Property Tax In Cantonment Areas
March 5, 2019 BY Nauman Qaiser
The relationship between cantonment boards and the federal government is akin to the relationship between local governments and the respective provinces. As far as the federal legislature is concerned, the governance of cantonment areas falls under the repository of powers/subjects mentioned in the Fourth Schedule of the Constitution of Islamic Republic of Pakistan 1973 (Federal Legislative List)[1] which includes, but is not limited to, foreign affairs, communication, defence and local self-government in cantonment areas[2]. In pursuance of a similar entry related to local self-government in cantonment areas, the federal legislature of the time promulgated the Cantonments Act 1924, whereby it not only established individual cantonment boards to be body corporates [3] but also defined the scope of "local self-governance", including the political, administrative and financial powers to be conferred on cantonment boards.
Similarly, all the residuary subjects not mentioned in the Federal legislative List of the Constitution of 1973 come within the legislative competence of provincial legislatures.[4] In this regard, Article 140-A[5] of the Constitution envisages that the respective provincial legislatures shall confer political, administrative and financial autonomy on local governments. It ought to be noticed that instead of having a separate local-government's legislative list enshrined in the Constitution, the scope of the autonomy to be conferred by the provinces on local governments has been left at the discretion of provincial legislatures, which is to be "between nothing and everything", as the "Constitution makers could have determined the scope of such devolution by enumerating Local Government powers within the Constitution itself, however, they chose, not to do so. Such omission by the Constitution makers to specifically enumerate such powers was deliberate; they left the scope of such powers to be determined by each Province in accordance with the prevailing circumstance and political realities of the day."[6]
In pursuance of Article 140-A ibid, the respective provincial legislatures have promulgated various local government laws to define the scope of political, administrative and financial autonomy of local governments situated within the territorial jurisdiction of the respective provinces. It needs to be emphasized that before the insertion of Article 140-A in its present form vide the Eighteenth Amendment, the Constitution merely encouraged local government institutions through Article 32 enshrined in the Chapter containing Principles of Policy, which, as such, were not enforceable. However, after the insertion of the Article 140-A, the devolution of political, administrative and financial autonomy to the local government has become a constitutional duty.
In this regard, the federal government has defined the scope of "local self-governments" in cantonment boards, by virtue of the Cantonments Act 1924 and other such laws promulgated from time to time, while the respective provincial governments have promulgated various local government laws in order to define the scope of political, administrative and financial autonomy of local governments. It cannot so happen that any provincial legislature can interfere in the scope of the cantonment boards defined by the federal government, nor can the latter vary the scope of local governments situated within the territory of the respective provinces, as doing so would be in grave contravention of Article 142 of the Constitution, read with the Federal Legislative List.
In this regard, the provisions in Article 142 (a) and 143[7] of the Constitution, read with those in section 3(4)[8] and section 5[9] of the 1924 Act state that any area declared as a cantonment area under the Act will be governed by the 1924 Act and the rules and regulations made thereunder, and any other law related to local self-governance pertaining to that area would be subject to the cantonment laws. How can a provincial law prevail within the jurisdiction of a federally constituted cantonment area, unless allowed by a federal law governing cantonment boards?
Seen in this context, the section 60 of the Cantonments Act 1924 describes the general taxation powers of cantonment boards, whereby the respective cantonment boards may "with the previous sanction of the Federal Government , impose in any cantonment, any tax which, under any enactment for the time being in force, may be imposed in any municipality in the Province wherein such cantonment is situated" [emphasis provided]. The relevant enactment for the province of Punjab is the Punjab Local Government Act 2013, which by virtue of the section 115, read with the Third Schedule, states that "…a local government may, by notification in the official Gazette, levy any tax, fee, rate, rent, toll, charge or surcharge specified in Third Schedule" [emphasis provided]. Interestingly, the Third Schedule, part II, entry 1 confers the power to levy "tax on urban immovable property" on the Metropolitan Corporation (of District Lahore), Municipal Corporations and Municipal Committees. The word 'may' in section 60 of the 1924 Act, and in section 115 of the 2013 Act means that irrespective of the actual issuance of notification of the levying of property tax by the local government in Punjab, cantonment boards situated in Punjab can charge property tax within their territorial jurisdictions.
This clearly means that if Punjab Assembly in future decides to alter the scope of local governments in its territorial jurisdiction in a way that the power of imposition of property tax is taken away from local governments, then the cantonment boards situated in Punjab cannot charge such a tax. However, the Cantonment (Urban Immovable Property Tax and Entertainment Duty) Order 1979 (PO 13 of 1979) [10] took care of such an uncertain situation regarding the powers of cantonment boards to levy property tax. By virtue of PO 13 of 1979, cantonment boards were to continue to levy and collect tax on the annual value of buildings and lands i.e. property tax, under relevant provisions of the Cantonment Act 1924, irrespective of whether such a tax is not levied by any municipality in a province where the cantonment board is situated under section 60 ibid. This order of 1979 was later validated by Article 270-A of the Constitution in 1985, and subsequently upheld by the superior courts of Pakistan (order dated 24-07-2001 in Writ Petition No. 4807-1991) including the august Supreme Court of Pakistan (in PLD 2004 SC 743).
The immediate necessity to promulgate PO No. 13 probably resulted after a judgment of the august Supreme Court of Pakistan, cited as PLD 1975 SC 37, which originated from an original petition/suit filed by the Federation of Pakistan against the Province of Punjab under relevant provisions of the 1956 Constitution. In the suit, the federation sought exemption from provincial property tax for properties vesting in cantonment boards, under the Constitution of 1956. The judgement was rendered after the promulgation of the 1973 Constitution and held, inter alia, that the provincial law pertaining to property tax would be applicable within the jurisdiction of cantonment areas, under the relevant Legislative Lists of the 1956 Constitution. In this respect, the third last paragraph[11] of this judgment makes it clear that when there is a specific provision for a special subject (like "taxes on land and buildings") in a particular item of a particular list (i.e. the Provincial Legislative List in the 1956 Constitution), then that subject falls within that item of the said list and not under any general item (such as the local self-governance in cantonment areas in the Federal Legislative List of the 1956 Constitution).
This is not the case in the 1973 Constitution where the "tax on lands and buildings" (property tax) is not a specific item in any legislative list, rather it is a residuary item. Therefore, the general item of "local self-government in cantonment areas" would take precedence and would include the charging and levying of property tax by the respective cantonment boards within their territorial jurisdiction. Such a situation has been further buttressed, as mentioned above, by the promulgation of PO 13 of 1979 and its validation by Article 270-A as well as the superior courts of Pakistan. There has been no change in the legislative competence of respective legislatures vis à vis the subjects of "local self-government in cantonment areas" as well as "taxes on land and buildings/property tax", even after the promulgation of the Eighteenth Constitutional Amendment, hence cantonment boards would continue to charge and levy this tax.
In this respect, Article 270-A confers the powers on the "appropriate legislature" to alter, repeal or amend the laws like PO 13 made during the martial law regime of 1977-1985.[12] In order to decide the appropriate legislature, it ought to be decided whether the subject is "local self-government in cantonment areas" or "taxes on lands and buildings". A bare perusal of the preceding paragraphs would bring home, without a shadow of doubt, that the subject is "local self-government in cantonment areas", which includes the incidence of levying "taxes on lands and buildings" – thus the "appropriate legislature" is the federal legislature. Furthermore, a reading of the legislative history of sub-article 6 of Article 270-A[13], especially before and after the Eighteenth Amendment, would also show that the "appropriate legislature" is the federal legislature. Sub-article 6 ibid before the Eighteenth Amendment stated that the laws enshrined in the Seventh Schedule of the Constitution, which included PO 13 of 1979, could only be amended in the manner provided for making amendments to the Constitution – which could only be done by the federal legislature. The amendment in this sub-article after the Eighteenth Amendment, apart from the removal of the Seventh Schedule, provides for a simple majority to bring about an amendment in the laws made during the martial law regime of 1977-1985. Therefore, the mere change of procedure for amendments on its own does not change the appropriate legislature from the federal legislature before the Eighteenth Amendment to the provincial legislature after the Eighteenth Amendment.
For the sake of argument, even if it is conceded that the "appropriate legislature" is indeed the provincial government, no such alteration, repeal or amendment of the subject of tax has been brought about by the provincial legislatures, thus PO 13 of 1979 would hold the field.
It would be safe to conclude that the scope of levying "taxes on lands and buildings"/property tax by cantonment boards in their respective territories has been defined by the federal legislature under section 60 of the Cantonments Act 1924, along with provisions of the Cantonment (Urban Immovable Property Tax and Entertainment Duty) Order 1979 (PO 13 of 1979). When such a tax may be imposed in any municipality in the province wherein such cantonment is situated, then the cantonment board can also impose such a tax within its jurisdiction under section 60 of the 1924 Act. However, when the provincial legislature in question does not confer this power on respective municipalities, then property tax would be imposed by cantonment laws, not by virtue of section 60, but under the mandate of PO 13 of 1979. Both the Act of 1924 and the Order of 1979 are different incidences whereby the federal government has undertaken to define/alter the scope of local self-government in cantonment areas, as is the case when various local government laws are promulgated in the respective provinces from time to time in order to cater to the exigencies of circumstances and political realities.
[1] Article 142(a) of the Constitution: "Subject matter of Federal and Provincial laws: Subject to the Constitution – a) …..Parliament shall have exclusive power to make laws with respect to any matter in the Federal Legislative List.
[2] Item II, Part I, Federal Legislative List: "Military, naval and air force works; local self-government in cantonment areas, the constitution and powers within such areas of cantonment authorities, the regulation of house accommodation in such areas, and the delimitation of such areas."
[3] Section 11, Cantonments Act, 1924: "Incorporation of cantonment Board. Every Board shall, by the name of the place by reference to which the cantonment is known, be a body corporate having perpetual succession and a common seal with power to acquire and hold property both moveable and immoveable and to contract and shall, by the said name, sue and be sued."
[4] Article 142 (c): ".Subject to the Constitution…… (c ) Subject to paragraph (b), a Provincial Assembly shall, and Majlis-e-Shoora (Parliament) shall not, have power to make laws with respect to any matter not enumerated in the Federal Legislative List."
[5] Article 140-A, Local Government: (1) Each Province shall, by law, establish a local government system and devolve political, administrative and financial responsibility and authority to the elected representatives of the local governments.
[6] Lahore Development Authority Versus Imrana Tiwana & others (2015 SCMR 1739)
[7] Article 143: "In consistency between the Federal and Provincial Laws: If any provision of an Act of a Provincial Assembly is repugnant to any provision of an Act of Majlis-e-Shoora (Parliament) which Majlis-e-Shoora (Parliament) is competent to enact , then the Act of Majlis-e-Shoora (Parliament), whether passed before or after the Act of the Provincial Assembly, shall prevail and the Act of the Provincial Assembly shall, to the extent of repugnancy be void.
[8] Section 3(4): "The Federal Government may, by notification in the official Gazette, direct that in any place declared a cantonment……, the provisions of any enactment relating to local self-government other than this Act shall have effect only to such extent or subject to such modifications, or that any autho­rity constituted under any such enactment shall exercise authority only to such extent, as may be specified in the notification.
[9] Section 5: When….….any local area is included in a cantonment, such area shall thereupon become subject to this Act and to all other cantonments for the time being in force throughout the cantonment and to all notifications, rules, regulations, bye-laws, orders and directions issued or made there­under."
[10] 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.
Section 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 land…
[11] "Nevertheless, if we read the legislative lists in the manner that they should be read, namely, that if there is a specific provision for a special subject in a particular item of a particular list, then that subject falls within that item of the said list and not under any general item. Since taxation on lands and buildings is specifically mentioned in the Provincial Legislative List as a separate item of legislation, legislation in respect of taxes on lands and buildings comes within the competence of the Provincial Legislature and the law so made would apply in any part of the Province making the law, unless the area sought to be excluded has been specifically exempted under the law or under any constitutional provision."
[12] Article 270-A(3) of the Constitution
[13] Article 270-A (6) before the 18th Amendment: "Such of the President's Orders and Ordinances referred to in clause (1) as are specified in the Seventh Schedule may be amended in the manner provided for amendment of the Constitution, and all other laws referred to in the said clause may be amended by the appropriate Legislature in the manner provided for amendment of such laws.
Article 270-A(6) after the 18th Amendment: "The laws referred to in clause (1) may be amended by the appropriate legislature in the manner provided for amendment of such laws."
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Nauman Qaiser
The writer is an Advocate of the High Court. He tweets @naumanqaiser and can be be reached at naumanqaiser@gmail.com