The Supreme Court has dismissed appeals seeking exemption of the Defence Housing Authority (DHA), Islamabad, from income tax, holding that merely performing administrative or development functions does not make an institution a local authority.

A three-member bench, headed by Chief Justice Yahya Afridi and comprising Justice Naeem Akhtar Afghan and Justice Muhammad Shafi Siddiqui, issued its judgment on appeals filed under Section 49(2) of the Income Tax Ordinance, 2001. The judgment was authored by Justice Siddiqui.

The court held that for an institution to qualify as a local authority, it must have the legal power to impose taxes or duties and control municipal funds. Merely carrying out development and administrative functions within an area does not amount to local self-government.

According to the judgment, DHA Islamabad failed to establish that it possessed the fundamental legal characteristics of being able to impose taxes in its own name or maintain separate funds. The court therefore dismissed its appeals seeking an exemption from income tax and held that DHA Islamabad is not a local authority and is consequently not entitled to any exemption under Section 49(2) of the Income Tax Ordinance.