Charitable Institution

2026 PLD 355 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 3 & 5Zakat and Ushr Ordinance (XVIII of 1980), S.24Deduction of ZakatExemptionCharitable institutionProofPetitioner / University was aggrieved of deduction of Zakat on its investments made with a financial institution

Plea raised by petitioner / University was that it was a charitable institution and was exempted from deduction of Zakat

Validity

Petitioner / University was established for paramount national interest to establish a center for advancement of education and learning of internationally acknowledged standards to the talented and deserving students of Pakistan

Petitioner / University was neither alleviated institution to the category of a charity nor there existed any operative provision in Foundation University Ordinance, 2002 for its declaration to be a charitable institution

Liability to Zakat was attached to prescribed assets held by a person or institutions defined under the law, subject to only those exemptions, which were expressly provided under S.24 of Zakat and Ushr Ordinance, 1980

Nature and character of petitioner / University, whether statutory, chartered, public service or otherwise, did not by itself create immunity, unless such immunity was grounded in the statute which the petitioner / University had failed to bring on record

Under the law, where the Legislature intended exemption, it had done so explicitly

Absence of such expression must be construed as deliberate

Petitioner / University did not place on record any specific document, nor pointed out any specific provision in its parent statute or in Foundation University Ordinance, 2002 granting exemption from Zakat liability

High Court in exercise of Constitutional jurisdiction declined to interfere in the matter as the petitioner / University failed to demonstrate any illegality in the letter issued by authorities holding petitioner / University liable to deduction of Zakat

Constitutional petition was dismissed in circumstances.

2019 SCMR 865 SUPREME-COURT Judicial Precedent

S. 4(f)Sindh Urban Immovable Property Tax Rules, 1958, Rr. 23 & 24Societies Registration Act (XXI of 1860), PreambleLiaquat National Hospital/Institute of Postgraduate Medical Studies and Health Sciences ('the subject hospital')Property tax, payment ofCharitable institutionCharitable purposesExemption from payment of property tax

Subject hospital by virtue of its registration under the Societies Registration Act, 1860 ipso facto did not become entitled to exemption from payment of property tax visualized by S. 4(f) of the Sindh Urban Immovable Property Tax Act, 1958 ('the Act')

Exemption from payment of property tax was available to a charitable institution if on the basis of an application moved in such regard, the competent officer of the Department came to the conclusion that its assets were used exclusively for charitable purposes

Building of the subject hospital was not used exclusively for charitable purposes

Counsel for the subject hospital admitted that the hospital charged fee for the services provided to patients who could pay for the same, but provided subsidies and rebates to the needy patients as well as some charitable healthcare services

At best, the subject hospital was providing services to paying patients (non-charitable) and non-paying/partly paying patients (possibly charitable)

In view of such circumstances the immovable property of the subject hospital was not used exclusively for charitable purposes

Fact that the profits of the subject hospital were not distributed amongst the members did not by itself establish that it was a charitable organization bringing it within the ambit of S. 4(f) of the Act read with Rr. 23 & 24 of the Sindh Urban Immovable Property Tax Rules, 1958 ('the Rules')

Audited accounts of the subject hospital as well as the analysis of such accounts undertaken by the Tax department for the years 1982 to 2002, clearly established that only paltry amounts had been spent on public charity by way of discounts, rebates and concessions in fee presumably to the poor and needy patients; that the subject hospital extensively engaged in commercial activities and spent a very low portion of its funds on public charity while charging high fees for providing healthcare and diagnostic services

Subject hospital was not entitled to the benefit of exemption from payment of property tax as visualized in S. 4(f) of the Act read with Rr. 23 & 24 of the Rules

Appeal was dismissed accordingly.

2010 PTD 1904 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Second Sched., Part-1, Cl. (94)ExemptionVoluntary contributionsCharitable institutionRice Exporter Association, of Pakistan

Voluntary contributions of the Rice Exporters Association of Pakistan were exempt under CI. (94) of the Second Schedule to the Income Tax Ordinance, 1979

Expenses related to voluntary contributions shall be deducted, while allowing exemption under CI. (94) of the Second Schedule of the Income Tax Ordinance, 1979

Objection that assessee had not obtained "exemption" certificate from Federal Board of Revenue, no such exemption certificate was required in law to avail the privilege of exemption.

2008 PTD 1007 INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN Judicial Precedent

Second Sched., Part-I, Cl. (86)ExemptionEducational institutionCharitable institution

.Exemption was denied by the Assessing Officer that the institution being not established solely for educational purposes rather it was set up for various other purpose which were enumerated in the aims and objectives of the society such as establishment of blood bank, financial aid to the poors, dowers for the girls etc.

Refusal to grant exemption was upheld by the First Appellate Authority after observing that the limitation did not have sole purpose of education Validity-Although the assessee had mentioned other aims and objectives in the memorandum but the fact remained that no material had been gathered to find out as to whether the assessee was carrying on .such activities or not

Mere mentioning other aims and objectives, though also revolve around charitable purposes, did not debar the assessee from availing exemption

Assessing Officer was all out to disbelieve the claim of exemption after grappling with irrelevant material or on account of extraneous considerations which did not empower him to do so

Revenue could have a better case for denying exemption to the assessee if it could bring sufficient material on record to show that the premises owned by the institution had been rented out or the income earned by it had been channelized to other profit earning avenues

Nothing was available on record wherefrom it could be deduced that the surplus arising out of the earning of the school or any part thereof had been distributed amongst the Members of the Board or had been misused by the management

In absence of any evidence to the contrary, exemption to the institution could not be refused under the garb of flimsy or lopsided reasoning

Neither any glaring disability nor any disqualification having been pointed out by the Revenue on the basis of which claim of exemption to the profit earned by the assessee could be denied department had no case

Assessee's claim of exemption had been refused on whimsical inference drawn from the set of facts which were recorded ante, exemption to the educational institution of the assessee was allowed in terms of Cl.86 of the Part-I of the Second Schedule to the Income Tax Ordinance, 1979.

1968 PTD 774 CALCUTTA-HIGH-COURT-INDIA Judicial Precedent

Charitable Institution Charitable institution

Company not for gain-Object to promote and develop home industries, arts and crafts-Incidental objects to provide raw materials and purchase and sell finished products-Whether public charitable institution-Income-tax Act, 1922, S. 4(3) (i).

1950 PLD 43 PRIVY-COUNCIL Judicial Precedent

Income-tax-Charitable institution - Exemption - Re­quisites for-(Canadian Law). The appellant's claim was that the income in question was not liable to taxation by reason of section 4 (e) of the Act which exempts from liability the income of any religious, charitable, agricultural and educational institution, board of trade and chamber of commerce, no part of the income of which inures to the personal profit of, or is paid or payable to any proprietor thereof or share-holder therein.