W.T.A. NO. 252/HQ OF 1987-88, DECIDED ON 21ST DECEMBER, 1995. VS W.T.A. NO. 252/HQ OF 1987-88, DECIDED ON 21ST DECEMBER, 1995.
1996 P T D (Trib.) 404
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman and S.M. Sibtain, Accountant
Member
W.T.A. No. 252/HQ of 1987-88, decided on 21/12/1995.
Wealth Tax Rules, 1963---
----R. 8(3), Explanation---Valuation of assets---Land and building---Gross annual rental value---Determination---Principles---Assessing Officer is required to determine the gross annual rental value of a property on the basis of annual rent received or receivable by a landlord and not on the basis of rent received in the last month of the year.
Explanation to Rule 8(3), Wealth Tax Rules, 1963 shows that the gross annual rental value has been defined to mean the sum for which the property might reasonably be expected to let from year to year and in the provision it is further indicated that the gross annual rental value shall be calculated on the basis of annual rent paid or payable by the tenant.
Assessing Officer is bound to follow the method provided in rules for the purpose of determining the value of assets. It is thus abundantly clear that the gross annual rental value is to be determined by the Assessing Officer in accordance with the provisions contained in the rules. It is provided in Explanation in sub-rule (3) of Rule 8 that for the purpose of sub-rule (3) the gross annual rental value means the sum for which the property might reasonably be expected to let from year to year and the intention of the rule making authority is further crystallized in the proviso which says that the G.A.R.V. shall not be calculated at an amount less than the annual rent paid or payable by the tenant. In view of clear and unambiguous provisions the Assessing Officer is required to determine the G.A.R.V. of a property on the basis of annual rent received or receivable by a landlord and not on the basis of rent received in the last month of the year.
The Assessing Officer, therefore, was not justified in estimating the value of the property on the basis of rent for the last month of the year.
Mehfoozur Rehman Pasha, D.R. for Appellant
Arshad Siraj for Respondent
Date of hearing: 30th November, 1995.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI, CHAIRMAN.- Heard Mr. Mehfoozur Rehman Pasha, learned representative for the department and Mr. Arshad Siraj, learned counsel for the respondent.
2. This appeal is directed against the order, dated 31-8-1988 by the learned C.I.T.(A), Zone V, Karachi. The grievance of the department is that the learned C.I.T.(A) was not justified in directing that the actual rent of the yeas should be taken as gross annual, rental value and not by multiplying the rent of the last month of the year by 12.
3. Briefly stated the relevant facts are that the respondent owns a building which has been let out to various tenants. The respondent declared value of the building by working out the gross annual rental value on the basis of rent received for the whole year, and then multiplying the same by 10. The assessing officer, however, did not accept this method of working but G.A.R.V. of the property. He worked out the G.A.R.V. by multiplying the rent for the last month of the year by 12 and then further multiplying it by 10, meaning thereby that the valuation date which is 31-12-1986 was taken as the basis for working out the gross annual rental value. The learned C.I.T.(A) did not approve this method of working out the value of the property and directed the W.T.O. to adopt the G.A.R.V. in accordance with the actual figure of gross rent received for the whole year instead of basing his valuation on the figures of the closing month of the year. The department is dissatisfied with this direction and hence this appeal. The learned D.R. has submitted that the assessing officer has rightly worked out the G.A.R.V: of the building as according to him the value of the property is to be worked out on the basis of rent received on the valuation date. On the other hand, Mr. Arshad Siraj, learned counsel for the respondent has submitted that while determining the G.A.R.V. the assessing officer has ignored the definition of G.A.R.V. as contained in the Explanation to Rule 8(3) of the Wealth -Tax Rules, 1963. He has contended that according to the said explanation the G.A.R.V. is to be taken on the basis of rent received for the whole year and not on the last day of the year of valuation. We have carefully considered the contentions raised by the learned representatives for the parties. The point in issue is, if the G.A. R.V. of properly for the purposes, of Rule 8(3) of the Wealth Tax Rules, 1963 is to be determined on the basis of rent received by a landlord for the whole year or on the basis of rent received in the last month of the year. The controversy can be conveniently resolved by recourse to the Explanation to Rule' 8(3) and proviso hereto which read as follows:
"Explanation. ---For the purpose of this sub-rule "gross annual rental value" means the sum for which the property might reasonably be expected to let from year to year:
Provided that the gross annual rental value shall not be calculated at an amount less than the annual rent paid or payable by the tenant. "
4. A perusal of the above explanation shows that the gross annual rental value has been defined to mean the sum for which the property might reasonably be expected to let from year to year and in the proviso 4 is further indicated than the gross annual rental value shall be calculated on the basis of annual rent paid or payable to the tenant. It is not provided in sub-rule (3) of Rule 8 that the G.A.R.V. of the property may be determined on the basis of rent received of receivable by the landlord in the last month of the year or as receivable on the valuation date. We are conscious of the fact that according to section 3 of the Wealth Tax Act, 1963 section 3 of the Wealth Tax Act is a charging section and the method of valuation of the assets for the purpose of charging wealth tax is not provided in this section. As already observed the wealth tax is to be charged subject to the other provisions contained in the Wealth Tax Act The method of valuation of the assets is given in section 7 of the Wealth Tax Act which provides that the value of any asset other than the cash for the purpose of the wealth tax shall be estimated by the W.T.O., in accordance with the rules made under section 46 of the Act. By virtue of authority vested in C.B.R. rules have been framed and, therefore, value of the assets are to be determined in accordance with the provisions contained in section 7 read with the rules framed by the C.B.R. under section 46 of the Wealth Tax Act, 1963. Thus the Assessing Officer is bound to follow the method provided in rules for the purpose of determining the value of assets. It is thus abundantly clear that the gross annual rental value is to be determined by the Assessing Officer in accordance with the provisions contained in the rules and as already shown it is provided in Explanation in sub-rule (3) of Rule 8 that for the purpose of sub?-rule (3) the gross annual rental value means the sum for which the property might reasonably be expected to let from year to year and .the intention of the rule-making authority is further crystallized in the proviso which says that the G.A.R.V. shall not be calculated at an amount less than the annual rent paid or payable by the tenant. In view of clear and unambiguous provisions discussed above the Assessing Officer is required to determine the G.A.R.V. of a property on the basis of annual rent received or receivable by a landlord and not on the basis of rent received in the last month of the year. Thus the impugned direction given by the learned C.I.T.(A) is perfectly in consonance with the spirit of the law to which no interference is required. It is held that the assessing officer was not justified in estimating the value of the property on the basis of rent for the last month of the year. The impugned direction of learned C.I.T.(A) is hereby maintained and the appeal at the instance of department stands dismissed.
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