| Citation(s) |
|---|
| 2026 SLG 4886 = 2026 SLD 4886 = 2026 SCP |
Supreme Court of Pakistan
Civil Appeals No.1309 to 1312 of 2019 [On appeal from the judgments/orders dated 14.01.2019 of the Islamabad High Court, Islamabad passed in I.T.R. Nos.32 to 35 of 2012]
Presented By: Mr. Justice Yahya Afridi, CJ Mr. Justice Naeem Akhter Afghan Mr. Justice Muhammad Shafi Siddiqui
Mr. Rehan Seerat, ASC.
Civil Appeals No.1309 to 1312 of 2019 [On appeal from the judgments/orders dated 14.01.2019 of the Islamabad High Court, Islamabad passed in I.T.R. Nos.32 to 35 of 2012]
Presented By: Mr. Justice Yahya Afridi, CJ Mr. Justice Naeem Akhter Afghan Mr. Justice Muhammad Shafi Siddiqui
Mr. Rehan Seerat, ASC.
M/s Defence Housing Authority, Islamabad. … Appellant
VERSUS
Commissioner Inland Revenue (Zone-II), Large Taxpayers Unit, Islamabad. … Respondent
Law: Income Tax Ordinance, 2001
Section: 49(1),49(2),49(3),120,122(5A)
Law: General Clauses Act, 1897
Section: 3(28)
Law: Local Authorities Loans Act, 1914
Section: 2
Summary The Court held that Defence Housing Authority, Islamabad (DHA) is not a “local authority” for the purposes of the income-tax exemption in section 49(2) of the Income Tax Ordinance, 2001. Although DHA operates in a defined area and performs development, planning and regulatory functions, it did not prove that it had the essential statutory powers of a local authority—particularly the legal control or management of a municipal/local fund or the legal power to impose a cess, rate, duty or tax. Therefore, DHA could not claim exemption from income tax, and its appeals were dismissed. Core points DHA claimed exemption from income tax for Tax Years 2005–2008 under section 49(2) of the Income Tax Ordinance, 2001, asserting that it was a “local authority.” DHA’s tax returns were initially treated as assessment orders under section 120 of the Ordinance. The tax authorities amended those assessments under section 122(5A), holding that DHA was not a local authority and therefore was not entitled to exemption. The Commissioner Inland Revenue (Appeals) and the Appellate Tribunal Inland Revenue accepted DHA’s claim and treated it as a local authority. The Islamabad High Court reversed those decisions and held that DHA did not qualify as a local authority. The Supreme Court upheld the Islamabad High Court’s view and dismissed DHA’s appeals. Under section 3(28) of the General Clauses Act, 1897, a local authority must be legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund. Under section 2 of the Local Authorities Loans Act, 1914, a local authority must either: Control or manage a local or municipal fund; or Have legal authority to impose a cess, rate, duty or tax within a local area. Merely working within a defined geographical area, collecting charges, or performing public/developmental functions does not by itself make an institution a local authority. A body must substantially possess the attributes of local self-government, including statutory powers to levy taxes/fees, maintain its own local fund, make bye-laws, and perform municipal functions…