The Lahore High Court has dismissed two petitions seeking exemption from property tax filed by a private medical college and hospital, imposing a Rs1 million fine for what the bench described as delaying tactics aimed at deferring lawful payment.
Bench Delivers 15-Page Judgment
A two-member bench comprising Justice Hassan Nawaz Makhdoom and Justice Khalid Ishaq issued the 15-page judgment, authored by Justice Khalid Ishaq. The court held that a private medical college and hospital cannot claim exemption from property tax merely on the grounds that they are lessees rather than owners of the property.
2024 Amendment Brings Lessees Under Owner Definition
According to the judgment, an amendment to the Punjab Finance Act 2024 means a lessee in possession is also considered an owner for the purpose of property tax. The change to the Punjab Urban Immovable Property Tax Act incorporated a lessee in possession into the definition of an owner.
The court observed that the private medical college could not claim exemption simply because it was a lessee. The institution had acquired the property under a lease agreement dated September 14, 2017. The lease was initially set for 33 years, with provisions allowing further renewals for another 33 years and subsequently as well.
Lease Terms Held to Be Permanent in Nature
The court determined that these terms made the lease permanent in nature. Justice Khalid Ishaq observed that a party could not avoid its legal tax liability by taking advantage of an unregistered lease agreement, adding that no person could benefit from their own failure to fulfil legal requirements.
The judgment stated that the primary liability for property tax rests with the property owner. However, if the owner fails to pay the tax, the person using the property on rent or lease can also be served a payment notice by the tax authorities.
Commercial Activity on Rural Land Questioned
The court further observed that the private medical college and hospital were carrying out commercial activities in a rural area. The petitioners also failed to provide evidence of the required legal permission and payment of fees for conversion of the use of rural land. The petitioners subsequently withdrew their plea seeking non-imposition of property tax in the rural area.
The court held that interim relief could not be used as a basis for obtaining permanent exemption from property tax. The private medical college was also held liable for payment of previously outstanding property tax.
Fine Recoverable as Land Revenue Arrears
Justice Khalid Ishaq observed that the petitioner had continuously avoided payment of lawful taxes and dues and had used delaying tactics to defer payment. The court consequently imposed a Rs1 million fine, which, according to the judgment, would be recovered as arrears of land revenue under the Punjab Land Revenue Act 1967.
The court made clear that constitutional jurisdiction could not be used to violate the law or evade payment of taxes. It dismissed both petitions filed by the private medical college and hospital seeking property tax exemption and upheld the order for payment of the relevant tax liabilities.
Key Rulings at a Glance
- The Lahore High Court rejected two property tax exemption petitions from a private medical college and hospital.
- A Rs1 million fine was imposed for delaying tactics in tax payment.
- The bench held that a lessee in possession qualifies as an owner under the Punjab Finance Act 2024 amendment.
- The lease, signed in 2017 for 33 years with renewal options, was deemed permanent in nature.
- The court ruled that interim relief cannot serve as grounds for permanent tax exemption.
- The fine is recoverable as arrears of land revenue under the Punjab Land Revenue Act 1967.
