NAZEER AHMED LANGOVE, J. In this petition, following prayer has been made: "It is, therefore, respectfully prayed that under above stated circumstances, submissions made therein this Hon'ble Court may kindly be pleased to issue a writ against respondents with the following declaration: i. Declare that petitioner is exempted from payment of any tax on its properties in terms of section 99(2)(f) of the Cantonment Board Act, 1924; ii Declare that all unauthorized acts of the respondents including the notices/challan issued by respondent No.4 to the petitioner are illegal, without lawful authority and have no legal effect; iii. Restraining the respondents from taking any further steps contrary to law with reference to issuing notices, imposing any sort of tax including property tax from the petitioner in respect of its properties being the property in occupation of the Federal Government for public purposes situated within the limits of Quetta Cantonment. Moreover, respondents be restrained not to adopt any coercive method for recovery of property tax and other dues; iv. Any other relief this Hon'ble Court deem fit and appropriate under the above explained circumstances may be granted, in the interest of justice, equity and good conscience."
2. Facts of the case are that the State Bank of Pakistan, Quetta (SBP), is situated within the limits of Cantonment Board Quetta and performing its function according to the Act, 1956.
It is the case of the petitioner that the Cantonment Board Quetta (respondent No.4), without adhering to the provisions of Cantonment Act, 1924, as well as, Article 165 of the Constitution of Islamic Republic of Pakistan, 1973, issued the impugned demand notice No.Tax/SBP/3893, dated 20th April 2020 for recovery of property tax, sewerage charges, conservancy charges and composition fee against the petitioner-Bank; hence this petition with the prayer mentioned above.
3. On service of notice, the learned Deputy Attorney General appeared on behalf of respondents Nos.1 to 3 and 5, Mr, Adnan Basharat, Advocate for respondent No.4 and, raised various legal objections in respect of maintainability of the petition and contested the same on merits as well
4. Heard the learned counsel for the parties and gone through the record with their assistance, which reflects that the petitioner is a body constituted under the State Bank of Pakistan Act, 1956, whereas the respondent No.1 is Central Administrative Department of the Government of Pakistan; similarly the respondent No.5 is Central Administrative Department, responsible for financial matters and the respondent No.3 is an attached Department of the respondent No.5, responsible for implementation of the Cantonments Act, 1924.
The respondent No.4 shown to have issued a demand notice dated 20th April, 2020 to the petitioner-Bank for payment of property tax, sewerage charges, conservancy charges and composition fee in respect of State Bank of Pakistan; appraised of the legal and factual position by the petitioner-Bank, but no heed was paid.
5. The main stress of the petitioner was that under the provisions of Article 165 of the Constitution of Islamic Republic of Pakistan 1973, various public properties including the petitioner-Bank have been exempted from taxation.
Similarly under the provisions of section 49 of the State Bank of Pakistan Act, 1956, the petitioner- Bank is exempted from taxes; further provided under section 53 of the Income Tax Ordinance, 2001, notice therefore, issued by the respondent No.4 (Cantonment Board Quetta) is contrary to the referred Article of the Constitution of Islamic Republic of Pakistan, 1973 and relevant provisions of the law, therefore, is liable to be declared as illegal.
6. On the other-hand, learned counsel for the respondents strongly opposed the contention of the petitioner-Bank and urged with vehemence that after having attained status of Corporation, the petitioner-Bank is not entitled for exemption of taxes provided under Article 165 of the Constitution.
But in our view point the referred Article of the Constitution provides protection to the petitioner- Bank from levy of taxes and such like liabilities, which reads as under: "165. Exemption of certain public property from taxation.
(1) The Federal Government shall not, in respect of its property or income, be liable to taxation under any Act of Provincial Assembly and, subject to clause (2) a Provincial Government shall not, in respect of its property or income, be liable to, taxation under Act of Majlis-e-Shoora (Parliament) or under Act of the Provincial Assembly of any other Province.
(2) If a trade or business of any kind is carried on by or on behalf of the Government of a Province outside that Province, that Government may, in respect of any property used in connection with that trade or business or any income arising from that trade or business, be taxed under Act of Majlis-e-Shoora (Parliament) or under Act of the Provincial Assembly of the Province in which that trade or business is carried on.
(3) Nothing in this Article shall prevent the imposition offees for services rendered"
Section 49 of the State Bank of Pakistan Act, 1956 also provides that:
49. Exemption from taxes.---Notwithstanding anything in Wealth Tax Act, 1963 (XV of 1963), and Income Tax Ordinance, 1979 (XXXI of 1979), or any other law for the time being in force relating to wealth tax, income tax or super tax the Bank and any subsidiary, or trust, established by it shall not be liable to pay wealth tax, income tax or super tax on their income or wealth.
Similarly, section 53 of the Income Tax Ordinance, 2001, describes exemption and concessions in second schedule, which reads as under:
53. Exemptions and tax concession in the Second Schedule.---(1) The income or class of income, or persons or classes of persons specified in the Second Schedule shall be--
(a) exempted from tax under this Ordinance, subject to any conditions and to the extent specified therein;
(b) subject to tax under this Ordinance at such rates, which are less than the rates specified in the First Schedule, as are specified therein;
(c) allowed a reduction in tax liability under this Ordinance, subject to any conditions and to the extent specified therein; or (d) exempted from the operation of any provision of this Ordinance, subject to any conditions and to the extent specified therein.
7. Learned counsel for the petitioner-Bank placed on record a copy of summary issued by the Government of Pakistan, Finance Division, Islamabad wherein it has been mentioned that: "State Bank of Pakistan (SBP) and its subsidiary SBP-Banking Services Corporation (BSC) perform multifarious functions across the country under SBP Act, 1956 and SBP-BSC Ordinance, 2001. BSC, with a view to carrying out its responsibilities properly in its offices/premises across the country, particularly in provincial and federal capital and major industrial and commercial centers. All the Cantonment Boards have levied property tax on SBP/BSC buildings located in their respective jurisdictions.
2. SBP is of the view that being a Public Service Organization, property tax is not applicable on SBP Buildings. In terms of section 42 of SBP Act, 1956, the entire profit of the bank after providing for expenditures is remittable to the Federal Government. Furthermore, the entire capital of the Bank vests in the Federal Government. SBP is not a commercial entity, rather it performs functions on behalf of the Federal Government. The properties of SBP need to be treated as owned by the Federal Government and hence may be exempted from the levy of property tax. This would be in consonance with the scheme of taxation already enshrined in the SBP Act, 1956 whereby it is exempted from stamp duty, income tax and wealth tax under Sections 48 and 49 of the said Act.
The Law and Justice Division has also supported the viewpoint of State Bank of Pakistan/Finance Division by conveying that Federal Government may exempt the SBP from payment of Tax under 99-A of Cantonment Act, 1924."
If contention of the respondent-Cantonment Board is believed in totality, even then, case of the petitioner-Bank is on different footings with that of the National Bank of Pakistan (NBP) and Pakistan Telecommunication Corporation (PTC). In this respect the Courts have taken diverse position on the interpretation of said Articles in different cases; in the case of Central Board of Revenue v. SITE (PLD 1985 SC 1997), the Hon'ble Supreme. Court of Pakistan was of the view that SITE is a limited company; however, as it is effectively controlled by the Provincial Government, hence, is exempted from payment of income tax. This view was followed by Sindh High Court in the case of Rice Export Corporation of Pakistan Limited v. Karachi Municipal Corporation (PLD 1990 Karachi 186); further been followed by the Lahore High Court in the case of Chairman District Council, Rahim Yar Khan v. United Bank Limited (1986 CLC 1397).
8. It appears that the Courts are basically concerned that whether the corporation under consideration is a business organization or is providing basic necessities to the people as an extending arm of the Government. In case of statutory corporations, providing basic necessities, the Court generally took the view that they are entitled to benefit of Article 165 of the Constitution of Islamic Republic of Pakistan; 1973.
9. In our perception, the State Bank of Pakistan being a public service organization is exempted from property tax on its buildings in terms of section 49 of the State Bank of Pakistan Act, 1956, for another reason that profit of the Bank after providing expenditures is remittable to the Government.
Moreover, the entire capital of the Bank vests in the Federal Government; above all the State Bank of Pakistan is not a commercial entity rather it performs its functions on behalf of the Federal Government, its properties, therefore need to be treated as owned by the Federal Government; hence, exempted from the levy of taxes; this otherwise would be in consonance with the scheme of taxation already, provided in the State Bank of Pakistan Act, 1956, whereby it has been exempted from stamp duty, income tax and wealth tax under the provisions of sections 48 and 49 of the Act.
Same criteria has been mentioned under the provisions of SBP Banking Services Corporation Ordinance, 2001, section 25 of the "Ordinance" provides exemption to the petitioner-Bank, which reads as under: "25. Exemption from taxes. Notwithstanding anything contained in the Wealth Tax Act, 1963 (XV of 1963), and the Income Tax Ordinance, 1979 (XXXI of 1979) or any other law for the time being in force relating to wealth tax, income tax or super tax, the Bank shall not be liable so pay any wealth tax, income tax or super tax on its income or wealth."
10. For what has been discussed above, the petitioner-SBP has established its case on legal and factual grounds; thus is exempted from levy of property tax, as a result, the petition is allowed, the impugned demand notice No.Tax/SBP/3893, dated 20th April 2020 issued by the respondent-CBQ is declared illegal, unlawful and of no legal consequence.