(a) Wealth Tax Rules, 1963---

----R. 8(3)---House property---Valuation of property---Principles---Value of any property is determinable on the basis of the rent payable and not on the basis of the rent actually received by the owner---If the rent payable under a lease is les than the rent on which the property might be let out from year to yea; the value shall be determined on the basis of that rent which the property might fetch.

(b) Wealth Tax Rules, 1963---

----R. 8(3)---Valuation of property---House property--Landlord and tenant-- Tenant by sufferance---Concept---Rent payable by the tenant to the landlord under lease agreement and the "compensation payable by tenant by sufferance' are not synonymous expressions in law---Compensation awarded to an owner for the use and occupation of his premises by a tenant by sufferance or trespasser must and always includes an element of damages because unlike the claim for rent, where cause of action arises out of a contract, in cases for the recovery of compensation the cause of action arises out of tort---Value of the assessee's property, in circumstances, was required to be estimated on the basis of the rent on which it could be let out from year to year basis.

A tenant by sufferance is .the person who being a tenant continues in the possession of the property after the determination of lease without express or tacit consent of the landlord. The relationship between a tenant by sufferance and the landlord is not that of a tenant and the landlord in the popular sense but is of a trespasser and the owner. A tenant by sufferance, like a trespasser is liable to pay compensation to the owner for the use of the property.

A tenant who after the determination of lease continues in the occupation of the premises without express or tacit consent of the landlord has to pay compensation to the owner for the use of the property at the rate of double the rent.

The compensation awarded to an owner for the use and occupation of his premises by a tenant by sufferance or trespasser must and always includes an element of damages because unlike the claim for rent, where cause of action arises out of a contract, in cases for the recovery of compensation, the cause of action arises out of tort. Legally the value of the assessee's house was required to be estimated on the basis of the rent on which it could be let out from year to year basis.

Rehman Cotton Factory v. Nichimen PLD 1970 Lah. 455 and PLD 1970 SC 781 ref.

(c) Tax proceedings--

----Nature---Such proceedings are not private law proceedings in which the Court must do justice even if the heaven falls---Such proceedings are public law proceedings which are required to stand final even if they result in giving something to the citizen not due to him.

Gul Muhammad, D.R. for Appellant.

Ghulam Hussain, ITP for Respondent

Date of hearing: 9th January, 1996.

ORDER

CH. IRSHAD AHMAD (JUDICIAL MEMBER). ---First the positive law. Section 3 of the Wealth Tax Act, 1963 provides that there shall be charged for every financial year the tax known as wealth tax in respect of the net wealth of every individual etc. Section 7 of the Act provides that the value of any assets shall be estimated by the Wealth Tax Officer (WTO) in accordance with the rules made under the Act. Rule 8(3) of the Rules provides that the W.T.O. shall not determine the value of any property at sum higher than 10 times the gross annual rental value (GARY) of the property. The rule explains that the GARV would mean the sum on which the property might reasonably be expected to let from year to year: This is all well known, but the distinction between the rent payable by a tenant to the landlord and the compensation payable by a tenant by sufferance to the owner for the purposes of rule 8 ibid lies at heart of the case.

The facts, so far as now material, are that on the valuation date (30th June, 1992) relevant to the assessment year 1992-93 the assessee's house identified as No. 18, Park Road, F-8/2, Islamabad was in the use and occupation of the International Islamic University, Islamabad as a tenant by sufferance. A tenant by sufferance is" the person who being a tenant continues in the possession of the property after the determination of lease without express or tacit consent of the landlord. The relationship between a tenant by sufferance and the landlord is not that of a tenant and the landlord in the popular sense but is of a trespasser and the owner. A tenant by sufferance, like a trespasser is liable to pay compensation to the owner for the use of the property. The assessee sued the University for the recovery of compensation for the use and occupation of his house at the rate of Rs.24,000 per mensem. The rent of the house under the lease which had expired since 1988 was Rs.12,000 per mensem. It appears that a decisional rule derived from two English statutes of eighteenth century called the Landlord and Tenant Act, 1730 and Distress for Rent Act, 1737 has established in Pakistan [See Rehman Cotton Factory v. Nichimen PLD 1970 Lahore 455 affirmed by the Supreme Court in PLD 1970 SC 7811 that a tenant who after the determination of lease continues in the occupation of the premises without express or tacit consent of the landlord- shall pay compensation to the owner for the use of the property at the rate of double the rent. (The above rule perhaps may not apply to the premises subject to rent restriction laws). The Court awarded the assessee compensation @ Rs.24,000 per mensem. After the decree; however, the assessee and the University adjusted the decree by paying by the University to the assessee rent Rs.12,000 per mensem plus Rs.100,000 per annum for the period the University continued to occupy and use the house. The W.T.O. has estimated the value of the house equal to 10 times of the annual compensation awarded by the Court to the assessee.

On assessee's appeal the Commissioner of Wealth Tax (Appeals) has directed that the value of the house shall be estimated equal to the amount the assessee actually received from University for yearly use of the house (annual rent @ Rs.12,000 per mensem plus Rs.100,000).

The W.T.O. has objected to the order of the C.W.T. (A). The W.T.O. contends that since the value of the assessee's house was determinable on the basis of the rent payable to the owner he was right to estimate the same on the basis of the amount awarded by the Court to the assessee and the CWT (A) was wrong to direct that it (the value) should be determined on the basis of the amount actually received by the assessee.

We have heard Mr. Gul Muhammad, D.R. for the W.T.O. and Mr. Ghulam Hussain, ITP for the assessee.

The W.T.O is right to contend that the value of any property is determinable on the basis of the rent payable and not on the basis of the rent actually received by the owner. We may 'go further in saying that if the rent payable under a lease is less than the rent on which the property might be let out from year to year the value shall be determined on the basis of that rent which the property might fetch. But there is a clear fallacy in the WTO's contention that the value of the assessee's house shall be determined on the basis of the compensation the Court directed the University to pay to the assessee for the use and occupation of the house as tenant by sufferance/trespasser. It appears that in the WTO's view the rent payable by the tenant to the landlord under lease agreement and the compensation payable by a tenant by sufferance to the owner are synonymous expressions. Whereas in law they are not so. The compensation awarded to an owner for the use and occupation of his premises by a tenant by sufferance or trespasser must and always includes an element of damages because unlike the claim for rent where cause of action arises out of a contract, in cases for the recovery of compensation the cause of action arises out of tort. Legally the value of the assessee's house was required to be estimated on the basis of the rent which it could be let out from year to year basis. Unfortunately the Tax Authorities have not estimated the amount on which the house could be let out from year to year basis. May be that it could fetch the amount equal to the compensation awarded by the Court to the assessee (Rs.24,000 per mensem). May be that it could not fetch even the amount equal to the amount at which the assessee adjusted the decree. The assessee has not contested the value adopted by the C.W.T.(A). No relief can be given to him if the GARY of the house is less than the amount on which he agreed to adjust the decree of the Court. The value determined by the W.T.O. cannot be restored because he has not brought any evidence on record to show that the amount on which the house could be let out from year to year basis shall be Rs.24,000 per mensem. Complete justice can be done if the case is remitted to the W.T.O. to re-determine the value of the house on the basis of GARV of the house as explained in rule 8(3) of the Rules but the nature of the proceedings before us do not require us to enter into that venture. Tax proceedings are not private law proceedings in which the Court must do justice even if the heaven falls. They are public law proceedings which are required to stand final even if they result in giving something to the citizen not due to him. Let the matter stand with the C.W.T. (A)'s determination. The W.T.O.'s appeal is rejected.

M.B.A./196/Trib.Order accordingly.