The owners of farmhouses in Gulberg Greens, Islamabad, have filed petitions in the Islamabad High Court (IHC) challenging the imposition of the Capital Value Tax (CVT) on their properties. The petitioners, who own residential houses or farmhouses measuring at least 1,000 square yards, have contested the legality and constitutionality of the tax introduced through amendments in the Finance Act, 2024.
According to the petitions, the owners are retired pensioners who rely on their pensions for daily living expenses. They argue that the CVT, imposed on farmhouses of at least 2,000 square yards and residential houses of at least 1,000 square yards, is discriminatory and violates the Constitution. The tax is calculated based on the size of the property rather than its value or any income generated from it, which the petitioners claim is against the nature of a Capital Value Tax.
The petitioners contend that CVT is traditionally levied on economic activities, such as the sale or purchase of assets, where the liability falls on the purchaser. However, the current levy has no connection to any economic activity or the value of the assets, making it akin to a property tax. They argue that the federal government lacks the authority to impose such a tax, as the power to tax immovable property was removed from the federal domain through the 18th Amendment to the Constitution.
The petitioners further highlighted that property taxes within Islamabad are already under the jurisdiction of the Metropolitan Corporation Islamabad (MCI), which has significantly increased property taxes under the Islamabad Capital Territory Local Government Act, 2015. They claim that the CVT amounts to double taxation, as their properties are already subject to MCI’s property tax.
The petitioners also argue that the tax is discriminatory, as it targets specific individuals based on the size of their properties, violating Article 25 of the Constitution, which guarantees equality and prohibits discrimination. They claim the tax is unreasonably confiscatory, forcing them to pay from their limited resources or sell their properties to meet the tax liability.
The petitioners have requested the court to declare the CVT unconstitutional and strike it down. They have also sought interim relief, asking the court to restrain the Federal Board of Revenue (FBR) from taking any coercive action against them and to allow them to file their income tax returns without paying the disputed tax until the case is resolved.
