ISLAMABAD: The Supreme Court has dismissed four civil appeals filed by the Defence Housing Authority (DHA), Islamabad, against the denial of income tax exemption under Section 49 of the Income Tax Ordinance, 2001, ruling that DHA is not a “local authority” for the purpose.

A three-member bench headed by Chief Justice Yahya Afridi and comprising Justice Naeem Akhter Afghan and Justice Muhammad Shafi Siddiqui upheld the Islamabad High Court’s Jan 14, 2019, judgement, which had answered the tax references against DHA. Justice Siddiqui authored the judgement. The appeals arose from tax references filed in 2012.

DHA had filed returns for tax years 2005 to 2008, claiming exemption under Section 49(2) on the ground that it was a local authority. The returns were treated as assessment orders under Section 120.

Later, the Commissioner (Audit-II), LTU Islamabad, amended the assessments for 2005 to 2007, while the Additional Commissioner (Audit-II) amended the assessment for 2008 under Section 122(5A), treating them as erroneous and prejudicial to revenue on the ground that DHA did not fall within the expression “local authority”.

Before the Supreme Court, Syed Tanseer Tassaduq Bukhari argued that DHA was a statutory authority responsible for the development, planning, regulation and administration of its area, exercised public and local powers, and that the expression “local authority” should not be construed narrowly.

The Commissioner Inland Revenue (Zone-II), LTU Islamabad, represented by ASC Rehan Seerat and AOR Tariq Aziz supported the high court judgement and argued that DHA lacked the essential legal attributes of a local authority.

Justice Siddiqui observed that the question was not whether DHA performed public or municipal functions within a defined area, but whether the nature and extent of its statutory powers satisfied the legal attributes of a “local authority” under Section 49(2).The court held that DHA’s case did not go beyond showing that it operated within a defined area and performed development, planning, regulation and administrative functions.

The court subsequently held that DHA was not entitled to the exemption.

Published in Dawn, September 25th, 2026