Summary Lahore High Court rejects property tax exemption pleas by private medical college and hospital, imposing Rs1 million fine for delaying tax payment.
LAHORE (Muhammad Ashfaq) - The Lahore High Court has rejected two petitions seeking exemption from property tax for a private medical college and hospital and imposed a Rs1 million fine for using delaying tactics in payment of the tax.
A two-member bench comprising Justice Hassan Nawaz Makhdoom and Justice Khalid Ishaq issued a 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 not owners of the property but lessees.
According to the judgment, following an amendment to the Punjab Finance Act 2024, a lessee in possession is also considered an owner for the purpose of property tax. The amendment to the Punjab Urban Immovable Property Tax Act included a lessee in possession in the definition of an owner.
The court observed that the private medical college and hospital could not claim exemption merely because they were lessees. The private medical college had acquired the property under a lease agreement dated September 14, 2017. The lease was initially for 33 years, with provisions allowing further renewals for another 33 years and subsequently as well.
The court held that these terms made the lease permanent in nature. Justice Khalid Ishaq observed in the judgment 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.
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.
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 it 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.
