1990CLC92 (PLP)

Date of hearing: 15th August, 19$

9. SALEEM AKHTAR, J.‑‑The petitioners are Local Authority and manage the affairs of Karachi Port under the provisions of Karachi Port Trust Act. They enjoy exemption from payment of property tax of berths and sheds under section 4 (b) (ii) of Urban Immovable Property Tax Act, 1958 as they use them exclusively for public purpose. With the introduction of container service for carriage of cargo the petitioners to meet its requirements and modernise the facilities made necessary changes in the mode of loading and discharging the cargo packed .in containers. The petitioners therefore at their cost provided specially reinforced plinths and additional facilities for stacking containers. 1t has been alleged that in the interest of efficient working the stacking areas for the containers instead of being managed by petitioners themselves were allocated to various shipping agents who regularly handled container vessel. It has been further stated in the petition that in order to compensate for the loss of space and revenue and to recover the costs incurred in developing and maintaining the container parks and providing services the petitioner on the basis of calculation made started charging of Rs.215 per sq. meter per annum from the container operators as container handling and marshalling charges. The petitioners by an application dated 24‑6‑1984 filed before the Excise and Taxation Officer, sought exemption from payment of property tax on the said container parks. This request was rejected by order dated 15‑7‑1984. The petitioners filed an application before the Director Excise and Taxation which was also dismissed by order dated 12‑4 1986. Revision filed before respondent No.l also met the same fate. All these Authorities held that the petitioners were not entitled to exemption as the container parks which have been let out to various Shipping Companies are not used exclusively for public purposes and further that they are used for purposes of profit. The petitioners have challenged these orders in this petition. The entire controversy revolves round the interpretation of section 4 (b) (ii) of the Urban Immovable Property Tax Act which reads as follows:‑‑ Section 4: The tax shall not be leviable in respect of the following properties namely: (a)

(b) Buildings and lands other than those leased in perpetuity. (i)

(ii) owned or administered by a local authority when used exclusively for public purposes and not used for purposes of profit he learned counsel for the petitioners has contended that the container parks are just like warehouses and wharf kept and maintained by the petitioner for loading and unloading purposes for which no tax is charged. He further contended that the petitioners 'are local authority and the container parks are used for public purposes and not used for purposes of profit. In order to claim exemption from tax the petitioners must show that the building is owned or administered by them which are local authority and is used exclusively for public purposes and not for purposes of profit. All these three ingredients should be present and fully satisfied before any claim for exemption can be admitted. The petitioners are a local authority and there is no dispute about it. The only dispute seems to be whether the container parks are used exclusively for public purposes and further that they are not used for purposes of profit. The admitted position with regard ‑to the property is that it is an open space prepared for landing the containers from the vessel and parking them there. The petitioners have incurred expenses for making them serviceable for that purpose. Having developed them under an agreement of licence, pro forma of which has been filed, possession has been handed over to various shipping agents. Licence fee is charged at a fixed rate which has now been provided under the statute. The agreement provides that on failure to pay the licence fee, the petitioners are entitled to re‑enter the premises and charge interest at the rate of 10% per annum with quarterly rest or such higher rate of interest as is charged by banks from time to time. The licensee will pay all rates, taxes and outgoings whatsoever which are leviable in respect of the said premises to the Government, petitioner, Corporation or to any other person or company or Association. The licensee is also required, in addition, to pay charges on account of electric charges, tire protection, watch and ward and such other works which the Board may in their discretion consider necessary for the improvement of amenities and efficient working of the yard. The licensee will be responsible for all damages caused due to his negligence or his agents and servents. Where the licensee defaults in payment of licence fee or other charges, the petitioners are entitled to recover the same with interest and expenses of recovery at the rate of 6% of the amount of arrears. In clause 21 (B) (a) it is a condition that the shipping lines must be regular callers at the port with at least one call per month, based on past performance or future guarantees. The containers will be loaded and discharged from vessel using ships gear. All container handling equipments `will be supplied and maintained by shipping lines/agents and use of type‑equipment cleared in advance with' the petitioners. Clause 21 (B) (e) provides dwell time of cargo up to 10 days from the date of completion. Containers with import cargo must be removed out of the Port Area within the dwell time or destuffed into K.P.T. Sheds/linths within the dwell time. If the licensee fails to clear the container or destuff within the dwell time a surcharge of Rs.250 per day per 20 ft. equivalent unit will be recoverable from the licensee. The sub‑letting of container parks is prohibited and it is to be utilized exclusively by the licensee. According to clause 23 on execution of the licence the licensee shall deposit with the Board Rs: 1,50,000 as security for due performance of the terms and conditions and in the event of breach by the licensee the petitioner is entitled to forfeit the deposit or any part thereof and in that event on demand licensee will be required to make up the deficit of the deposits. In case of fulfilment of the contract, deposit money will be returned without any interest. These are the salient terms on which the container parks have been let out to the shipping agents. The container parks are exclusively for the use of the licensees to the exclusion of all other persons. The g licensees have to pay fee, charge, taxes, penalty and furnish security deposit besides the demurrage payable after the dwell time of 10 days. The container parks are thus in exclusive use of the licensees shipping agents and income accrues to the petitioners. In the background of these facts we have to determine' whether the petitioners have fulfilled the conditions laid down by section 4 (b) (ii).

Mr. Usmani the learned counsel for the petitioners has contended that as the cost for preparing and maintaining the parking lots is much higher than what the petitioners are realizing by way of fee they cannot be treated to have been used for the purposes of profit. The term `for purposes of profit' has not been used in the sense it is understood in accountancy for determining gains and profits. The moment income accrues from any investment it amounts, to employment of resources for purpose of profits. It is the accrual of income from property movable or immovable, investment, or development or resources which determines the purpose and nature of utilization of such property. Every advantage, benefit of productivity resulting from employment of resources or capital will amount to profit. The terms of licence establish that the container parks arc regular source of income to the petitioners and are thus used for purposes of profit. Mr. Usmani has contended that on wharves and berths established by the petitioners no tax is levied because they are used for public purposes and therefore parking containers should be treated at par with them. The contention for any public purpose, to warrant excmptio) an exclusive use by the public, open to all the a basis, of equality to such extent as the capacity of the admits, or an exclusive use by some public or quasi‑public agency on behalf of the public.' In Black's Law Dictionary it has been defined as under: "The term is synonymous with governmental purpose. State v. Dixon, 66 Mont. 76,

213. P.227,

231. As employed to denote the: objects for which taxes may be levied,, it has no relation to the urgency of the public: need or to the extent of the public benefit which is to follow; the essential rednisite being that a public service or use shall affect the inhabitants a; a community, and not merely as individuals. Stevenson v. Port of Portland, 82 Or, 576, 162 P. 509,

511. A public purpose or public business' has for its objective the promotion of the public health, safety, morals, general welfare, security, prosperity, and contentment of all the inhabitants or residents within a given political division, as, for example, a State, the sovereign powers of which are exercised to promote such public purpose or public business. Green v. Frazier, 44 N.D. 395, 176 N.W. 11,

17. See also, City of Tombstone v. Macia, 30 Ariz. 218, 245 P. 677, 679, 46 A:L.R. 828.". Considering the facts and circumstances of the case it is clear that the petitioners having contracted to let out the container parks cannot claim to use them for D public purpose as they are not open for use by all the people on the basis of equality like other berths and wharves. The learned counsel for the petitioner has referred to Hamabai Framjee Pent v. Security of State for India in Council 42 Indian Appeals

44. In this case the land was leased to one appellant and in the other appeal it was granted by Samad on a nominal rent. In both the cases there was a stipulation that the land could be resumed for public purpose on payment of compensation. The Government of Bombay served notice to resume possession for‑ public purpose. The lessee challenged the proceedings and the High Court ruled against her. The Privy Council observed: "The argument of the appellants is really rested upon the view that there cannot be a 'public purpose' in taking land if that land when taken is not in some way or other made available to the public‑at‑large. Their Lordships do not agree with this view. They think the true view is well expressed by Batchelor, J. in the first case, when he says: "General definitions are, I think, rather to be avoided where the avoidance is possible, and I make no attempt to define precisely the extent of the phrase `public purposes' in the lease; it is enough to say that, in my opinion, the phrase, whatever else it may mean, must include a purpose, that is, an object or aim, in which the general interest of the community, as opposed to the particular interest of individuals, is directly and vitally concerned." This dictum hardly supports the petitioners. The container parks leased out to shipping agents serve the interest of individual companies to exclusion of the general public interest at large. Their use is restricted to individuals who have reserved it for their exclusive use for valuable consideration. Furthermore as container parks are source of income to the petitioners, they are used for purpose of profit. In our view the petitioners do not qualify for exemption and therefore the petition is dismissed with no order as to costs. AA/T‑69/K Petition dismissed.