Professional Taxes by Cantonment Boards

In a significant ruling, the Supreme Court of Pakistan addressed Civil Appeals No. 1363 to 1365 of 2018, brought forward by the Cantonment Board Faisal and Cantonment Board Clifton. The appeals challenged the judgment passed on July 15, 2017, by the High Court of Sindh, Karachi, which held that the Cantonment Boards could not levy provincial taxes on professions, trades, callings, and employments.

Key Issues:

Legality of Professional Taxes by Cantonment Boards: The core issue revolved around whether Cantonment Boards had the authority to impose professional taxes under Article 163 of the Constitution of Pakistan and the Cantonments Act, 1924.

Constitutional Amendments and Legislative Powers: The appellants contended that subsequent amendments to the Constitution, particularly the introduction of Article 140A, empowered local governments, including cantonment boards, to levy such taxes.

Arguments for the Appellants (Cantonment Boards): The appellants argued that section 60 of the Cantonments Act, 1924, permitted cantonment boards to perform local government functions, including the imposition of professional taxes. They contended that amendments to the Constitution, specifically Article 140A, now allowed such taxation powers.

Arguments for the Respondents (Various Corporations and Sindh Government): The respondents, supported by the Additional Advocate-General, Sindh, argued that under Article 163, only provincial assemblies could impose professional taxes. They emphasized that the Federal Legislative List and other constitutional provisions did not grant such powers to cantonment boards.

Case Law: The Supreme Court's previous decision in the ICI case "ICI Pakistan Ltd. v Tehsil Council (PLD 2007 Supreme Court 428)" was pivotal, which held that only provincial assemblies could impose professional taxes and any contrary provisions in other statutes would yield to Article 163. The case of Province of Punjab v Sargodha Textile Mills Ltd. (PLD 2005 Supreme Court 988) provided historical context and interpretation of professional tax laws.

Court's Conclusion: The Supreme Court, led by Chief Justice Qazi Faez Isa, upheld the High Court's decision, dismissing the appeals. The Court reiterated that:

Exclusive Provincial Authority: Article 163 of the Constitution explicitly empowers only provincial assemblies to impose professional taxes, not cantonment boards or any federal entities.

Invalidation of Section 60(1) Amendment: The amendment to section 60(1) of the Cantonments Act, made by the Cantonments (Amendment) Act, 2023, which purported to delegate taxation powers to cantonment boards, was declared ultra vires the Constitution.

Refund of Unconstitutionally Collected Taxes: Taxes collected under the impugned provisions were deemed unconstitutional, and the Cantonment Boards were directed to refund these amounts. The judgment underscores the constitutional boundaries between federal and provincial taxation powers, reinforcing the principle that only provincial assemblies can impose professional taxes.

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