WTA NO. 52/LB OF 1991-92, DECIDED ON 21ST SEPTEMBER, 1992. VS WTA NO. 52/LB OF 1991-92, DECIDED ON 21ST SEPTEMBER, 1992., 1993 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 941 (1992)

Per Nasim Sikandar, Judicial Member--

(a) Interpretation of statutes---

---- Proviso to a section---Function.

Proper function of a proviso is merely to limit the scope of the provision to which it is a proviso but not to abrogate it completely. Proviso may limit and severely limit the application of an enactment to which it is a proviso but it could only be held in the most exceptional circumstances that, the proviso nullifies the enactment.

A proviso should not be interpreted so as to have a greater effect than strict construction of the proviso rendered it necessary. Ordinarily, the proviso is something subordinate to the main clause, and generally what is contained in the proviso is not to be imported by implication into the clause.

If the language in the enacting part of the statute does not contain the provisions which are said to occur in it, one cannot derive these provisions by implication from a proviso.

Madras and Southern Maharatta Railway Co. Ltd. v. Bezwada Municipality AIR 1944 PC 71; Dyad Singh v. Kenyan Insurance Ltd. PLD 1955 PC 4; Life Insurance Corporation of India v. United Commercial Bank, Karachi and 2 others PLD 1962 (WP) Kar. 837 and West Derby Union v. Metropolitan Life Assurance Society 1897 AC 647 ref.

(b) Wealth Tax Rules, 1963---

----R.8(3), first proviso [as inserted by S.R.0.293(1)/71, dated 29-7-1991]-- Value of lands and buildings, how to be determined---Principles---Assessing Officer has to seek the approval of Central Board of Revenue where the value of the property is determined at a sum higher than ten times of the gross annual rental value.

A plain reading of sub-clause (3) of rule 8 of Wealth Tax Rules, 1963 makes it abundantly clear that primarily the value of lands and buildings (excluding agricultural land) shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the same locality. The proviso to rule 8 only provides that the assessing officer shall not determine the value of any property at a sum higher than ten times of the gross annual rental value of such property without prior approval of the Central Board of Revenue. It nowhere restricts the connotation and application of the valuation as detailed in sub-rule (3) itself. The only restriction it places upon the jurisdiction of the assessing officer is to seek the approval of Central Board of Revenue where the value of the property is determined at a sum higher than ten times of the gross annual rental value. It does not exclude various modes of evaluation in the rule itself that the properties shall be estimated with due regard to their nature and size, the amenities available and the price prevailing for similar other properties in the locality.

The language of rule 8(3) being plain and unambiguous, the provisions of proviso cannot be imported into it in order to read that for every property a gross annual rental value shall be determined by the assessing officer in the first instance and then it shall be evaluated accordingly at ten times of the GARY so determined or even at higher rate by the permission from the Central Board of Revenue.

Where the assessing officer opts to assess the property basing his valuation on the GARY then in that case only he is required to seek permission of Central Board of Revenue when the estimated value exceeded ten times of the GARV determined by him.

Rule 8(3) expressly permits valuation to be estimated with due regard to nature and size of the properties, the amenities in the same locality or in the neighbourhood of that locality. This being the first and main method of evaluation, the other could be by way of determining the value of a property at ten times or higher of the gross annual rental value. And, in 'case such valuation, when based upon GARY exceeds ten times of the same then the permission of the Central Board of Revenue would be required.

In cases of lands and buildings the value shall be estimated under rule 8(3) of the Wealth Tax Rules keeping in view the nature and size of the properties, the price prevailing for similar properties in the same locality or in the neighbourhood as also the amenities available. In case the assessing officer decides to base his valuation on GARV determined by himself or keeping in view the one determined by Provincial of Municipal authorities then his estimate shall be restricted to ten times of the gross annual rental value so determined or taken into account. In case he would like to determine the value at a higher sum than 10 times of the gross annual rental value as aforesaid then he would seek permission of the Central Board of Revenue for this purpose.

(e) Income Tax Ordinance (XXXI of 1979)--

----S. 134---Appeal to Appellate Tribunal---Points involving interpretation of Statutory rules was permitted to be agitated for the first time in second appeal before the Tribunal.

Per A.A. Zuberi, Accountant Member---

It emerges on a combined reading of sub-rule (1) and sub-rule (3) of Rule 8 of the Wealth Tax Rules (together with the provisions) that in order to give full legal effect to the scope of these rules, the assessing officer has a free hand to determine the price which the property would fetch if sold in the open market on the valuation date, as long as while fixing the value of land and buildings he gives due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the same locality. Having once estimated the value in adherence to Rule 8(3), he is expected to find out whether any GARV of that property is available, with a view to judge whether the value estimated by him, is higher than ten times of that GARY. If so, the proviso to Rule 8(3) requires him to obtain "the prior approval of the Central Board of Revenue" in support of the estimate by him. It is logical, in case no GARY is available or the estimated price/value under Rule 8(3) is less than the ceiling, the determination by the assessing officer would hold good entailing no approval by any superior authority. It is thus manifest that while the estimate of the value by the assessing officer has to be on the basis of independent considerations, his own authority to put a seal of finality is subject to prior approval of Central Board of Revenue only in those cases where the value so determined by him is a sum higher than ten times the GARV of such property. Therefore, it would be putting the horse before the cart if the assessing officer were to first find out the GARY of the property, then to consider whether the enhancement over ten tunes would be a reasonable value or that a higher value should be assigned after approval, as prescribed. This will be contrary to the expectation by the Legislature.

Abdul Haq Kang for Appellant.

F.D. Qaiser, D.R. for Respondent.

Date of hearing: 21st July, 1992.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER).---This second appeal is directed against an order of CIT (Appeals), Zone-3. Lahore, date-d.9-7-1991. In the grounds of appeal the assessee-appellant took exceptions to the valuation of two immovable properties as adopted by the Wealth Tax Officer, The first property is a one-Kanal house situated in Cavalry Ground, Lahore Cantt and the other is an open plot of 1,000 sq. yards in Defence Housing Society, Karachi: non-acceptance of a liability claimed to the tune of Rs.55.000 is also being contested.

2. For the assessment year 1988-89, the appellant a medicine professional, filed a return with the Wealth Tax Officer to declare his total wealth. A house situated in Cavalry Ground, Lahore Cantt. and construed over an area of one kanal was declared at Rs.3,80,000. However, the assessing officer keeping to view the locality and the amenities available therein, adopted the value at Rs.10,00,000. On appeal learned CIT (Appeals), though approved rejection of declared value, nevertheless reduced the valuation to Rs.9,00,000. The open plot of 1,000 sq, yards in Defence Housing Society, Karachi was declared at a cost of Rs.5,000. However, the assessing officer adopted a value of Rs.16,00,000, on the ground that the plot was situated m posh locality of Karachi where all the amenities of life were available: Also, claimed liability at Rs.55,000 was disallowed for lack of evidence.

3. On appeal, as aforesaid, the valuation of the house at Lahore was reduced to Rs.9,00,000. Likewise the value of the plot at Karachi declared at Rs.5,000 and assessed at Rs.16,00,000 by the. WTO was reduced to Rs.14,00,000 on the ground of its being "somewhat excessive" The disallowance of Rs.55.000 in respect of claimed liabilities was, however, confirmed on account of lack of evidence.

4. We have heard the parties. As regards the valuation of the house situated at Lahore, the learned appellate authority already appears to have been charitable to reducing the value by Rs.1,00,000. The observation of the n assessing officer that the house was situated in a locality where all the amenities were available was not challenged even before us. Therefore, the valuation ultimately adopted by the appellate authority appears more than reasonable.

5. As regards the valuation of 1,000 sq. yards plot in Defence Housing Society, Karachi at Rs.5,000 the learned counsel for the appellant has come up with an objection to the effect that since this is an open plot and since its ALV has not been determined by the assessing officer, the valuation adopted and then subsequently reduced by the appellate authority are both illegal and ultra vires of the Wealth Tax Act, 1963. In order to support his contention the learned counsel for the appellant took us to the first proviso to Rule,8(3) of the Wealth Tax Rules, 1963. Relevant provision and its sub-clause (3) alongwith the first proviso as inserted by way of SRO 293(1)/71, dated 29-7-1991 are reproduced below for facility of reference:---

"8. Valuation of assets other than cash: --(1) Subject to the provisions of sub-rules (2), (3), 1(3A), (4), 2(4A), (4C), (5), (6), (7), (8) and (9), the value of any asset (other than cash) shall, for the purposes of assessment to wealth tax, be estimated to be the price, which in the opinion of the Wealth Tax Officer, it would fetch if sold in the open market on the valuation date.

8(3). Lands and buildings.---The value of lands and buildings (excluding agricultural land) shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar (property) in the same locality or in the neighbourhood of the said locality:

Provided that the Wealth Tax Officer shall not except with the prior approval of the (Central Board of Revenue) determine the value of any property at a sum higher than ten times the cross annual rental value of such property; and

Provided further that any amount by way of advance or security which is not adjustable against the rent payable by the tenant shall be taken into consideration for determining gross annual rental value."

From the above first proviso to Rule 8(3) (as underlined) the learned counsel for the appellant pursuades us to believe that this has the effect of modifying Rule 8(3) to the effect that for every property of the nature stated therein ARV shall be determined by the Wealth Tax Officer in the first instance and then he may proceed to evaluate the property at a sum maximum to ten times of the ARV so determined by him. It is further submitted that according to the proviso where a property is not susceptible to determination of ARV, adoption of a valuation in respect of such a property is not warranted by the Wealth Tax Rules. In explaining his contention it is further stressed that the normal ,.,function of a proviso is to exclude something out of the, purview of an enactment or to clarify something enacted therein which but for the proviso, would be within the purview of the enactment. To support this way of interpretation of a statute, learned counsel for the appellant relied upon a pre -partition reported case of Privy Council re: Madras and Southern Maharatta Railway Co. Ltd. v. Bezwada Municipality cited as AIR 1944 PC 71 at 74. On facts, a case of this Tribunal reported as 1978 PTD (Trib.) 44 was quoted to submit that the adopted value being higher than ten times of GALV without complying with the proviso of rule 8(3) (prior approval of concerned IAC) was not sustainable in law. He concluded by saying that since the WTO failed to determine ARV of the plot in question, therefore, his adoption of certain valuation was clearly illegal. To a query from the Bench, learned counsel for' the appellant was doubtful if at all a GALV of an open piece of land m an approved housing scheme could be determined. He rather suggested that an open plot where it was neither rented out nor it could be rented out was beyond the scope of, levy of Wealth Tax. The learned DR on the other hand supported the orders of the authorities below on the ground that it was Rule 8, sub-rule (3) which governed the valuation of the property and not the proviso added subsequently to this rule.

6. The contention of the appellant has been examined in the light of the proviso to Rule 8(3) of the Wealth Tax Rules, 1963. The acceptance of the contention would not only nullify the provisions of rule 8(3) but will also rather mean complete substitution of the provision by the proviso. Needless to say that it would not be permissible under any rule of interpretation of statutes. Proper function of a proviso is merely to limit the scope of the provision to which it is a proviso but not to abrogate it completely. The Privy Council in a case reported as PLD 1955 PC 4 re: Dyal Singh v. Kenyan Insurance Ltd. held that "a proviso may limit and severely limit the application of an enactment to which it is a proviso but it could only be held in the most exceptional circumstances that the proviso nullifies the enactment." The ambiguity apparent in the provisions of rule 8(3) of the Wealth Tax Rules, 1963 and the proviso to this sub-rule could be due to the framing of the proviso in isolation of the rule or the fact that the proviso was added to the provision subsequently in the year 1971. Whatever be the case, the interpretation put on the proviso by the appellant will, besides as held above, militate against the basic method of valuation under the wealth tax rules which are framed under the powers conferred by section 46 of the Wealth Tax Act. A plain reading of sub-clause (3) of rule 8 makes it abundantly clear that primarily the value of lands and buildings (excluding agricultural land) shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the same locality. The proviso in question only provides that the assessing officer shall not determine the value of any property at a sum higher than ten times of the gross annual rental value of such property without prior approval of the Central Board of Revenue. It nowhere restricts the connotation and application of the valuation as detailed in sub-rule (3) itself. The only restriction it places upon the jurisdiction of the assessing officer is to seek the approval of Central Board of Revenue where the value of the property is determined at a sum higher than ten times of the gross annual rental value. It does not exclude various modes of evaluation in the rule itself that the properties shall be estimated with due regard to their nature and size, the amenities available and the price prevailing for similar other properties in the locality. In the case of Life Insurance Corporation of India v. United Commercial Bank, Karachi and others reported as PLD 1962 (WP) Kar. 837 at 854 the Court examined the provisions of section 6 read with sections 2(2)(c), 2(4), 10 and 26 of Karachi Rent Restriction Act (VIII of 1953). While examining sub-clause (a) of section 6 which was added as proviso to the main section, one of the Honourable Judges observed "it is a well-settled principle of interpretation of statutes that a proviso should not be interpreted so as to have a greater effect than strict construction of the proviso rendered it necessary. Ordinarily, the proviso is something subordinate to the main clause, and generally what is contained in the proviso is not to be imported by implication into the clause. In West Derby Union v, Metropolitan Life Assurance Society 1897 AC 647 Lord Watson said "If the language in the enacting part of the statute does not contain the provisions which are said to occur in it, you cannot derive these provisions by implication from a proviso." The language of rule 8(3) being plain and unambiguous, the provisions of proviso cannot be imported into it in order to read that for every property a GARY shall be determined by the assessing officer in the first instance and then it shall be evaluated accordingly at ten times of the GARV so determined or even at higher rate by the permission from the Central Board of Revenue.

7. Coming to two cases relied upon by the appellant; the one by this Tribunal reported as 1978 PTD (Trib.) 44 is not relevant to the facts of this case. In that case this Tribunal held the valuation adopted by the Wealth Tax Officer at more than ten times of the GALV without stipulated permission of IAC to be improper. The issues now under consideration were neither raised nor ruled upon by the Tribunal. In that case, the properties were admittedly constructed bungalows. In para 2 of the order this Tribunal observed that "the assessing officer did disclose the annual letting value of these two properties but again ignored the proviso to rule 8(3) which laid down in explicit terms that in case he decided to determine the value of any property at a sum higher than ten times of the GALV of the such property, he could not proceed except with the approval of the LAC of Wealth Tax. The assessing officer in his anxiety to enhance the quantum of tax payable ignored all the provisions of law and proceeded to value each of the two properties at a figure which happened to be more than ten times of the annual letting value. The learned appellate Assistant Commissioner being aware of this law; restricted the valuation to a sum which did not exceed ten times of gross annual rental value. He had no alternative." It is apparent from this para that the Tribunal did not observe any thing which could lend support to the averments of the present appellant. We are in respectful agreement with the observation of this Tribunal in that case that where the assessing officer opts to assess the property basing his valuation on the GARV then in that case only he was required to seek permission of Central Board of Revenue when the estimated value exceeded ten times of the GALV determined by him.

8. The other case relied upon by the learned counsel for appellant is a pre-partition decision of Privy Council rendered in re: Madras and Southern Maharatta Railway Company Limited v. Bezwada Municipality reported as AIR (31) 1944 Privy Council 71. In this case the Court was examining a proviso to section 82(2) of the Madras District Municipalities Act (V of 1920). The other relevant section being section 81 of the said Act. Both of these sections are reproduced to understand the real issue in controversy:---

Section 81: --(1) If the Council by a resolution determines that a property tax shall be levied, such tax shall be levied on all buildings and lands within Municipal limits save those exempted by or under the Act or any other law. The property tax may comprise---

(a) tax for general purpose;

(b) a water and drainage tax.

(2) Save as otherwise provided in this Act, these taxes shall be levied at such percentage of the annual value of lands or buildings or both as may be fixed by the Municipal Council, subject to the provisions of section 78.

(3) The Municipal Council may, in the case of lands which are not used exclusively for agricultural purposes and are not occupied by or adjacent and appurtenant to, buildings, levy these taxes at such percentage of the capital value of such lands or at such rates with reference to the extent of such lands as it may fix:

Provided that such percentages or rates shall not exceed the maximum, if any, fixed by the Local Government and that the capital value of such lands shall be determined in such manner as may be prescribed.

(4)(a). The Municipal Council may, in the case of lands used exclusively for agricultural purposes, levy these taxes at such proportions as it may fix of the annual value of such lands as calculated in accordance with the provisions of S.79, Madras Local Boards Act, 1920.

Section 82: --(1) Every building shall be assessed together with its site and other adjacent premises occupied as an appurtenance thereto unless the owner of the building is a different person from the owner of such site or premises.

(2) The annual value of lands and buildings shall be deemed to be the gross annual rent at which they may reasonably be expected to let from month to month or from year to year less a deduction, in the case of buildings only of ten per centum of such annual rent and the said deduction shall be in lieu of all allowances for repairs or on any other account whatever:---

Provided that:

(a) In the case of---

(i) any Government or railway building or

(ii) any building of a class not ordinarily let the gross annual rent of which cannot in the opinion of the executive authority, be estimated, the annual value of the premises shall be deemed to be six per cent of the total of the estimated value of the land and the estimated present cost of erecting the building after deducting for depreciation a reasonable amount which shall in no case be less than ten per centum of such cost.

9. The facts of this case are that Bezwada Municipality by a resolution resolved to levy a property tax within their municipality at a certain specified rate. According to section 81(2) of the said Act, the property tax, except for certain exceptions, was to be levied at a percentage of "the annual value of lands or buildings or both". Subsection (3) of section 81 otherwise provided and permitted but did not enjoin the levy of the tax in the case of lands which were not used exclusively for agricultural purposes and were not occupied by or adjacent and appurtenant to buildings either at a percentage of the capital value of such lands or at such rates with reference to the extent of such lands as the municipal council may fix subject to the compliance with the proviso to the subsection. If either of the alternate methods permitted by the subsection (3) was adopted the assessment could not be on annual value. The appellants did not dispute that if this subsection had not a proviso appended to it, it would have been open to the respondents to resort to any of the recognised methods of arriving at the rent which a hypothetical tenant might reasonably be expected to pay for the land in question including the method of taking the percentage of their capital value, Their Lordships disagreed with the contention of the appellants on the ground that the proviso did not say that the method of arriving at annual value by taking a percentage of capital value was to be utilised only in the cases of classes of buildings to which the proviso applied. Their Lordships opined that proper function of a proviso was to except and deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. They further held that the language of the main enactment being clear and unambiguous a proviso could have no repercussion on the interpretation of the main enactment so as to exclude from it by implication what clearly fell within its expressed terms. The appeals were consequently dismissed on account of their Lordships' opinion that the respondent Bezwada Municipality were not precluded from adopting percentage of the capital value of the appellants' lands as a method of determining their annual value for the purpose of imposition of property tax merely by reason of the fact that this method was specifically enjoined in the particular instances mentioned in the proviso and that their lands were not included in these circumstances.

10. It is apparent from the findings of this case that a proviso cannot limit the provisions of the main enactment. In this way it rather goes against the contention of the present appellant inasmuch as the main provision viz. rule 8(3) expressly permits valuation to be estimated with due regard to nature and size of the properties, the amenities in the same locality or in the neighbourhood of that locality. This being the first and main method of evaluation, the other could be by way of determining the value of a property at ten times or higher of the gross annual rental value. And, in case such valuation, when based upon GARY exceeds ten times of the same then the permission of the Central Board of Revenue would be required.

11. Keeping in view the abovesaid discussions we will reject the contention of the appellant and hold that in cases of lands and buildings the value shall be estimated under rule 8(3) of the Wealth Tax Rules keeping in view the nature and size of the properties, the price prevailing for similar properties in the same locality or in the neighbourhood as also the amenities available. In case the assessing officer decides to base his valuation on GARY determined by himself or keeping in view the one determined by Provincial or Municipal authorities then his estimation shall be restricted to ten times of the gross rental value so determined or taken into account. In case he would like to determine the value at a higher sum than 10 times of the gross rental value as aforesaid then he would seek permission of the Central Board of Revenue for this purpose.

12. In this case the assessing officer determined the valuation of the plot measuring 1,000 sq. yards at Rs.16,00,000 which is situated in Defence Housing Society, Karachi on the ground of its location, locality and the fact that all amenities of life were available there. This valuation, though reduced to Rs.14,00,000, the appellate authority evidently did not dispute the method of valuation. It may be noted that the contentions raised before us do not appear to have been averred before the first appellate authority. However, since these related to the interpretation of the said Rule and its proviso, its raising was permitted at the stage of second appeal. The method and the valuation of the plot in the facts and circumstances of the case, as ultimately determined by the appellate authority, is, therefore, confirmed.

13. As regards claim of liabilities as Rs.55,000, both the authorities below did not allow the same for lack of any evidence. The observations of the authorities below having remained unchallenged, we find no reason to interfere in this matter as well.

14. Resultantly this appeal fails in toto.

A. A. ZUBERI (ACCOUNTANT MEMBER).---I have immensely benefited by the lucid and logical analysis of the law and the rules as also the inescapable conclusions in the order proposed by my learned brother, the Judicial Member. With these I am in whole-hearted agreement. However, as respects "valuation of assets other than cash" discussed in para. 8 of the order, I would like to fortify the interpretations and the conclusions by summarising as under:

It emerges on a combined reading of sub-rule (1) and sub-rule (3) of Rule 8 of the Wealth Tax Rules (together with the provisos) that in order to give full legal effect to these scope of these rules, the assessing officer has a free hand to determine the price which the property would fetch if sold in the open market on the valuation date, as long as while fixing the value of land and buildings he gives due regard -to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the same locality. Having once estimated the value in adherence to Rule 8(3), he is expected to find out whether any GARY of that property it available, with a view to judge whether the value estimated by him, is higher than ten times of that GARY. If so, the proviso to Rule 8(3) requires him to obtain "the prior approval of the Central Board of Revenue" in support of the estimate by him. It is logical, in case no GARV is available or the estimated price/value under Rule 8(3) is less than the ceiling, the determination by the assessing officer would hold good entailing no approval by any superior authority. It is thus manifest that while the estimate of the value by the assessing officer has to be on the basis of independent considerations, his own authority to put a seal of finality is subject to prior approval of Central Board of Revenue only in those cases where the value so detcrmit3ed by him is a sum higher than ten times the GARY of such property. Therefore, it would be putting the horse before the cart if the assessing officer were to first find out the GARY of the property, then to consider whether the enhancement over ten times would be a reasonable value or that a higher value should be assigned after approval, as prescribed. This will be contrary to the expectation by the Legislature. With these remarks, I concur with the views expressed by my learned brother, leading to the dismissal of the appeal.

M.B.A./2289/TAppeal dismissed.