Legal Principle & Question Decided

Ruling Summary: This decision was rendered by the Sindh High Court on 2023-12-31, officially reported as 2025 PLD 187. In this matter between M/s Millennium Mall Management Co. and Pakistan & others, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.

Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.

Full Judgment Text & Judicial Ruling

Court Name: Sindh High Court Judge(s): Muhammad Shafi Siddiqui, Jawad Akbar Sarwana Title: M/s Millennium Mall Management Co. vs Pakistan & others Case No.:Constitution Petition No.D-132 Of 2019 and 126 other connected petitions as

JUDGMENT

Reported As: 2024 SHC 1, PTCL 2024 CL. 538, PLD 2025 Sindh 187 Result: Order Accordingly Judgment

JUDGMENT Muhammad Shafi Siddiqui, J.- The subject matter of these petitions is Tax demand based on annual rental value of property by different Cantonment Boards from the petitioners. The petitioners' assertion is that it is a kind of tax and levy that taxes remain with the provinces only whereas the federal government and the cantonment boards claim such levy to be in their competence. In support of such questions raised, both sides counsel have assisted us and summarized their structural points as under:- COUNSELS' BULLET POINT SUBMISSIONS MR. AYAN MUSTAFA MEMON Mr. Ayan Mustafa Memon, learned counsel for petitioner in C.P. No. D- 2603/2023) has made the following submissions: Post-18th Amendment, the subject of levying property tax rests with the Provinces. Placed reliance on Entry No.50 of the Fourth Schedule of the Constitution of Pakistan, 1973. Contended that after omission of the Seventh Schedule of the Constitution, which was protected for a period by the Presidential Order of 1979, levying of all property tax now rested with the Provincial Government. Argued that property tax had always been a provincial subject. Contended that Entry 2 of the Fourth Schedule relied upon by the petitioners was not a tax entry. Argued that after the 18th Amendment, with regard to tax entries, there was no provision for concurrent taxation. Placed reliance on PLD 1975 SC 37, PLD 1978 Karachi 500 and PLD 2022

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Peshawar 46. Submitted that omission of 79 Order via P.O would not create any vacuum on account of the Sindh Urban Immovable Property Tax Act, 1958 via 18th Amendment to Constitution. Additionally, argued that any statute not in consonance with the Constitution of Pakistan is invalid and be held accordingly. Pleaded that Respondents' reliance on the Cantonment Act, 1924 was misconceived. Relied on PLD 1989 SC 416. Contended that the above case law had been followed and approved, cited by the Supreme Court in 1993 SCM R 1523. Further contended that as per the Benazir Bhutto case, the referred principles had been further expanded. Relied on pages 1528 page 1530 of the Benazir Bhutto case. Concluded that the Provinces had domain over property tax, and not the federal government, and relied on Freight Forwarder's case (2017 PTD 1). Relied heavily on the interpretation of Article 270A of Constitution of Islamic Republic of Pakistan in terms of Benazir's case. MR. KHAWAJA SHAMSUL ISLAM, Learned Counsel For Petitioner in C.P. NO. D- 2603/2023). Mr. Khawaja Shamsul Islam was asked to address only those points which are not covered by other counsel to save the time. He then took us to the history of cantonment and their formation. It is claimed that these cantonment boards are essentially civil/housing societies and cannot be identified as cantonments. He claimed that under the garb of Cantonment board, the authority under the act are trespassing provincial land and federal land abutting seashore and the geographical extension is not permissible in such way. Additionally he took us to the impugned notification in his petition which unilaterally enhanced the assessm ent to many folds thus rendering the mechanism of Section-60 to 64 of Cantonment Act as redundant. It is claimed that person issuing the said notification is not identified by Cantonment Act, 1924. He objected to the creation of new cantonment after urbanization and notification in this regard by Federal Government. MR. ZEESHAN ADHI, LEARNED ADDITIONAL ADVOCATE GENERAL, SINDH Argued that property tax had always been a provincial subject. To illustrate this he took us through the several laws, starting from the Government Act of India of 1935, 1956 Constitution, the Constitution of 1962 and the Constitution of 1973. He argued that any statute not in consonance with the Constitution of Pakistan is invalid. Pleaded that Respondents' reliance on the Cantonment Act, 1924 was misconceived and also relied upon PLD 1989 SC 416 (relevant page 509 placitum AA, page 511, both paragraphs and 512 second paragraph). Contended that the above case law had been approved by the Supreme Court in 1993 SCM R 1523. Concluded that the Provinces had domain over property tax, and not the federal government. Also relied upon Benazir's case as far as application of Article 270A is concerned. MR. ABDULLAH MUNSHI, learned counsel for Respondent/Clifton Cantonment Board (CP No.D- 4985/2018, CP No.D-5166/2018, C.P No.D 5167/2018). Commenced submissions with the history of the cantonments in the Indian Subcontinent - pre- partition till present. Provided a backdrop of how the Cantonments came about in the Indian Subcontinent, starting from the Cantonment Act of 1864, Cantonment Codes of 1899, 1912 and finally, the Cantonments Act of 1924, which regulated the municipal functions of the Cantonment Boards. Argued that there was nothing in the Cantonments Act, 1924, which violated Articles 8 and 25 of the Constitution of Pakistan. Relied on I.A. Sharwani and Others v, Government of Pakistan through

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Secretary, Finance Division, Islamabad and Others, 1991 SCMR 1041 and Lucky Cement Ltd. v. Khyber Pakhtunkhwa through Secretary Local Government and Rural Development, Peshawar, 2022 SCMR 1994. Further, argued that if there was/is a difference of opinion with regard to the powers under Cantonments Act, 1924, between the Federal Government and the Provincial Governments, Article 184 of the Constitution of Pakistan should intervened. The private petitioners challenging the constitutionality of the federal government's powers under Article 199 of the Constitution of Pakistan were/are acting contrary to Article 184. Contended that in case of an action initiated by any of the Provincial Governments without adopting the procedure highlighted under the Articles of the Constitution of Pakistan, such matter is to be agitated before the Supreme Court of Pakistan only and not the High Courts. He relied on Haider Mukhtar and Others v. Government of Punjab and Others, PLD 2014 Lahore 214, and Khalid Mahmood and Others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 74 Others, PLD 2003 Lahore 629. As a corollary argued that the Petitions filed before us are malafide and he relied on The Federation of Pakistan through the Secretary, Establishment Division, Government of Pakistan, Rawalpindi v. Saeed Ahmad Khan and Others, PLD 1974 SC 152. Further contended that under Article 270-A of the Constitution of Pakistan, the laws promulgated under the Seventh Schedule (Article 270-A (6)) were saved. The Seventy Schedule included the Cantonments (Urban Immovables Property and Entertainment Duty) Order 1979, which would remain in place. Contended that after Article 270-A, when the Eighth Amendment ratified the said provision, the Presidential Order, which included Cantonment's power to tax, was protected and could not be assailed until and unless the Parliament enacted fresh legislation on the same subject. Additionally, argued that none of the Petitioners had challenged the validity of the Presidential Orders which continued to remain in place. He relied on the Federation of Pakistan and Another v. Ghulam Mustafa Khar, PLD 1989 SC 26, Mehmood Khan Achakzai and Others, v. Federation of Pakistan and Others, PLD 1997 SC 426, and Sargodha Textile Mills v. Federation of Pakistan through Secretary Ministry of Defence, Rawalpindi and 3 Others, PLD 2004 SC 743. Further submitted that section 14 of the Sindh Local Government Act, 2013, specifically excluded "Cantonments" and tax on annual rental value was also excluded under Schedule "V" of the said Act. Submitted that the Cantonments had the power to charge property tax and placed reliance on Pakistan v. Province of Punjab and Others, PLD 1975 SC 37, PLD 2022 Peshawar 46. Further submitted that for all practical purposes, the Government of Sindh has conceded that they will not administer the collection of tax on cantonment lands. To this end, he argued that in fact, by applying "de facto" doctrine, Cantonment had the powers to levy and collect tax impugned in the Petitions. Argued that the Cantonments were local municipal governments and Entry 2 of the Fourth Schedule to the Constitution of Pakistan would become redundant if the power to tax is taken away. Cantonment would be unable to render services. Lastly argued that if the Court concludes that there is no competency for Cantonments to levy tax, then equally, there is no legislation on the part of province to impose such tax. The Cantonments Act, 1924, has not been repealed after the 18th Amendment, and Cantonments being a strategic area require preservation, which can only be achieved by way of tax. MR. FAROOQ HAMID NAEK Mr. Farooq Naek, who was engaged subsequently, while cases were being heard, appeared for Faisal Cantonment Board. and argued in line with Mr. Munshi's arguments and raised the following

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additional grounds: At the outset, Mr. Naek contended that Entry No.50 of the Fourth Schedule specifically referred to "taxes on immovable property" and no other genre of tax involved i.e tax on rented value of immovable property. Argued that taxes on immovable property were/are of four kinds classified as: a) Capital value tax on assets; b) Capital gain tax on property; c) Income tax on property; and d) Annual rental value. With regard to (a) Capital Value Tax on Assets, Mr. Naek referred to Section 4 of the Sindh Finance Act, 2010. He claimed that the capital value tax was payable by the owners of the property whereas capital gain is payable on sale of property. Next, he took the Court to Section 15 of Income Tax Ordinance, 2001 and contended that income tax from property income, triggered under Income Tax Ordinance, 2001 does not deal with value of property and it is in relation to rent received hence it was a tax on rent being collected on the rental income only and precisely includes the tax on annual rental value also. Contended that all these three categories of tax were not covered by Entry No.50 of the Fourth Schedule of the Constitution of Pakistan. Contended that the entry mentioned in Fourth Schedule did not expressly refer to annual rental value and that all entries were silent with regard to annual rental value. In the circumstances, he argued that Entry No.2 was relevant to the case at hand. He argued that Entry 2 has empowered the Cantonment/federal government to impose tax. He also argued the applicability of Article 7 to be read with entry 54 and Article 2 of Constitution of Islamic Republic of Pakistan. BARRISTER DR. FAROGH NASEEM for Cantonment Board. Barrister Farogh Naseem argued that the tax being collected by Cantonments was, although being referred to as a tax, it was, in fact, not a tax. Therefore, argued that because it is not a tax, it does not fall squarely within the tax entries in the Fourth Schedule of the Constitution relating to tax i.e, 43 to 53. Argued that the tax imposed by Cantonments was "something else" but not a tax. He relied upon the Workers Welfare Fund and GIDC cases to support his contention. The crux of his argument was that the "revenue" collected by the cantonment is for cantonment fund for a purpose and its place either in consolidated fund of Federation or province is not going to alter the status of revenue collected as "sums" for cantonment fund and not being tax. Argued that whatever was/is being collected goes to the Cantonment fund under section 106 for its application under section 109. He argued that if the collection by Cantonment was not a tax, then it was covered by entry 54 as a "Fee". Thus, if it is, then Entries 54 and 2 would regulate the recovery of cantonment tax, which was/is a tax by name only. He argued that the taxing power is given under the Fourth Schedule between Entry 43 to 53 and that the collection by the Cantonments is not in the nature of a tax but closer to a fee in terms of its utility and application. Further submitted that the amount collected is used as an expenditure, and on this count too it is not a tax regardless of whatever name is used to describe it. Article 142 and Article 7 of the Constitution disclosed separate entities and Article 142 cannot be read in isolation. Seventh Schedule may not be available but the listed laws are still in force. Any item in Seventy Schedule is subject to amendment by simple majority. Article 279 - the laws listed in Seventh Schedule have not been replaced by appropriate legislation.

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Cantonment Boards are transprovincial - hence federal subject. ATTORNEY-GENERAL/DEPUTY ATTORNEY GENERAL QAZI ABDUL HAMEED SIDDIQUI Notices under Section 27A CPC were served and DAG addressed the Court. Adopted arguments of Dr. Farogh Naseem. Argue that Provincial Government is "sleeping on its right." In CP D-2149, page 27, Government of Sindh has stated that they wish to claim tax on annual rental value but if this is so, then the Provincial Government must proceed to the Supreme Court. 2. Heard counsels and perused record. 3. For the sake of brevity, in response to some common arguments, the cumulative and required reasons are provided, whereas individual points raised have been responded to separately in the later part of judgment. 4. The primary object of concern in understanding the subject, i.e. tax on immovable property, is the legislative competence as restored by the restoration of the constitution via 14th Presidential Order 1985, followed by the 18th Amendment to the Constitution of the Islamic Republic of Pakistan, 1973. In order to understand its effect with clarity, a brief history of such legislative competence on the subject is needed. 5. Tax on immovable property has always been a provincial subject. If we trace history since 1935, i.e. from the date of promulgation of the Government of India Act, 1935 passed by the British Parliament, which received royal assent in August 1935, we understand that the subject always remained part of the provincial pool. 6. A comparative table of taxes on land and buildings is given below:- S.No.Constitution of Pakistan/India ActEntry No. Subject of Tax 1. 1935 Entry No.42 of Provincial ListTaxes on land and buildings, hearths and windows 2. 1956 Entry No.70 of Provincial ListTaxes on lands and buildings 3. 1962 No Entry in Third ScheduleNo Entry in the list of Central Legislature i.e. Third Schedule under Article 132 4. 1972 (Interim Constitution)Entry 40 of Provincial ListTaxes on land and buildings........................... 5. 1973 (Before 18th Amendment)No Entry in FLL and CLLNo Entry in FLL and CLL 6. 1973 (after 18th Amendment)No Entry in FLL (CLL omitted)No entry in FLL (CLL omitted) 7. Last horizontal column provides only the Federal Legislative List (FLL) whereas the Concurrent Legislative List (CLL) omitted and the subject was not available in the FLL, whereas second last horizontal column shows both FLL and CLL but the subject is not available. 8. The other constitutional history is of taxes on the capital value of the assets (covered by its limb of entry 50) and the table is as under:- S.No.Constitution of Pakistan/India ActEntry No. Gist of Entry

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1. 1935 Entry No.55 of Federal ListTaxes on capital value of the assets, exclusive of agricultural land of individual and companies; taxes on the capital of companies 2. 1956 Entry No.25 of Federal ListDuties of customs (including export duties), duties of excise (including duties on salt, but excluding alcoholic liquor, opium and other narcotics), Corporation taxes and taxes on income other than agricultural income; estate and succession duties in respect of property other than agricultural land; (taxes on capital value of assets exclusive of agricultural land; taxes on sales and purchases; stamp duties on negotiable instruments and insurance policies; terminal taxes on goods or passengers carried by railway, sea or air; taxes on their fares and freights; taxes on mineral oil and natural gas. (underlining is for emphasis. 3. 1962 Entry No.42(e) of Central ListTaxes on capital value of assets not including taxes on capital gains on immovable property. 4. 1972 (Interim Constitution)Entry 57 of Federal ListTaxes on capital value of assets, not including taxes on capital gains on immovable property. 5. 1973 (Before 18th Amendment)Entry No.50 of Federal ListTaxes on capital value of the assets, not including taxes on capital gains on immovable property.

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6. 1973 (after 18th Amendment)Entry 50 of Federal ListTaxes on the capital value of the assets, not including taxes on immovable property. 9. The constitutional history of the later subject, i.e. "taxes on the capital value of assets," shows that this subject always remained within the domain of the Federal Legislature, as against taxes on the immovable property. 10. After examining the above history, it becomes clear that the subjects of "taxes on land and buildings" and "taxes on the capital value of the assets" are separate subjects/entries; the prior one primarily belongs to the provincial legislature, and the later subject belongs to the federal legislature, historically. 11. As of now, after the 18th Amendment, the Federal Legislature is not constitutionally empowered to levy, impose, charge and/or recover (directly or indirectly) any tax on immovable property, including a tax on the annual rental value of immovable property within a province, under a law legislated by Federation. 12. For a brief period, the subject identified above, i.e. tax on the immovable property, came into the basket of the federation during the Marshal Law period, and a brief history is required to understand such "reroute" of the legislature. 13. In 1958 (per constitution 1956), the provincial government enacted the law called West Pakistan Urban Immovable Property Tax Act, 1958, and the subject tax on land and buildings continued to vest in the province since the promulgation of the India Act, 1935. 14. This core issue of charge, levy and recovery of such taxes, identified above, came for consideration before Courts earlier when the cantonments intervened and consequently the issue decided by the Supreme Court of Pakistan in the case of Pakistan through Ministry of Defence v. Province of Punjab[1]. The Supreme Court clarified that since the cantonment areas are located within the respective provinces, they were/are, therefore, part of the provinces and do not constitute a federal territory. The Supreme Court summed up that tax on immovable properties is a subject to be dealt with by the provincial statute of 1958 in cantonment areas in consonance with the 1956 constitution. 15. This judgment was then followed particularly in the case of Gulzar Cinema[2]. 16. The two judgments provide that imposition of tax, i.e. levy of property tax by the provincial government in areas lying within the limits of the cantonment board, is valid. 17. Now comes the period when martial law was imposed in Pakistan and Chief Martial Law Administrator acting as President of Pakistan, finding it as an alternate way, promulgated the "Cantonments (Urban Immovable Property Tax and Entertainment Duty) Order, 1979" commonly called Presidential Order 13 of 1979. This is based on 5 sections only, and purposely, by virtue of section 3, the effects of the Act of 1958 ibid ceased on properties within the cantonment areas, and the said order of 1979 was then applied to such properties. 18. Mr. Munshi emphasised that notwithstanding the 18th Amendment and revival of the constitution in 1985, the subject law of 1979 is in line with the Cantonment Act, 1924 read with Presidential Order 13 of 1979 and that cantonments are competent to levy and collect such taxes as the scheme of such statutes are not overshadowed either by restoration of constitution or assumption of a constitutional frame after 18th Amendment. 19. Per section 3 of the Presidential Order No.13 of 1979 the operation of The Urban Immovable Property Tax Act, 1958 was ceased to be given effect in the cantonment areas available in the provinces, apparently, to circumvent the two judgments of Supreme Court of 1975 and 1978, referred above; it was legislated that the cantonments could impose taxes to be assessed on the annual rental value of the building and lands as per provisions of Cantonment Act, 1924. The Said

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Order of 1979 was then given effect for a brief period as identified in the 8th Amendment to the Constitution of 1973 when it was introduced. The Presidential Order No.13 of 1979, amongst other Orders, laws etc. were given protection (for a specified period), in terms of amendment in the Constitution, which is being identified as Article 270A and the 7th Schedule to the Constitution of Islamic Republic of Pakistan, 1973 where the Cantonments (Urban Immovable Property Tax and Entertainment Duty) Order, 1979 was placed and protected which then lost its effectiveness after the revival of constitution and 18th Amendment to the Constitution. 20. A reading of Article 270A as a whole provides that the protection was given to two types of laws: (a) those which were mentioned by reference to their date of promulgation in Article 270A and (b) those which were specifically mentioned in 7th Schedule. This particular Order, which now seems to be overlapping and transgressing the constitutional mandate and provincial law of 1958 after the restoration of the constitution and enactment of 18th Amendment, is mentioned in the 7th Schedule, now omitted. 21. Sub-clause 1 of Act 270A clarified the period of effectiveness of the law made available between July 1977 to 30th December 1985, i.e. when Article 270A was introduced in the constitution. Sub- clause 2 of Article 270A saved all actions orders, proceedings by any authority/any person "again clarifying" between July, 1977 to the date of Article 270(A). Sub-clause 3 emphasised that such Orders, Ordinances, Regulations, Martial Law Orders, Enactments, Notifications and Rules etc, which were in force immediately before the date of Article 270A shall continue until repealed, amended or altered by the competent authority, whereas sub-clause 6 requires clause 1 amendment by the appropriate legislature. 22. Article 270A of the Constitution of the Islamic Republic of Pakistan, 1973 and its effect came for consideration and interpretation before the Supreme Court in the case of Benazir Bhutto[3]. Although the subject matter in the said judgment of the Supreme Court is to the extent of certain amendments which were made through Presidential Orders to the Political Parties Act in the year 1978-1979, during the period of Martial Law governing the country, however, the subject amendments were challenged (as are in this case in one of the petitions as far as 1979's Order is concerned) as it claimed to have been protected by Article 270A (as cantonments claimed now for 1979 Order), which amendments (under the Political Parties Act) deprived the citizens of one of their fundamental rights. The judgment distinguished the effect of the law promulgated during the period in two categories, i.e. (i) those laws that are protected by Article 270A as they fell within the time zone specifically mentioned therein and (ii) those laws that were specifically protected under the 7th Schedule. The said amendments in the Political Parties Act fell within the first category, referred above, and the Supreme Court held that future operation of all laws protected under Article 270A would be "subject to limitations contained in the Constitution" (emphasis applied), which include that not only can such laws be struck down for violation of fundamental rights, as enshrined in the Constitution, but also on the touchstone of constitutional competence i.e. no such laws could be deemed to have been valid, after the period, as identified, against constitutional mandate and frame, as it exist and existed on the day of restoration of Constitution and/or 18th Amendment, whatever the case may be. 23. The Hon'ble Mr. Justice Muhammad Haleem, Chief Justice of Pakistan (as he then was), extended the reasoning for the conclusion drawn by the Bench in the aforesaid Benazir case as under:- The most important legal instrument which follows hereafter is the Revival of the Constitution of 1973 Order, 1985 (P.0.14 of 1985), which was promulgated on 2nd of March, 1985. Although this Order came into force at once but by Article 4, its revival was deferred to such dates on which the President was authorised, by notification, to revive its different provisions. Again by Article 5 of this Order, the…

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