R. AS. NOS. 149/LB TO 151/LB OF 1996 VS R. AS. NOS. 149/LB TO 151/LB OF 1996
1997 P T D (Trib.) 926
[Income-tax Appellate Tribunal Pakistan]
Before Nasim Sikandar, Judicial Member and Inam Ellahi Sheikh, Accountant Member
R. As. Nos. 149/LB to 151/LB of 1996, decided on 16/02/1997.
(a) Wealth Tax Act (XV of 1963)---
----S. 27---Reference to High Court---Question as framed appearing to be too general to be described as a specific legal issue to be referred to High Court.
(b) Wealth Tax Act (XV of 1963)--
----S. 27---Reference to High Court---Question of fact---Whether or not a person (or an assessee) is an owner of a property is essentially a question of fact.
(c) Wealth Tax Act (XV of 1963)--
----S. 27---Reference to High Court---Question of law---Conclusion drawn from a factual controversy will give rise to a question of law only if it was not supported by legal evidence or material; or conclusion drawn by the Tribunal was perverse and was not rationally possible.
(d) Wealth Tax Act (XV of 1963)---
----S.27---Reference to High Court---Question of law---If the Tribunal had misunderstood the facts or its findings were inconsistent and contradictory or it had drawn conclusions from its own imagination, question of law from factual controversy in such a situation, could be said to have arisen.
(e) Wealth Tax Act (XV of 1963)---
----S. 27---Reference to High Court---Question of fact---Whether or not an agreement is collusive is a pure question of fact.
(f) Wealth Tax Act (XV of 1963)---
----S. 27---Reference to High Court---Findings of both First Appellate Authority and 'those of Tribunal on the question were contrary to those arrived at by the Assessing Officer---Such fact alone would not by itself convert the factual controversy into one law and thus could not be a good ground for making a reference to the High Court.
W.T.As. Nos. 13 to 15 of 1990-91; 1996 PTD (Trib.) 905; Mehran Associates v. C.I.T., Karachi 1993 SCMR 274 = 1993 PTD 69: In re: Mehran Associates Ltd. 1992 PTD 719; CIT v. Morris Electronic Ltd. (1991) 190 ITR 653 = 1994 PTD Note 155 at p.196; CIT Lahore v. Jamal Ice Factory, Multan 1973 PTD 422; A.C.I.T. v. Roshan Lal Kuthalia 1989 PTD 1333; CIT (Central), Calcutta v. Daulatram Rawalrnull (1973) 87 ITR 349; CIT, Behar and Orissa v. S.P. Jain (1973) 87 ITR 370; Mian Ghulam Murtaza v. CIT, Lahore 1981 PTD 180 and CIT v. Sh. Muhammad Saeed and Brother 1993 PTD 1198 ref.
Shahbaz Butt, L.A. and Mrs. Sabiha Mujahid, D.R. for Applicant. Saleem Chaudhry for Respondent.
Date of hearing: 22nd December, 1996
ORDER
NASIM SIKANDAR (JUDICIAL MEMBER).---The respondent A.O.P. derives income from real estate business. During the three years under consideration i.e., 1987-88 to 1989-90 it was found engaged in construction of a multi-storeyed building namely, Sadiq Plaza at the Mall, Lahore Wealth tax returns were filed to declare deficit wealth at Rs.1,03,556, Rs.3,39,772 and Rs.J0,31,943. In support of denial to wealth tax liability it was submitted that total contribution of members of AOP in the project was Rs.8.3 million but they owed a sum of Rs.24.36 million of M/s. National Industrial Cooperative Finance Limited. Therefore, their liabilities exceeded the assets. It was further stated that the land on which the Plaza was being constructed did not belong to them. The assessing officer rejected the pleas, inter alia on the ground that the assessee was undertaking the construction of Plaza and was also authorised to effect booking of various parts of the building. In the opinion of the assessing officer no one could be authorized to sell parts of a building without ownership rights. Some portions of agreement to sell between one of the members of A.O.P. namely Mr. Muhammad Sadiq and the original owners M/s. Kohinoor Textile Mills Limited were referred to say that in the first instance he made a deal to purchase this plot. However, due to financial constraints he got an agreement reached between M/s NICFC and the owners M/s. Kohinoor Textile Mills Limited ostensibly transacting property between them. According to the assessing officer the sale-deed executed between both of these parties did not reflect the true transaction inasmuch as M/s. NICFC provided money and purchased the property only for the benefit of the said individual member of A.O.P. Mr. Muhammad Sadiq. The assessing officer further observed that on the very next date of purchase of property by M/s. NICFC it agreed to sell the plot in question to the assessee which supported his suspicion that the transaction of sale between M/s. Kohinoor Textile Mills Limited and NICFC was only a guise to transfer the property in the plot to the assessee whose advanced sum of Rs.50,00,000 was adjusted in the total price paid by M/s. NICFC to the owners M/s Kohinoor Textile Mills Limited. It was further observed that in reality the property in plot was conveyed in favour of M/s. NICFC as security for their advance made in the form of the remaining price paid to the owners. The assessing officer fortified his opinion by remarking that M/s. NICFC did not show the plot in question in their balance-sheet for the period ending on 30-6-1987 although the sale transaction evidencing transfer of the demised property between M/s. Kohinoor Textile Mills Limited as seller and M/s. NICFC as purchaser had already taken place on 20-5-1987. Accordingly as against declared nil value for the land/plot the assessing officer estimated it at Rs.3,72,66,000, Rs.3,89,30,000 and Rs.6,87,00,000 in the three years in the hands of the assessee to levy wealth tax. The declared cost of work in progress was also enhanced to reach net wealth in these three years at Rs.1,24,20,830, Rs.i,06,10,887 and Rs.5,24,43,264. Earlier the claimed liabilities at Rs.3,25,93,670. Rs.5,53,19,613 and Rs.7,30,14,996 were reduced to Rs.2,45,63,170 Rs.4,57,89,113 and Rs.6,02,56,736. The difference being the declared capital investment of the members of the A.O.P. in the going project.
2. The assessee succeeded in first appeal. Learned CIT(A)-III, Lahore on 17-5-1990 agreed that the appellant not being the rightful owner of the plot in question, the charge of Wealth Tax and inclusion of this asset in its wealth was improper. The declared cost of work in progress was also directed to be accepted.
3. Aggrieved from the order the Revenue filed three appeals which failed on 7-5-1996 through a consolidated order recorded by a Division Bench of this Tribunal in W.T.As. Nos. 13 to 15 of 1990-91 (Assessment years 1987-88 to 1989-90) now reported as 1996 PTD (Trib). 905. The order of the first appellate authority that the assessee was not owner of the plot in question was upheld. This Tribunal further found that M/s. NICFC was a complete owner of the plot in question after its purchase from M/s. Kohinoor Textile Mills Limited. Also that the arrangement between M/s. NICFC and the assessee was not unusual through which the assessee undertook to construct the building and to sell a part of it. The stipulation that on every such sale of part of the structure the assessee will surrender a bulk of sale price to M/s. NICFC towards price of land was also considered as a factor in favour of the assessee. Therefore, the contention that it was in possession of the plot only as an intended purchaser under an agreement to sell and was not a complete owner was accepted. This Tribunal by way of the aforesaid order also found that in absence of a conveyance deed in favour of the assessee, M/s. NICFC remained owner for all legal and practical purposes. On the ratio of a number of reported decisions from the superior Courts, particularly the one from Supreme Court of Pakistan re: Mehran Associates v. CIT, Karachi 1993 SCMR 274 = 1993 PTD 69 the Tribunal concluded that the demised property, the plot under the Plaza did not "belong" to the assessee that the assessee was only an owner of the structure raised thereupon and that the assessing officer did not undertake the required exercise to bring home a substance to his suspicion qua the alleged "arrangement" with M/s. NICFC. In the aforesaid case re: Mehran Associates (supra) it may be noted while reversing order of the Karachi High Court in re: Mehran Associates Limited 1992 PTD 719 the Honourable Judges of the Supreme Court observed that notwithstanding some of the attributes of ownership pointed out by the High Court, the assessee was not owner of the structure in question. The Court according to our view accepted the possibility of duality of ownership in land and structure in two different parties as in the case of the assessee before us.
4. Now through these applications under section 27 of the Wealth Tax Act, 1963, CIT Companies-I, Lahore seeks reference of the following common question of law as having arisen from the said order of this Tribunal:--
"Whether under the circumstances and facts of the case, learned I.T.A.T. was justified to hold that the value of subject land could not be assessed in the hand of M/s. Sadiq Enterprises for the purpose of wealth tax assessment."
5.? The prayer for reference in terms of the statement of facts and the proposed question has been repeated by Mr. Shehbaz Butt, learned Legal Advisor for the Revenue. It is suggested that the question framed being one of law and raising legal controversy needs to be referred for the opinion of the High Court. Ch. Muhammad Salim, learned counsel for the respondent assessee however opposes the prayer. He has two objections. The first is that it is not a question of law and seconds that the Tribunal having decided the issue on the basis of ratio of a recent decision of the Supreme Court, no reference of the same issue could possibly be made, In support of the second submission reliance has been placed upon (1491) 190 ITR 635=1994 PTD Note 155 at p.196 re: C.I.T. v. Morris Electronic Limited. In that case it was held by a Division Bench of the Bombay High Court that a question covered by a decision of High Court could not be referred. In support of the first submission that the question as framed does not raise an issue of law Ch. Muhammad Salim, Advocate refers to the ratio settled in re: CIT, Lahore v. Jamal Ice Factory, Multan reported as 1973 PTD 422.
6. Having heard the parties we are persuaded to agree with the submissions made at the bar for the assessee. The question as framed, in the first instance appears too general to be described as a specific legal issue to be referred to the High Court. The first appellate authority found that she assessee was not owner of the plot and, therefore, charge of wealth tax thereupon or inclusion of its value in the net wealth of the assessee was not justified. Same was the conclusion of the Tribunal on the facts as well as the documents which appeared admitted between the parties. Whether or not a person (or an assessee) is an owner of property is essentially a question of fact. The Revenue has not challenged impliedly or expressly the finding of the Tribunal that the word "belonging" as used in subsection (m) of section 2 of Wealth Tax Act is equivalent to and conveys the meaning of an owner of an asset to be included in the net wealth of an assessee. It is also not its case that the ratio of the cases referred to in this connection were not applicable or attracted to the facts in hand.
7: In the case relied upon by Ch. Muhammad Salim, Advocate re: CIT v. Jamal Ice Factory, Multan (supra) a Division Bench of the Lahore High Court found that the Tribunal's finding that for all legal purposes the assessee firm was owner of the property did not give rise to a question of law since it was based upon evidence on record. In the statement of facts drawn the question itself the finding of the Tribunal has not been the challenged the ground that the conclusions drawn were not supported by evidence on record. It is well-settled that a conclusion drawn from a factual controversy will give rise to a question of law only in three situations. These are; that it was not supported by legal evidence or material that the conclusion on fact drawn by the Tribunal was perverse and that it was not rationally possible. See 1989 PTD1333 re: ACTT v. Roshan Lal Kuthalia? Same? appears to be the opinion of their lordships of the Supreme Court of India in (1973) 87 ITR 349 re: CIT, Central Calcutta v. Daulatram Rawamull. In the same report (1973 ) 8 , ITR at page 370 the Supreme Court of India in re: CIT, Behar and Orissa v. S.P. Jain addressed the issue more succinctly. Their lordships? laid down that a question of law from a factual controversy could be said to have arisen and the High Courts and the Supreme Court will have always have the jurisdiction to intervene if it appears that either the Tribunal had misunderstood the facts or that its findings were and contradictory or that the Tribunal had drawn conclusion from its own imagination. No such element has been pointed out by the Revenue nor has their exercise been alleged in the order of the Tribunal out of which this application has arisen.
8. Our view of the arrangement between the assessee and M/s. NICFC again is also a finding of fact. As found by Honourable Judges of the Lahore High Court in 1981 PTD 180 re: Mian Ghulam Murtaza v. CIT, Lahore the question whether or not an agreement was collusive was a pure question of? fact.
9. To us it appears that the Revenue has sought reference of the above question only for the reason that findings of both the first appellate authority and of this Tribunal are contrary to those arrived at by the assessing officer. This is not a good ground for making a reference. In 1993 PTD 1198 re: CIT v. Sh. Muhammad Saeed and Brother, Irshad Hassan Khan, J., speaking for the Division Bench of the Lahore High Court remarked that where the question posed was essentially of fact, "mere fact that finding of the Tribunal as well as that of Assistant Appellate Commissioner was contrary to the finding reached by the I.T O. would not by itself convert the factual controversy into one at law".??????????????
10. The situation before us being exactly the same and the Revenue having failed to meet the objections made by the learned counsel for assessee, we will refuse the prayer. These reference applications, there for fail.
M.B.A./323/Trib.???????????????????????????????????????????????????????????????????? Order accordingly.