W.TA. NO.73/LB OF 1989-90, DECIDED ON 29TH AUGUST, 1994. VS W.TA. NO.73/LB OF 1989-90, DECIDED ON 29TH AUGUST, 1994.
1995 P T D (Trib.) 1048
[Income-tax Appellate Tribunal Pakistan]
Before Ch. Irshad Ahmad, Judicial Member and Saleem Asghar Mian, Accountant Member
W.TA. No.73/LB of 1989-90, decided on 29/08/1994.
Wealth Tax Rules, 1963---
----R.8(1)(3)---Valuation of assets---How to be estimated---Conditions-- Valuation of the property was to be made on the basis of the price which it would fetch if sold on the valuation date---Wealth Tax Officer will estimate the value of the property on the basis of its price and then check if the estimated price does or does not exceed ten times of the gross annual rental value of the property and would adopt that value which is less of the two values.
Rule 8(1) of the Wealth Tax Rules, 1963, provides that subject to the provisions of sub-rule (3) 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. Sub-rule (3) of Rule 8(1) provides that the value of lands and buildings shall be estimated with due regard to the nature and size of the properties, the amenities available and the price prevailing for similar property in the same locality or in the neigh boarhound of the said property. Thus the stating point to estimate the value of any asset is the price which it would fetch if sold in the open market on the valuation date. The proviso to sub-rule (3) of Rule 8, however, provides 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 of gross annual rental value of such property. Sub-rule (3) of Rule 8 does not provide for estimating the value of any asset but it only provides an embargo that the estimated price of any land or property shall not exceed ten times the gross annual rental value of any property.
The Wealth Tax Officer will estimate the value of the property on the basis of its price and then check if the estimated price does or does not exceed ten times of the gross rental value of the property and would adopt that value which is less of the two values.
Mrs. Shahnaz Rafique, D.R. for Appellant.
Shahid Mahmood a nephew of Assessee and Abdul Wahid for Respondent.
Date of hearing: 28th August, 1994.
ORDER
CH. IRSHAD AHMAD (JUDICIAL MEMBER).---Through this appeal the Wealth Tax Officer, Circle-2, Faisalabad has objected to the order, dated 5-4-1989 of Commissioner of Wealth Tax (Appeals), Sargodha so far it relates to the valuation of the property identified as F-18, Latif- Centre, Regal Road, Faisalabad for the assessment year 1987-88. In the return of wealth, the assessee has declared the value at Rs.850,000. The declared value has been calculated on the basis of the rent, which the assessee, as per various rent rates, allegedly received from various tenants. The Wealth, Tax Officer was of the view that the rent rates produced by the assessee were collusive and did not give correct rent and as such could not be relied upon. He, therefore, rejected the base rental value given by the assessee estimated the rent of the property at Rs.32,100 per month and on that basis estimated the value at Rs.38,52,000 which was equal to ten times of the annual rental value. On appeal by the assessee, the Commissioner of Wealth Tax (A) found that the valuation made by the Wealth Tax Officer could not be confirmed because the estimation of the rent made by the Wealth Tax Officer was not supported by any example to show that it was comparable with the rent of other properties similarly situated. At the end the Commissioner directed that the total wealth of the assessee from all sources shall be taken at Rs.13,00,000. The basis on which the Commissioner has estimated the total wealth from all sources has not been given.
We have heard Mrs. Shahnaz Rafique, D.R. in support and Mr. Shahid Mahmood, nephew of the assessee, in opposition, of the appeal.
We are of the view that neither the Wealth Tax Officer nor the Commissioner has estimated the value of the property in accordance with law. Rule 8(1) of the Wealth Tax Rules, 1963, so far as relevant, provides that subject to the provisions of sub-rule (3) 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. Sub-rule (3) of Rule 8(1) provides that the value of lands and buildings shall be estimated with due regard to the nature and size of the properties, the amenities available and the price prevailing for similar property in the same locality or in the neighborhood of the said property. Thus the starting point to estimate the value of any asset is the price which it would fetch if sold in the open market on the valuation date. The proviso to sub-rule (3) of Rule 8, however, provides 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 of gross annual rental value of such property. Sub-rule (3) of Rule 8 ibid does not provide for estimating the value of any asset but it only provides an embargo that the estimated price of any land or property shall not exceed ten times the gross annual rental value of any property. It appears that both the Wealth Tax Officer and the Commissioner proceeded on the assumption that the value of the property was to be estimated equal to ten times of its gross rental value. The assumption was plainly wrong. The valuation of the property was to be made on the basis of the price which it would fetch if sold on the valuation date.
The question is what to do next. Should the case be remitted to the Wealth Tax Officer for reassessment or not? We do not want to bother the assessee again and again. Since the assessee has not objected to the valuation estimated by the Commissioner, let the matter for this year be concluded by the order of the Commissioner. We hope that in future the Wealth Tax Officer will estimate the value of the property on the basis of its price and then check if the estimated price does or does not exceed ten times of the gross rental value of the property and would adopt that value which is less of the two values. The order of the Commissioner under appeal would, therefore, not become part of assessee's history. The appeal would, therefore, not become part of assessee's history. The appeal filed by the. Wealth Tax Officer is rejected.
M.B.A./108/T Appeal dismissed.