High court suspends property tax collection in Islamabad

ISLAMABAD: The Islamabad High Court (IHC) on Wednesday suspended the collection of property tax from residents of the federal capital, granting interim relief to taxpayers who have challenged the levy imposed by the Metropolitan Corporation Islamabad (MCI).

The order was issued by a single-member bench during the initial hearing of a writ petition filed by Muhammad Munir Ahmed Chaudhary and Ahmed Hasan Rana, who also represented petitioner No. 1 as legal counsel.

The petition challenges Gazette Notification No. 404(1)-4/2024, issued on March 14, 2024, along with a property tax bill amounting to Rs846,398 served on April 24, 2026. The case is expected to have far-reaching implications for thousands of Islamabad property owners facing similar tax demands.

During the hearing, the petitioners argued that the property tax had been imposed in violation of the Islamabad Capital Territory Local Government Act, 2015, and the Urban Immovable Property Tax Act, 1958. They contended that the MCI lacked the authority under Section 89(1) of the 2015 Act to levy property tax on the annual value of land and buildings.

The petitioners further maintained that the notification had been issued by an administrator rather than an elected local government body, contrary to the requirements of Section 75(e) of the Act. They also argued that the notification lacked the specific authorization mandated under Section 3 of the 1958 Act, rendering it legally unsustainable.

According to the petition, the respondents exceeded their lawful powers by imposing the tax without following the prescribed legal procedure. The tax demand was also described as arbitrary, as it was allegedly issued without proper assessment or providing taxpayers an opportunity to be heard.

In support of their case, the petitioners cited Supreme Court rulings, including the judgment in Haji Faqir Hussain and others versus Secretary, Provincial Board of Revenue, NWFP, and others, which held that property tax cannot be imposed solely through a notification issued by a local government department without the requisite notification under Section 3 of the 1958 Act.

After hearing the preliminary arguments, the court observed that the petitioners had established a prima facie case and that the legal issues raised required detailed examination. The bench noted that the balance of convenience favored granting temporary protection to taxpayers until a final decision is reached.

The court subsequently issued notices to the Metropolitan Corporation Islamabad, its Directorate of Revenue, the Capital Development Authority (CDA), and the Federation of Pakistan through the secretaries of the Interior and Cabinet divisions.

The operation of the disputed property tax bills has been suspended until the next hearing, which has been scheduled after four weeks. As a result, taxpayers who have received similar bills will not be required to make payments until the court revisits the matter.