-38/91(P-I) dated 13-10-2001 regarding Valuation Tables for assessm ent of UIP Tax under section 5-A of the Punjab Urban Immovable Property Tax Act, 1958. 2. In exercise of powers conferred under subsection (1) and (1-A) of section 10 of the Punjab Urban Immovable Property Tax Act, 1958, the Government of the Punjab is pleased to appoint a Committee comprising Additional Director General, Excise and Taxation, Deputy Secretary (Technical) Excise and Taxation Department and District Officer, Excise and Taxation concerned as "Appellate Authority" in respect of exceptional cases where the annual value of the particular property determined on the basis of the category of the locality in which it falls as per Valuation Tables appears to be excessive in view of any peculiar disability affecting the rentability of that property. 3. In exercise of the powers conferred under subsection (2) of section 10 of the Punjab Urban Immovable Property Tax Act, 1958, the Government of the Punjab is pleased to appoint Director- General Excise and Taxation, Punjab to exercise the powers of "Revisional Authority" in respect of the orders of the "Appellate Authority" referred to in para 2 above. 4. The powers of "Appellate Authority" and "Revisional Authority" in all other cases shall continue to be exercised by "Collector" and "Commissioner" as notified vide this department's notifications No, SOAI (E&T) 3-116-2000 dated 22-12-2001. SAMI SAEEDSECRETARY TO GOVERNMENT OF THE PUNJAB EXCISE AND TAXATION DEPARTMENT No,& Date Even A copy is forwarded to the Superintendent, Government Printing Press, Punjab, Lahore for publication in the official Gazette and to supply 50 printed copies of the Notification to Excise and Taxation Department. (Sd.) (IMRAN ASLAM) SECTION OFFICER (TAX)" From a reading of the above Notification, it appears that the original communication, dated the 13th of October, 2001 had also been "notified". Be that as it may, it is nobody's case that any of the aforementioned communications or the valuation tables have not been "notified." 5. Mr.Alamgir, Advocate, who led the side of the writ-petitioners, Challenged the vires and constitutionality of the newly-added section 5-A of the Urban Immovable Property Tax Act (No,V of 1958), which was the source of power for the impugned valuation tables, by contending that it was bad for want of guidelines; it was over-board, rather too bald; it lent itself to nakedness; it conferred un-channeled and arbitrary discretion on the Government, and being patently violative
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of the Preamble of the Constitution as well as its Articles 4, 8 and 25, the same is liable to be struck down, even on the ground of excessive or impermissible delegation of legislative power of Provincial Assembly of the Province of Punjab. It was further contended that the valuation tables prepared pursuant to section 5-A, besides being equally bad, were discriminatory in nature and are, therefore, liable to be scrapped. The broad-based arguments of Mr. Alamgir were adopted by M/s. Ejaz Feroze, AzmatSaeed, Ahmad Sibtain Fazli, Sahibzada Anwar Hameed, Muhammad Azhar Siddique, Musthaq Ahmad Tahirkheli, Farooq Ahmad Chishti Qureshi, Tariq Rahim and Ishtiaq Ahmad, Advocates, who appeared for their respective clients in other writ petitions. Learned counsel appearing in other cases also adopted the arguments of Mr. Alamgir. A long catena of reported decisions from abroad and of domestic Superior Courts was cited by the learned counsel for the petitioners in support of their contentions. 6. On the other hand, Syed Shabbar Raza Rizvi, learned Advocate-General assisted. By Ch. Aamir Rehman. Learned Addl. A.G., Mr. Tahir Mahmood, learned Assistant Advocate-General and Mrs. Erum Sajjad Gul, Advocate, besides Mr. M. Saleem Sahgal. Advocate who represented the respondent-Excise and Taxation Department, vehemently contended that delegated legislation had never been struck down for want of standards or guiding principles and that in a taxation matter it is not un-Constitutional for the legislature to leave it to the executive/departmental functionaries of the Government to work out details of categories of the properties, categorize them in a reasonable manner without any discrimination, and to determine details of tax to be levied. According to them, neither section 5-A is ultra vires any provision of the Constitution nor the same is liable to be struck down on the ground of excessive delegation of legislative functions. Further, that the valuation tables having been prepared after due deliberations and taking into account ground realities, the same are also not liable to be struck down on any ground whatsoever, including the attack based on alleged discrimination. They also relied on a long chain of reported decisions from foreign jurisdictions as well as of our own Superior Courts to which reference will be made presently. 7. Section 5-A of the Urban Immovable Property Tax Act 1958, impugned in these petitions, though small one, but most abused, reads as follows:-- "5-A. Valuation Tables to Ascertain Annual Value.. Notwithstanding the provisions of section 5 the annual value may be determined on the basis of such valuation tables and for such localities as may be notified by or under the authority of ' the Government." Learned Advocate-General submitted that the background for the legislation in dispute was the collective consciousness to up-root corruption, if not in its entirety, at least to minimize the same as far as possible and to do away with the feel-good factor, which had a long stay in this Department, and to ensure a somewhat clean atmosphere aimed at collecting revenue, within the permissible limits, to be spent on development programs and the well-being of the citizens of the country, which is sheet anchor to the strength of the social fabric and the erotic doctrine of sip every flower and change every hour and the philosophy of philandering self-fulfillment unless combated on the militant basis of gender justice, are fraught with catastrophic possibilities. Support for this submission was sought from the "Statement of Objects and Reasons" read out by the Minister Incharge at the time the Bill was introduced, providing inter alia for "introduction of a new simplified system of assessm ent of property tax" and to "mobilize reasonable additional financial resources for the Province and taxing the rich without affecting the common man." Learned Advocate- General supported by Mr. M. Saleem Sahgal canvassed that the amendment has been brought about with a view to promoting fiscal reform to get rid of International Lending Institutions and to ensure welfare of common man which is the policy of the present regime; ensuring, transparency in the levy and collection of property tax without any discrimination whatsoever; curtailing wide
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range of discretion of the Assessing Authorities, and thereby to combat with corruption. Moreover, in the earlier round of litigation, the Hon'ble Supreme Court has mandated that section 5-A of the Act is not to be considered in isolation but has to be read conjunctively with the other provisions of the Act. Besides, in order to unveil the evil which the legislature intended to punish, a conspectus of the Act and the Rules, to the extent relevant, is necessary to appropriate to the controversy between the parties. Section 3 is the charging section. Its subsection (1) authorizes Government (which, as defined in section 2 (d) means the concerned Provincial Government) to specify urban areas (an urban area, as defined by section 2(1) means an area within the boundaries of a Municipal Corporation, Municipal Committee, Cantonment Board, Small Town Committee, or other authority (not being a District Board) legally entitled to or entrusted by Government with the control or management of a municipal or a local fund) where tax shall be levied under the Act. Government has the power to divide one urban area into two or more rating areas, or several urban areas may be grouped as one rating area. Subsection (2) lays down that "subject to the provisions of subsections (3) and (4) there shall be levied, charged and paid, a tax on the annual value of buildings and lands in a rating area at the rate of twenty per cent of such annual value". Subsection (3) then provides that "in case of property of the annual value not exceeding twelve thousand rupees, other than the property referred to in subsection (3) a deduction of two hundred and seventy rupees from the annual value shall be allowed." By virtue of subsection (4) the Government "may, by notification, for reasons to be recorded remit in whole or in part, the payment of the tax by any class of persons in respect of any category of property". According to the Explanation, the "annual value for the purpose of this section shall be the aggregate annual value of all buildings and lands owned by the same person in the rating area". In view of the provisions of subsection (5) of section 3, payment of tax is the liability of the "owner of buildings and lands". "A rebate equal to five per cent of the amount of annual tax for a financial year" is allowed by subsection (5) "if the amount of annual tax is paid in lump sum on or before the 31st day of August of the financial year". Lastly, subsection (7) laid down that "from the first day of July, 1998, for calculating tax on owner occupied properties the annual value shall be increased by twenty five per cent of the annual -value existing on the said day". Section 4 of the Act excepts properties in respect of which tax is not leviable. In view of the provisions of section 5, "annual value of any land or building" is to be ascertained "by estimating the gross annual rent at which such land or building together with its appurtenances and any furniture that may be let for use or enjoyment with such building might reasonably be expected to be let from year to year" less certain allowances which an Assessing Authority in the given circumstances can allow. Section 6 makes provision that "there shall be an Assessing Authority for every rating area" and that it "shall exercise such powers and perform such duties as are conferred on it by this Act or the Rules made thereunder." Then comes the procedural part, which according to the learned counsel for the petitioners should have been observed by the Government before finalizing valuation tables, whereas learned counsel for the Department has argued that it had no application to the "valuation tables", but the procedure had to be followed while drawing up "valuation lists". Whereas the title of section 7 reads: "Making and operation of valuation lists" it lays down that a valuation list shall be made by the prescribed authority in accordance with the Rules for every rating area so as to come into force either on the 1st day of July or on the 1st day of January, and that valuation list shall enure for a period of five years, whereafter next succeeding valuation list shall come into force. The provisions to subsection (1) of section 7 authorize the Government to reduce or extend the period between two successive valuation lists for any rating area, cancel and direct preparation of a new list in the event the existing one is lost or destroyed by operation of circumstances beyond control and order recovery of tax on the basis of either of the said two lists. Government can also, by order, divide any rating area into parts for the purposes of a new valuation list and to determine when the next following list
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shall be made and shall come into force. By virtue of subsection (2) of section 7, a valuation list comes into force on the 1st of July or 1st of January next following the date on which it is finally approved by the Assessing Authority, and is to remain in force until superseded by a new valuation list. Subsection (3) added in the year 1976, is confined to properties located in, Cantonment Boards, and lays down that a list according to which house tax was being charged by a Cantonment Board before the 1st of July, 1975 shall be deemed to be a list under the Act until a new list is prepared. Rule 5 of Rules inter alia fixes responsibility of the Assessing Authority to prepare a property register in Form P.T.1. From the rating area and enter therein the necessary particulars, separately for each unit of property. It is a common ground between the parties that Register P.T.1. Is, in fact, the "valuation list." Rule 6 lays down a comprehensive procedure for preparation of "draft valuation lists", to be observed by the Assessing Authority. In order to prepare a valuation list, the Assessing Authority has to divide a rating area, if necessary, into sub-divisions of mohallahs; a particular number is to be allotted to reach property, with reference to sub-division; mohallah or street in which it is located, and the number so allotted to a property is to be marked on some conspicuous part of the property, and, after ascertaining the name of the owner and if the occupier thereof is other than the owner, his name is also ascertained, and the same are then entered in a register, commonly called P.T.2. If a property is owned by more owners than one, names of all are recorded in the said register, along with the extent of share of each one of them in the property. Section 18 of the Act…
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