AYESHA A. MALIK, J.---Through this Petition, the Petitioner Pakistan International Airline ("PIA") has challenged order dated 19.5.2015 passed by Respondent No.1 wherein they have been told that they are liable to pay property tax under the Punjab Urban Immovable Property Tax Act, 1958 ("Act") for the superstructure raised on the land leased out to the Petitioner by the Government of Punjab.
2. Facts of the case are that the Petitioner , PIA entered into an Agreement of Lease with the Government of Punjab in 1986 for land located at Lake Road, Old University Ground. Lahore for the purposes of establishing a planetarium ("Lease Agreement "). This lease was initially for five years, then extended and now it has been extended for another 30 years that is 14.11.2026 which fact is not in dispute. The Petitioner was served with notice dated 16.3.2015 under Section 16 of the Act demanding property tax on the supers tructure raised on the said land.
The Petitioner contested the levy of property tax on the ground that it is not the owner of the property as defined under the Act; that it is exempt from paying tax under the Act as well as in terms of Article 165 of the Constitution of Islamic Republic of Pakistan, 1973 ("Constitution "). Learned counsel for the Petitioner stated that the liability of tax under the Act is on the owner of the property and the Petitioner is not the owner of the property as per the definition given in Section 3(e) of the Act. Learned counsel further stated that the Petitioner is being treated as a lessee in perpetuity , however the Petition er is not a lessee in perpetuity because it has a lease agreement in its favour for a specific period with a termina tion clause which lease can be cancelled at any time if the government requires the land for public purpose. In this regard, he places reliance on Government of Sindh through Secretary and Director General, Excise and Taxation and another v. Muhammad Shafi and others (PLD 2015 SC 380). Learned counsel also argued that the Petitioner , PIA is performing functions in connection with the affairs of the Federation, hence is entitled to the exemption under Article 165 of the Constitution. Reliance is placed on Pakistan International Airline Corporat ion and others v. Tanweer-ur-Rehman and others (PLD 2010 SC 676). Learned counsel argued that this Court has already decided a similar matter in Messrs Lahore Electric Supply Co. Ltd. v. Province of Punjab (2014 CLC 590) as well as in terms of the other judgments held that where the occupier of land if an instrumentality of the Federation is exempt from paying tax on the basis of Article 165 of the Constitution. Reliance is also placed on Platinum Commercial Bank Ltd. v. Government of Sindh through the Secretary , Secretariat, Karachi and another (2003 MLD 279 ).
3. Report and parawise comments have been filed on behalf of the Respondents. Learned Law Officer stated that property tax is levied on the superstructure that has been built on the land for which the Petitioner is liable to pay tax under the Act. He has placed reliance on the judgment of this Court dated 23.4.2015 passed in W.P. No.10380 of 2006 titled Pakistan Cricket Board v. Executive District Officer (Revenue), Lahore and 2 others which is with reference to the Gaddafi Stadium which is under the control of Pakistan Cricket Board wherein they were held liable to pay property tax. Learned Law Officer further stated that the Petitioner is liable to pay tax to the extent of the superstructure as it is an autonomous body , hence it cannot seek exemption under Article 165 of the Constitution. Hence the instant Petition is liable to be dismissed.
4. Heard and record perused. The issue before the Court is whether the Petitioner , PIA is liable to pay property tax for the building constructed on land measuring 24 Kanals 13 Marlas located at Lake Road, Old University Ground, Lahore referred to as the 'Planetarium' which was constructed pursuant to the Lease Agreement. As per the Lease Agreement the tenant is liable to pay no rent but shall pay all rates, taxes, charges which are payable by the owner or the occupier of the land. The purpose of the Lease Agreement is so that PIA can build the planetarium. As per the Lease Agreement the Government of Punjab may resume the land if it is required for public purpose or if the land is used for any purpose other than the purpose stipulated in the Lease Agre ement. There is no dispute with respect to the lease period which was extended till May 2007 and then again for 30 years uptil 14.11.2026, free of cost. The Respondents have issued show cause notice for payment of property tax on the construction made on the said land essentially stating therein that they have raised a superstructure on the property , hence they fall within the definition of 'owner ' under the Act. The Act defines owner in Section 2(e) to include a mortgagee with possession, a lease in perpetuity , a trustee having possession of a trust property and a person to whom an evacuee property has been transferred previously or permanently under the Disab led Persons (Rehabilitation and Compensation Act, 1958 ). The Respondents argue that the Petitioner is liable to pay the tax because it is a lessee in perpetuity as its lease continues from 1986. However , in terms of the dicta laid down by the august Supreme Court of Pakistan in PLD 2015 SC 380 (supra), the attributes of a lessee in perpetuity is where the lease agreement is not for a fixed term or where there is no clause for renewal or termination of the agreement. The august Supreme Court of Pakistan has also held that it is necessary to go through the contents of the lease agreement to see whether it suggests permanency on the basis of its object and if at all any structure is raised on the same what is the outcome of the said structure in the event that the lease is terminated. In the instant case the Lease Agreement was initially for a period of five years, extendable by the mutual consent of both the parties.
Admittedly vide letter dated 10.5.2007 the lease period was extended for 30 years from 14.11.1996 to 14.11.2026 free of cost by the Deputy Secretary (Colonies). The Lease Agreement provides that the land is to be used solely for the purposes of the planetarium and where the Government of Punjab finds that the land is not used for this purpose they can terminate the Lease Agreement. In the event that the Lease Agreement is terminated, the Government of Punjab is not responsible for the structure or any material used for the purposes of the structure,, meaning thereby that they are not liable to compensate the tenant for any construction made on the land. As per Clause 4 Lease Agreement can be terminated on account of any breach or non-performance at which time the Government of Punjab may take down the structure and sell whatever material and retain proceeds of the sale. In this case even though the period is from 1986 uptil 2026, it is not the case of the Respondents that the land that has been given to PIA cannot be taken back from them or that the Lease Agreeme nt cannot be terminated or that they are obligated to extend the lease period. Under the circumstances, the Respondents' claim that the Petitioner is lessee in perpetuity is without basis.
5. That being so, the levy of tax under the Act is on the annual value of the building or land or both but tax can only be recovered from the owner of the land. In this case the Petitioner is not the owner of the land as it does not fall within the definition of owner under the Act since it is a tenant of the Government of Punjab, hence tax cannot be levied under the Act on the building raised by the Petitioner on the land leased from Government of Punjab.
6. In view of the aforesaid, the instant Petition is allowed and the impugned order dated 19.5.2015 passed by Respondent No.1, is set aside.