W.T.A. NO.328/HQB OF 1989-90 VS W.T.A. NO.328/HQB OF 1989-90
1997 P T D 1833
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqi, Chairman and Nazir Ahmad Saleem, Accountant Member
W. T. A. No.328/HQB of 1989-90, decided on 28/05/1997.
(a) Wealth Tax Act (XV of 1963)---
----S. 7---Wealth Tax Rules, 1963, R.8(3)---C.B.R. Circular No.14(7) W.T./IT-VI/79, dated 21-8-1979---C,B.R. Circular No.8(II)-W.T./79, dated 25-8-1982---C.B.R. Circular No.l(2),WT/94, dated 17-7-1996---Valuation of assets---Determination---Commercial building and shop---Instructions of C.B.R. in Circular No. 14(7)-WT/IT-VI/79, dated 21-8-1979 that in the case of commercial building and shops the valuation would be cost of the building to the assessee if it is used by him and has not been rented out, being expressly against the provisions contained in S.7, Wealth Tax Act, 1963 and R.8(3), Wealth Tax Rules, 1963, were ultra vires the said provisions and consequently had no binding force---Commercial property in self-occupation of assessee for his own business, therefore, could be estimated.
(b) C.B.R. Circulars---
---- Circulars, Instructions and Guidelines issued by C.B.R. in excess of jurisdiction or in express violation of the provisions contained in statute and the rules framed thereunder, have no legal validity and are not to be acted upon.
A.K. Shamim for Appellant.
Ali Nasir Bokhari, D. R. for Respondent.
Date of hearing: 15th May, 1997.
ORDER
Heard Mr. A.K. Shamim, learned counsel for the appellant and Mr. Ali Nasir Bokhari, learned representative for the department. The appeal is directed against the order, dated 31-5-1989 by the learned C.I.T.(A), Zone VI, Karachi in Wealth Tax Appeal No.263/A-VI relating to the assessment year 1987-88.
2. The sole objection pressed by the learned counsel for the appellant is the valuation of business premises bearing No. SB-4-6/2 and 3 in which 1/4th share is held by the appellant. The contention raised by Mr. A.K. Shamim, learned counsel for the appellant, is that the asset being business premises is not amenable to estimation by the assessing officer. In support of his contention he has placed reliance on para. 3(d) of Circular C.No.14(7) WT/IT-VI/79, dated 21-8-1979, according to which in cases of commercial buildings and shops the valuation will be the cost of building to the assessee if it is being used by him and has not been rented out. Mr. A.K. Shamim has contended that asset under consideration is admittedly the shop wherein the appellant is doing business and, therefore, the declared value should be accepted.
3. We have considered the contention raised by Mr. A.K. Shamim and have gone through the circular referred to above, dated 21-8-1979. A perusal of the entire circular shows that various directions contained in the circular are patently against the provisions contained in the Wealth Tax Act, 1963 and the Wealth Tax Rules, 1963 framed by the Central Board of Revenue itself. It appears that the Central Board of Revenue realised various mistakes in the circular dated 21-8-1979 with the result that para 3(b) of the said circular which provided that in case where an assessee does not exercise the option in favour of a self-occupied house but opts to avail of the full concession of non-taxable value of Rs.5,00,000, the house will be valued normally by captalising the gross annual rental value for 10 years, if it was previously let out. In cases where a house has been under self-occupation since its construction/purchase/acquisition, the value shall be the cost to assessee. In case of inherited property, the cost shall be the original cost, if so determinable, otherwise it will be the cost as determined by the Provisional Tax Authorities for levy of property tax, was deleted vide Circular N0.8(II)-WT/79, dated 25-8-1982. It has been stated in the circulars dated 25-8-1982 that according to Rule 8(3) of Wealth Tax Rules, 1963, a house is to be valued at its market price on the valuation date, it is further stated that the instruction contained in circular dated 21-8-1979 and subsequent circular, dated 18-2-1980 containing similar instructions were discriminatory and consequently circular dated 18-2-1980 was cancelled and para. 3(b) of circular dated 21-8-1979 was deleted. It was instructed that all houses were to be valued as per Rule 8(3) of the Wealth Tax Rules. The instructions contained in C.B.R. Circular dated 21-8-1979 referred to above were so confusing that the C. B. R. has to issue another Circular No. 14(7)IT 6/WT/79, dated 21-10-1979 clarifying that some misunderstanding has arisen about the basis of valuation of immovable property as clarified in the Board's open circular dated 21-8-1979. It was further clarified that the basis of valuation given in the said circular derives its sanction from the provisions of section 7 of the Wealth Tax Act, 1963 as read with Rule 8(3) of the Wealth Tax Rules. It was further stated that Rule 8(3) specifically provides that the value of lands and building excluding agricultural land shall be estimated with due regard to the nature and size of the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the said locality. The confusion created by C.B.R. Circular dated 21-8-1979 continued to haunt the assessing authorities and, therefore, C.B.R. has issued circular No.l(2)/WT/94, dated 17-7-1994 (Circular No.11 of 1994 Wealth Tax) The caption of the circular is,valuation of properties for the purposes of Wealth tax'. It is stated date the wealth tax is levied on the market value of assets as on the valuation date. In this circular guidelines were issued for bringing about uniformity and consistency in the value of various assets. In respect of commercial buildings it is stated in the circular that the value of commercial property which is used by the owner for his own business, shall be determined in the manner specified in sub-page 1(b)(i) and (ii). It is further instructed that where it is not possible to determine the gross annual letting value in that manner it may be determined in the manner given in sub-part. 1(b)(iii). Sub-part. 1 of this circular reads as follows:--
(1) Residential Houses/Apartments
(a) The market value of houses and apartments which have been let out is to be determined ten at the times the gross annual letting value of such property.
(b) The market value of houses/apartments which have never been let out in the past is to be determined in the following manner.
(i) the value of land shall be taken equal to the value specified by the District Collector for the purposes of Stamp Duty; and
(ii) the value of the building itself would be computed at the rates of cost of construction adopted by the District Collector for the purpose of Stamp Duty and in the absence of such rates the rates adopted by the local Development Authority or the municipal body for the purposes of similar construction (of its projects) where such rates differ, the highest of these shall be adopted;
(iii) Where valuation through any of these methods is not possible the assessing officer may estimate the gross annual letting value keeping in view the gross annual letting value of similar property in that or the nearest locality.
(c) Where a house or apartment is party self-occupied and partly let out, the owner may under clause (xvi) of subsection (1) of section 5 of the Wealth Tax Act, exclude from his non-agricultural assets the value of that portion of the house or apartment which is used by him for his own residence. The value of the self-occupied portion wherever necessary, shall be determined keeping in view the gross annual rental value of the portion that has been let out."
Dealing with the valuation of open plot it has been stated that para. (c) of Circular No. 14(7)/IT-6/WT/79, dated 21-8-1979 which provided different valuation method for plots in approved housing schemes has been omitted from the said circular.
5. From the above narration of facts we -find that the C.B.T. circular dated 21-8-1979, on which Mr. A.K. Shamim has placed reliance contains instruction against the express provisions of law which the C.B.R. has realised from time to time. The particular instruction on which Mr. A.K. Shamim has placed reliance is expressly against the provision contained in section 7 of the Wealth Tax Act, 1963 and Rule 8(3) of the Wealth Tax Rules, 1963. We have held it time and again that the circulars, instructions and guidelines issued by C.B.R. in excess of jurisdiction or in express violation of the provisions contained in the statute and the rules framed there under have no legal validity and are not to be acted upon. We, therefore, hold that the instruction of C.B.R. in circular dated 21-8-1979 that in the case of commercial building and shops, the valuation will be cost of the building to the assessee if it is used by him and has not been rented out, is ultra vires and consequently has no binding force. The contention of Mr. A.K. Shamim that the commercial property in self-occupation of assessee for his own business cannot be estimated is, therefore, repelled.
6. The appeal stands dismissed accordingly.
M.B.A./357/T Appeal dismissed.