W.T.AS. NOS. 1724/LB AND 1725/LB OF 1991-92 VS W.T.AS. NOS. 1724/LB AND 1725/LB OF 1991-92
1997 P T D (Trib.) 211
[Income-tax Appellate Tribunal Pakistan]
Before Nasim Sikandar, Judicial Member and Inam Ellahi Sheikh, Accountant Member
W.T.As. Nos. 1724/1,13 and 1725/LB of 1991-92, decided on /01/.
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November, 1996. (a) Wealth Tax Rules, 1963---
----R. 8(3)---Income Tax Ordinance (XXXI of 1979), S.13(l)(d) --- Valuation of land and building---Determination of market value and considering gross annual rental value---Distinction---Although an estimation under S.8(3), Wealth Tax Rules, 1963 does not bear same element of market value as is relevant under S.13, Income Tax Ordinance, 1979 yet the process to consider the gross annual rental value and estimating the market value of a property are necessarily distinguishable.
Although an estimation under Rule 8(3) of the Wealth Tax Rules, 1963 does not bear same element of market value as well as is relevant under section 13 of the Income Tax Ordinance, 1979 yet the process to consider the GALV and estimating the market value of the property are necessarily distinguishable. The GALV of a property as determined by the Assessing Officer in this case could not be said to invariably result into determination of the market value of a property. In case of the provisions of section 13(1)(d) of the Income Tax Ordinance the core of the issue remains the amount invested by an assessee in acquisition of a property while the determination of GALV under the Wealth Tax Rules primarily concerns itself with the capitalized value on the basis of its letting out value. The Gross Annual Rental Value as defined in Explanation to Rule 8(3) of the Wealth Tax Rules, 1963 may have at time no nexus with the price for which a property may be sold out in open market.
1995 PTD (Trib.) 1179; 1995 PTD (Trib.) 1162; W.T.As. Nos.251 and 252/HQ of 1990-91 and 1990 PTD (Trib.) 1059 ref.
(b) Wealth Tax Rules, 1963---
----R.8(3)---C.B.R. Circular No. 14(7)-WT-VI/79, dated 21-8-1979-- Valuation of land and property---Assessing Officer is not enjoined upon to accept the cost price of the property in all the years to come in respect of any kind of asset whatsoever---Where date of acquisition of property had remained in mystery throughout the proceedings and even before the Tribunal and condition precedent laid down in C.B.R. Circular No. 14(7) WT.VI/79 that the house acquired remained under self-occupation since its construction or acquisition had not been established, Tribunal repelled the contention that C.B.R. Circular No. 14(7)-WT-VI/79, dated 21-8-1979 was applicable in the case of assessee.
(c) Wealth Tax Act (XV of 1963)---
----Preamble---C.B.R. Circular No. 14(7)-WT-VI/79, dated 21-8-1979, C1.3(b) ---Provision of C1.3(b) of C.B.R. Circular No. 14(7)-W.T.VI/79 is not ultra vires of the sense and soul of not only Wealth Tax Act, 1963 and the rules framed thereunder but also the powers of the C.B.R. to issue directions to the Subordinate Authorities.
(d) Wealth Tax Act (XV of 1963)---
----S.5(1)(xv)(ii)---C.B.R. Circular No. I.T.J. (42/85), dated 22-8-1985-- C.B.R. Circular No. 8/42-WT/84, dated 30-6-1985---Exemption-- Encashment of Foreign Exchange Bearer Bond Certificates---Exemption does not apply to the amount received on the encashment of such certificates-- Principles---Foreign Exchange Bearer Bonds purchased out of remittance from abroad enjoy exemption but to claim exemption in respect of assets created on encashment of certificate is not at all allowable---Fact that such F.E.B.B.Cs. were issued in Pakistan by a banker or on an 'advice' from the remitter of foreign exchange is also hardly of any significance.
The exemption did not apply to the amount received on the encashment of Foreign Exchange Bearer Bond Certificates.
The emphasis is on creation of an asset and not on asset itself. Thus if an assessee has purchased the Foreign Exchange Bearer Bond Certificates out of remittances received or brought by him through proper banking channel in Pakistan he has surely created an asset but when subsequently he is encashing them into Pak rupees he is converting it into another asset. The exemption has been granted to an asset which is created and not to an asset which comes into existence after conversion of the already created asset. Even if it is held that the encashment in Pak rupees is also creation of an asset yet the exemption cannot be extended to it for the simple reason that the law has granted exemption to the asset which is created for the first time through proper banking channels and not to subsequently created assets. If, exemption is applied to the subsequently created assets then every asset obtained on conversion of previously created asset would be exempted and thus the wealth tax would never be chargeable on it which of course, does not appear to be the intention of the Legislature.
The F.E.B.B.Cs, purchased out of remittances from abroad enjoy exemption beyond any shadow of doubt. However, to claim exemption in respect of assets created on encashment of certificates is not at all proved either from the practice of the department or any provision of law, rule or precedent. Every claim of exemption presupposes the levy but for the concession allowed by law itself. The assessee having failed to bring home any such law, rule or precedent, which goes to exempt the assets created out of encashment of F.E.B.B.Cs, will not be obliged. The stress was heavily placed upon the fact that these F.E.B.B.Cs were issued in Pakistan by a banker on an "advice" from the remitter of foreign exchange, is also hardly of any significance. The fact remains that these were issued in Pakistan by a banker against foreign exchange. Far-fetched contention that F.E.B.B.Cs issued against foreign exchange on "advice from abroad" continue to remain and enjoy the status of foreign exchange and the amount received on their encashment would be the first asset created out of such remittance is not impressive. As the issuance of F:E.B.B.Cs in Pakistan had already assumed the form of an asset and their conversion, irrespective of the presence of an advice by the remitter would not clothe the proceeds with any exemption or the status of first asset. No provision of law or practice of the department has been referred to in support of the claim.
1990 PTD (Trib.) 1059 and 1991 PTD (Trib.) 135 ref.
(e) C.B.R. Circular No.ITJ-1(31)/85, dated 7-8-1990---
----Interpretation---C.B.R. Circular No. ITJ-1(31)/85 is merely explanatory in nature and does not contain any charging provision nor it has the effect of creating a charge---Question of circular's retrospectivity thus does not arise.
(f) Precedent---
---- Application of ratio decidendi settled in a case---Essentials---To apply a ratio decidendi of a case it is, inter alia, necessary that the common issue involved must have been raised and ruled upon.
(g) Appeal to Appellate Tribunal---
---- Ground taken but not argued before lower forum ---Admissibility-- Ground though taken shall be considered to have not been pressed if it was not argued before an authority.
(h) Wealth tax---
---- Exemption, claim for---Rejection by Assessing Officer---Validity---If an assessee has a history of rejection of such claim, a heavier burden is cast upon the assessee to show that the treatment meted out to her in the year under review was illegal:
Javaid lqbal Khan, F.C.A. for Appellant.
Mrs. Sabiha Mujahid, D.R. for Respondent.
Date of hearing: 16th October, 1996.
ORDER
The assessee-appellant in these further appeals for the Assessment years 1988-89 and 1989-90 an individual who returned net wealth for these two years respectively at Rs.1,02,05,016 and Rs.62,40,997. A house No.89 A-1 B-1 M.M. Alain Road, Lahore was returned at Rs.9,48,500 in each of the two years. The assessing officer determined its GAVL at Rs.1,44,000 under Rule 8(3) of the Wealth Tax Rules and therefore the capitalized value at Rs.14,40,000 in both of the years. In the year 1989-90 the assessee claimed exemption in respect of assets created at Rs.11,01,500 allegedly on encashment of F.E.B.Cs. The exemption was refused/disallowed as per history of the case. This has brought the assessee in further appeal before us.
2. Parties have been heard. Learned A.R. for the assessee submits that the house in question was purchased in the Assessment year 1988-89 and that the registered sale dated evidencing conveyance for the declared sum of Rs.9,48,500 was duly produced before the assessing officer. However, he ignored the same and adopted his own value in the year of the acquisition of the house. According to the learned counsel this treatment is violative of the ratio settled by a Division Bench of this Tribunal in 1995 PTD (Trib.) 1179. Also that the authorities below acted against the directions issued by C. B. R. through Circular No. 14(7) WT-VI/79 dated August, 21, 1979 enjoining upon the assessing officers to evaluate a house at cost to the assessee which is under self-occupation since its construction purchase/acquisition by the assessee. Further submits that the assessing officer illegally refused the claimed exemption in respect of the assets created on encashment of F.E.B.Cs. In support of his submissions that such assets were entitled to exemption under section 5(1)(xv)(ii) of the Wealth Tax Act, 1963 reliance is placed on 1995 PTD (Trib.) 1162 and an unreported decision recorded by a Division Bench at Karachi on 31-10-1991 in WTAs No.251-252/HQ of 1990-91. A reference has also been made to another reported decision cited as 1990 PTD (Trib.) 1059 to show that per findings recorded in para 13 of the decision an assessee was entitled to exemption if he could establish that the remittances brought into Pakistan were through normal banking channel out of which the F.E.B.Cs. in question were acquired. An affidavit of the appellant sworn on 15-10-1996 has been submitted to confirm that she received remittances through proper banking channel out of which the F.E.B.Cs. were acquired. It is further indicated that these certificates were encashed and the investment as made in shares and other assets which was not allowed exemption by the assessing officer. It is further affirmed that necessary proof in respect of receipt of advice from abroad was duly produced before the assessing officer who did not consider the same. This affidavit is also accompanied with photo copies of bank certificates namely Bank Al Mashriq dated 13-2-1996 and 27-8-1996 and American Express dated October 26, 1995. These were sought to be considered at this stage in support of the submission that remittances and advice were sent from abroad for issuance of F.E.B.Cs in favour of the assessee. Learned D.R. supports the orders of the authorities below for the reasons stated-therein. In case of the claim of exemption under section 5(1)(xv)(ii) of the Wealth Tax Act a. legal objection is raised that the documents, citations and other evidence is being introduced at this stage of second appeal while nothing appears to have been brought on record at any earlier stage of the proceedings. It is also stated that the impugned order being silent on the issue of exemption, it should be presumed that the assessee did not press the issue at the first appeal stage.
3. Having heard the parties it is our considered view that the assessee has not been able to bring home any justifiable reason for an interference in the impugned order. The assessment order does not indicate acquisition of the property in first assessment year viz. 1988-89 nor this submission appears to have been made before the first appellate authority. The case relied upon in this regard is clearly distinguishable inasmuch as in that case a Division Bench of this Tribunal on 7-11-1994 found that registered sale deed could not be thrown away on pure surmises and whims of the assessing officer. The issue before the learned Division Bench pertained to the valuation of the property and the consideration of difference between the sale and estimated price as deemed income of the assessee under section 13(1)(d) of the Ordinance. Although an estimation under Rule 8(3) of the Wealth Tax Rules, 1963 does bear some element of market value as well as is relevant under section 13 of the Ordinance, yet the process to consider the GALV and estimating the market value of a property are necessarily distinguishable. The GALV of a property as determined by the assessing officer in this case cannot be said to be invariably result into determination of the market value of a property. In case of the provisions of section 13(1)(d) of the Ordinance the core of the issue remains the amount invested by an assessee in acquisition of a property while the determination of GALV under the aforesaid rule of the Wealth Tax Rules primarily concerns itself with the capitalized value on the basis of its letting out value. The Gross Annual Rental Value as defined in Explanation of Rule 8(3) of the Wealth Tax Rules, 1963 may have at time no nexus with the price for which a property may be sold out in open market. The other submission based upon the aforesaid Circular dated August 21, 1979 is also irrelevant inasmuch as, as said above, neither the date of acquisition of property has been brought on record nor it was ever submitted before the first appellate authority that the treatment meted out in this regard was factually incorrect. Even otherwise we are not aware of any rule, law or precedent which enjoins upon an assessing officer to accept the cost price of a property in all the years to come in respect of any kind of asset whatsoever. The date of acquisition of property having remained a mystery throughout the proceedings and even before us, we will not accept the contention that the aforesaid Circular was applicable in the case of the assessee. The relevant portion of the Circular viz. clause 3(b) also appears to be ultra vires of the sense and soul of not only the Wealth Tax Act, the rules framed thereunder but also the powers of the C.B.R. to issue directions to the subordinating authorities. Also the other conditions precedent laid down in this Circular letter that the house acquired remained under self-occupation since its construction or acquisition do not appear to have been established on record. This being so, as said above, we find no reason to interfere in this aspect of the issue.
4. In case of the claimed exemption in respect of the assets created allegedly out of the proceeds of F.E.B.Cs again we are not persuaded to agree with the submissions made at the bar. Learned A.R. for the assessee has attempted his best to bring his case within exemption clause as provided in section 5(1)(xv)(ii) of the Wealth Tax Act, 1963. However, he has not been able to do it successfully as the issue in hand appears absolutely settled as far this Tribunal is concerned. The portions cited from 1990 PTD (Trib.) 1059 do not help the assessee at all inasmuch as the issue before the learned Division Bench was slightly different from the one falling for our adjudication presently, the learned A.R. for the assessee is attempting to stretch the same for his purpose and benefit. This cannot be allowed to happen. For the exact issue now under-consideration before us, was considered by another Division Bench at Karachi in 1991 PTD (Trib.) 135. In that case the issue was taken up without the ambiguity or an uncertainty whether the amount used in purchase of F.E.B.Cs was remitted from abroad through banking channel or not. The learned Division Bench referred to C.B.R. Circular No.I.T.J. 42/85 dated 22nd August, 1985 wherein it wasp specifically clarified that the exemption did not apply to the amount received on the encashment of certificates. Finally, the learned Division Bench concluded:---
"It is important to note that the emphasis is on creation of an asset 6, and not on asset itself. Thus if an assessee has purchased the certificates out of remittances received or brought by him through proper banking channels in Pakistan he has surely created an asset but when subsequently he is encashing them into Pak rupees he is converting it into another asset. The exemption has been granted to an asset which is created and not to an asset which comes into existence after coversion of the already created asset. Even if it is held that the encashment in Pak rupees is also creation of an asset yet the exemption cannot be extended to it for the simple reason that the law has granted exemption to the asset which is created for the first time out of remittances received or brought in Pakistan through proper banking channels and not to subsequent created assets. If we apply exemption to subsequently created assets then every asset obtained on conversion of previously created asset would be exempted and thus the wealth tax would never be chargeable on it which of course, does not appear to be the intention of the Legislature."
5. This also answers the reliance of the learned A.R. for the assessee of C. B. R. Circular No.8/42 W.T./84 dated June 30, 1985. This Circular primarily appears to have been issued to highlight the change brought in the year in respect of residential status of the assessee. In this Circular the phrase "and the assets would remain exempt for six years even if they change form" as pointed out by the learned A.R. appears to have been quite superfluous and not relevant to the exact subject-matter being sought to be clarified. Here again an uncertainty if there was one was duly done away with through Circular No.ITJI 1(31)/85 dated August 7, 1990. The Circular letter relied upon by the learned A.R. for the assessee is general in nature while the later mentioned in exact and addresses the issue before us directly which reads:
"The undersigned is directed to clarify that F.E.B:Cs as a class of asset is exempt from the levy of wealth tax but the assets created on its encashment in local currency do not qualify for exemption under section 5(1)(xv)(i) or 5(1)(xv)(ii) of the Wealth Tax Act 1963,"
The objection of the learned counsel for the assessee oil the later cited notification that it having been issued in the year 1990 did not apply to the assessment years before us is totally unimpressive. The said Circular letter dated August 7, 1990 is merely explanatory in nature. It does not contain any charging provision nor it has the effect of creating a charge. Therefore the question of its retrospectivity hardly arises. The assessee is also not entitled to the benefit of the ratio settled in the aforesaid unreported decision, dated 31-10-1991. To apply a ratio decidendi settled in case it is inter alia, necessary that the common issues involved must have been raised and ruled upon In the unreported decision the Revenue disallowed exemption only on account of absence of evidence to support the submission that impugned F.E.B.Cs were purchased out of remittances from abroad through normal banking channels. The learned Division Bench at Karachi found it as a matter of fact that adequate material to support the submission was already available on record. Therefore, the objection of the Revenue was overruled. The result of the assessee may well have been the same which the assessee before us intends to achieve. However, the question whether proceeds of F.E.B.Cs in local currency were also exempt from levy of wealth tax was neither raised, considered nor was ruled upon the learned Division Bench. Therefore, as said above, the view expressed in 1991 PTD (Trib.) 135 governs the facts i before us. Further we have noted that the kind of evidence required to avail, the benefit of the ratio in the unreported decision is not present before us. The photo copies of bank certificates coupled with the affidavit cannot be treated as a piece of evidence at this belated stage of second appeal inasmuch as no such contention based upon such material appears to have been made before the first appellate authority. The law by now is quite well-settled that a ground though taken shall be considered to have not been pressed if it was not argued before an authority. In the affidavit it has not been claimed that all these documents or related submissions were made before the first appellate authority which failed to take notice of them. Even if it had been so, the proper course for the assessee was to approach the first appellate authority under section 156 of the Ordinance to seek a rectification of the order. In absence of an evidence that this ground was properly argued before the first appellate authority we will hold that the only course open for the assessee was to approach the same authority for rectification of its order and to rule upon the ground taken and properly argued before him.
6. We have also noted that while disallowing the claimed exemption the assessing officer referred to a previous disallowance as history of the case. Learned A.R. has not assisted us on this issue nor he has controverted the finding so recorded. If the assessee does have a history of rejection of such claim a heavier burden is cast upon it to show that the treatment meted out to her in the year under review was illegal.
7. This being so, we will re-affirm our views expressed in 1991 PTD (Trib.) 135 as reproduced above; that F.E.B.Cs. purchased out of remittances from abroad enjoy exemption beyond any shadow of doubt. However, to claim exemption in respect of assets created on encashment of certificates is not at all proved either from the practice of the department or any provision of law, rule or precedent. Every claim of exemption presupposes the levy but for the concession allowed by law itself. The assessee having failed to bring home any such law, rule or precedent, which goes to exempt the assets created out of encashment of F.E.B.Cs. we will refuse to oblige. The stress heavily placed upon the fact that these F.E.B.Cs were issued in Pakistan by a banker on an "advice" from the remitter of foreign exchange is also hardly of any significance. The fact remains that these were issued in Pakistan by a banker against foreign exchange. Perhaps the learned A.R. wants us to believe that F.E.B.Cs. issued against foreign exchange on "advice from abroad" continue to remain and enjoy the status of foreign exchange and the amount received on their encashment would be the first asset created out of such remittance. We are not impressed with the far fetched idea as the issuance of F.E.B.Cs. in Pakistan has-already assumed the form of an asset and their conversion, irrespective of the presence of an advice by the remitter will not clothe the proceeds with any exemption or the status of first asset. No provision of law or practice of the department has been referred to in support of the claim which again appears to have been) made for the first time in second appeal. The ratio of the case cited as 1995 PTD (Trib.) 1162 and relied upon by the assessee rather supports the view of the Revenue as F.I.Rs. and Khas Deposit Certificates purchased out of foreign remittances were held to be the first asset created just like F.E.B.Cs. purchased by the assessee before us. Neither the facts nor the principle decided-in this case amounts to allow exemption to a second asset created out of foreign remittances. The submissions made and based upon the decision are also rejected.
8. The appeals in both the years in view of the above findings fails on all counts.
M.B.A./292/Trib.Appeals dismissed.