P L D 1969 Karachi 47 (PLP)

West Pakistan Urban Immovable Property Tax Act (V of 1958), S. 2(1) Local authority ‑ Urban area‑Land developed by company in pursuance of Government Resolution authorising it to develop same and to recover charges for electricity and water supply, etc.‑Company, held, did not become a local authority on that account nor land so developed an urban area as envisaged in S. 2(1). The terms used in the definition of the "urban area" were not an innovation introduced by the West Pakistan Urban Immovable Property Tax Act. These terms have been recognised to have a particular meaning and have always been used in a particular context. Indeed even in clause (i) of section 2 of the Act the term "other authority" has been used in continuation of such authorities as the Municipal Corporation, Municipal Committee, Cantonment Board, Small Town Committee. It is futile to contend that merely because in the Government resolution the company was required to develop the land and recover charges for water and electricity it became a local authority so as to fulfil the definition of "urban area" as laid down in clause (i) of section 2 of the West Pakistan Urban Immovable Property Tax Act. [p. 50]B National Bank of Pakistan v. Ataul Huq P L D 1965 S C 201 ref. JUDGMENT FARUQUI, J.‑This judgment will dispose of Petitions Nos. 189, 242, 261, 262, 263, 266 and 267 of 1964 because a short question of law common to all these petitions arises in these cases. The petitioners in all these cases are lessees of various plots situated within the area of the Sind Industrial Trading Estate (hereinafter to be described as S. I. T. E.). The West Pakistan Urban Immovable Property Tax Act, 1958, was applied to Karachi by Ordinance I of 1963 which came into force on 17th January 1963. Section 3 of that Act empowered the Govern ment by notification to specify urban areas where tax shall be levied under the Act. By a notification dated the 19th August 1963, the Provincial Government directed that tax under the West Pakistan Urban Immovable Property Tax Act, 1958 shall be levied in the following urban areas of Karachi:‑ (1) Sind Industrial Trading Estate. (2) Landhi Colony Town Committee. (3) The Drigh Town Committee. (4) Malir Saudabad Town Committee. In pursuance of this notification the assessing authority of M‑2 Division, Karachi, which is the sole respondent in these cases, issued notice of demand upon the lessees of various plots in the S. I. T. E. It appears that objections had been taken on behalf of the lessees of that area that it did not constitute an "urban area" not being within the Municipal limits of Karachi, and was therefore not ,liable to pay the said tax. The Provincial Government then came out with a notification dated the 20th June 1964, which was published in the Gazette of 3rd July 1964 by which the limits of Karachi Municipality was extended to include the S. I. T. E. area. This was done by the Government in exercise of its power under section 7 of the Municipal Administration Ordinance, 1960 read with Rule 3 of the Karachi Municipal Committee (General) Rules of 1960. In view of this notification, the liability of the lessees of the S. I. T. E. area to pay the said tax as from the 3rd of July 1964, is not the subject‑matter of dispute before us. What however is claimed is that any demand for payment of tax from the lessees of the S. I. T. E. area prior to 3rd July 1964, is without lawful authority. It is this question which has been argued before us by Messrs A. Aziz and Muzaffar for the petitioners and Mr. Akhtar Ahmad Qazi, the Additional Advocate‑ General for the respondent.

2. In none of these petitions any written statement or any counter affidavit was filed on behalf of the respondent. The position, however, which was taken by the learned Additional Advocate‑General, was that the question involved in these petitions was one of laws, and with reference to the various notifications, he could substantiate the claim of the respondent that the S. I. T. E. area was an urban area and was for that reason liable to pay tax when the said Act was extended to Karachi we shall now proceed to examine that claim. But before we do that it will be convenient to reproduce the definition of the term "urban area" given in the Act of 1958 to enable as to understand the argument of the learned Additional Advocate General. The definition is contained in section 2, clause (i). "(2) (i). "Urban area" means an area within the boundaries of a Municipal Corporation, Municipal Committee, Cantonment Board, Small Town Committee, or other authority (not being a District Board) legally entitled to, or entrusted by Govern ment with the control or management of a Municipal or a local fund." Our attention was first invited to a resolution of the former Government of Sind dated the 2nd June 1947, as a result of which this trading estate came into being. The relevant portion of this document, and upon which reliance was placed, is as follows:‑ "Resolution.‑With a view to bring about industrial develop ment of Sind, Government are pleased to direct that a company called. "The Sind Industrial Trading Estate Company" should be formed to establish and manage trading estates at Karachi, Hyderabad and Sukkur, on the following lines: (2) The functions of this Company will be to acquire land for these trading estates, to lay out and develop such land by construction of roads and drainage and the provision of light and where either at the request of a particular trader or other wise it appears to be advantageous to do so, to construct and rent premises to traders. The Company will make such charges for water and electricity supplied and for the rent of land and premises as to enable it to pay its expenses and interest at a rate not higher than 4 per cent on its capital outlay." The contention of the learned Additional Advocate‑General was that this trading estate was constituted by a resolution of the Government and was therefore on the same level as a statutory corporation. Referring then to clause 2 of the said document, it was contended that, as by the said resolution, the Company was to have the functions of acquiring land for the said trading estate, to lay out and develop such land by con struction of roads and drainage and to make provision of light, and collect charges for water and electricity, and to collect rent of land and premises to enable it to pay its expenses and interest, the area which was so formed became an urban area within the meaning of section (2) (i) of the Act. The argument was that the S. I. T. E. was an "authority" because it came to be constituted by virtue of a resolution of the then Provincial Government and it was legally entitled to the control and management of the fund which was to be raised in the manner indicated in para. 2 of the resolution. In this manner it was claimed that the requirement of the definition in clause (i) of section 2 was fully satisfied in relation to S. I. T. E. area, and that being so, the demand for payment of tax even before the notification of 2nd June 1964, was with lawful authority.

3. While we appreciate the difficulty of the learned Additional Advocate‑General because we take it that he was pressing, the case of the respondents under instructions we are quite clear in our mind that the respondent should not have resisted the claim made in this petition that there was no liability to pay tax for any period preceding the 3rd of July 1964 whereby the S. I. T. E. area was included within the limits of the Karachi Municipality. The terms used in the definition of the" urban area" were not an ,,innovation introduced by the West Pakistan Urban Immovable Property Tax Act. These terms have been recognised to have a particular meaning and have always been used in a particular context. Indeed even in clause (i) the term "other authority" has been used in continuation of such authorities as the Municipal Corporation, Municipal Committee, Cantonment Board, Small Town Committee. The term "local authority" has been defined by section 3, clause 28.of the General Clauses Act of 1897. It reads: "Local authority" shall mean a Municipal Committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund." It will be noticed that in clause (i) of section 2 of the Act of 1958‑June same expression have been used, namely, "legally entitled to, or entrusted by the Government with, the control or Management of a Municipal or a local fund". Now, what is a "local fund"? This term again has a technical meaning when used in any legislative provision. We may refer to the Sind Local Fund Audit Act of 1930. This term has been defined by section 3, clause (d) of the said Act to mean any fund to the control or Management of which a local authority is legally entitled and includes the proceeds of any case, rate, duty or tax which such authority is legally entitled to impose, etc. As far back as 1871, the term "local authority" and "local fund" was defined in the Cattle Trespass Act (1871) in section 2. "Local authority" was defined to mean any body of persons for the time being invested by law with control and administration of any matters within a specified local area, and "local fund" was defined to mean any fund under the control or management of a local authority. We have therefore no doubt that the terms used in clause (i) of section 2 of the Urban Immovable Property Tax Act have the same connotation, and we are unable to accept the contention that by reason of the resolution of 2nd June 1947 and what was stated therein the Sind Industrial Trading Estate Company, which was not even in existence at that time, became a local authority having the control of a local fund. It is important to note that this resolution of tad June 1947, did not by itself create any Company or Corporation. This was not even a legislative measure. It expressly provided that a company should be formed to establish and manage trading estates at Karachi, Hyderabad, etc. The authority of the company there fore comes not under the said resolution, but by its Memorandum of Association and Articles when the Company came to be incorporated under the Companies Act. 1 his Company therefore like any other Company incorporated under the Companies Act and it is futile to contend that merely because in the Government resolution this company was required t develop the land and recover charges for water and electricity became a local authority so as to fulfil the definition of "urban area" as laid down in clause (t) of section 2 of the West Pakis Urban Immovable Property Tax Act. Indeed, the Government themselves were conscious of this position because it was found necessary to issue a notification of 20th June 1964 whereby S. I. T. E. came to be included within the limits of the Karachi Municipality. The term "local authority" finds place in Article 98 of the Constitution and the question as to what is a local authority came to be considered by the Supreme Court in two cases which had bean decided by the Dacca High Court, one by an employee of the East Pakistan Development Corporation and the other by those of the National Bank of Pakistan, both of which institutions were incorporated by a statute. The High Court of Dacca in both these cases had held that they were local authorities within the meaning of Article 98 so that a direction to them could be given on a petition filed by an aggrieved party. Both these judgments were reversed by the Supreme Court. We may only refer to the judgment of the Supreme Court in the case of National Bank of Pakistan v. Ataul Huq (P L D 1965 S C 201). Dealing with the question their Lordships observed:‑ "The expression "local authority" has been used in statutory phraseology in the Indian sub‑continent for a great many years, and is always understood to mean an authority which is entrusted with the administration of a local fund. Local authorities are bodies exercising within limited territories included in a Province, powers which belong to the Province, but which by statute are delegated to the local authority. A local authority is ordinarily charged with functions of self Government, and has power of making bye‑laws, of imposing taxation, and of maintaining and administering a local fund." We do not think we can venture to improve upon this statement of law.

4. For the reasons given, we hold that the S. I. T. E. area was not an urban area within the meaning of section 2, clause (i) of the Act of 1958, and, for that reason, no property tax could be levied on the property holders of this area before 3rd July 1964 when by a notification that area was included in the Municipal limits. We accordingly declare that the demand of tax for any period before the 3rd July 1964 from the property holders of this area was without lawful authority. We accord ingly allow these petitions in the terms stated above. The res pondent shall pay costs to the petitioners in all these cases. In view of this judgment, if any amount has been deposited by any of these petitioners towards tax for this period, they shall be entitled to withdraw it. Petitions allowed.