Supreme Court rejects DHA Islamabad’s income tax exemption claim

The Supreme Court has thrown out appeals by Defence Housing Authority (DHA), Islamabad, that sought exemption from income tax, according to a report in Profit. A three-member bench led by Chief Justice Yahya Afridi ruled that carrying out development and administrative work does not turn an organisation into a local authority. The bench held that such functions alone cannot qualify a body for local self-government status.

Under the ruling, an institution counts as a local authority only when it holds statutory power to levy taxes or duties and controls municipal funds. The judgment, written by Justice Muhammad Shafi Siddiqui, found that DHA Islamabad had not shown these basic features, including the power to levy taxes in its own name and separate funds. The appeals were filed under Section 49(2) of the Income Tax Ordinance, 2001.

The court contrasted this with the Thal Development Authority, which it had accepted as a local authority given its broad statutory tax powers and its own funds. Consequently, DHA Islamabad was declared not to be a local authority and so was not entitled to the Section 49(2) exemption. The bench therefore dismissed its appeals in full.