LHC rules tuition fee doesn't justify property tax

Strikes down notices issued to LUMS before amendment to Cantonments Act

LAHORE:

The Lahore High Court (LHC) has declared demands for property tax from the Lahore University of Management Sciences (LUMS) for the period preceding a 2023 amendment to the Cantonments Act, 1924, unlawful, holding that educational buildings were automatically exempt from the levy under the earlier law and the conditions of public access and absence of income did not apply to them.

In a significant ruling on the interpretation of fiscal exemptions, a bench comprising Justice Hassan Nawaz Makhdoom and Justice Khalid Ishaq held that the mere charging of tuition fees could not, by itself, justify denying a property-tax exemption.

The court ruled that the authorities must examine the actual use of the relevant buildings, the nature and source of receipts, and the evidence concerning the institution's operations before deciding whether an exemption is available under the amended law.

The judgment allowed LUMS' constitutional petition and declared the impugned orders dated November 2, 2011, and April 26, 2017, along with any consequential demand founded upon them, to be of no legal effect.

The central question before the court was whether the conditions requiring buildings to be open to the public and generate no income applied to educational institutions under Section 99(2)(b) of the Cantonments Act before its amendment in 2023.

The judges concluded that the wording and punctuation of the earlier provision placed educational buildings and public libraries in a separate category from playgrounds and dharmsalas.

The conditions concerning public access and income, they held, applied to the latter category and could not be extended to educational buildings by interpretation.

The bench observed that the amendment had changed the statutory framework by placing educational buildings in a separate clause, expressly attaching the two conditions to them and replacing the mandatory words "shall be exempt" with "The Board may exempt".