(a) Income-tax---

----C.B.R. Circular No.7 of 1994, dated 10-7-1994---C.B.R. Circular No. 11 of 1994, dated 17-7-1994---Valuation of land and buildings in Karachi-- Determination--- Principles.

(b) Interpretation of statutes---

----Ambiguity in fiscal laws---Mode to resolve---Principle---If there is any ambiguity in respect of fiscal and tax laws same is to be resolved in favour of assessee.

Ebrahim Dahodwala, F.C.A. for Appellant.

Muhammad Majid, D.R. for Respondent.

Date of hearing: 12th February, 1998.

ORDER

The above appeal at the instance of assessee is directed against the order, dated 2-8-1998 by the learned CIT(A), Zone-VI, Karachi in WTA No.330/A-VI relating to the assessment year 1994-95. The objection raised on behalf of appellant is to the valuation of immovable property bearing No.D-14, Darakhshan Villas measuring 361 Sq. Yards Phase-VI, D.H.A. Karachi.

2. Heard Mr. Ebrahim Dahodwala, F.C.A., learned representative for the appellant and Mr. Muhammad Majid, learned representative for the department.

3. Mr. Ebrahim Dahodwala has submitted that the appellant declared the value of above property at Rs.5,72,456. The assessing officer rejected the declared version and estimated the value of property first by taking the value of open plot at the Collector's rate notified for the assessment year 1994-95 and thereafter, took the cost of construction in accordance with the KBCA rate as on 30-6-1994 for covered area of 280 sq. yards. The total valuation thus determined was Rs.16,71,267. The appellant assailed the method of valuation in first appeal contending that the assessing officer ought to have determined the value of property in accordance with the valuation table issued by the Collector of Karachi according to which the value of built up property is shown at Rs.1461 per sq. yard which is inclusive of both cost of land and cost of construction. The learned CIT(A) did not accept the contention and held that the method adopted by the assessing officer was correct. Being still dissatisfied the appellant has preferred this second appeal before us. Mr. Ebrahim Dahodwala has submitted that CBR two issued circulars containing instructions for the valuation of lands and building for the year 1994. The first Circular No.7 of 1994, dated July 10, 1994, according to which where the buildings have not been rented out the value shall be worked out by adding value of land and the value of structure determined at the rates adopted by local bodies or development authorities. Thereafter, another Circular No. 11 of 1994 dated July 17, 1994 was issued whereby detailed instructions were issued and the properties were divided in three categories namely (I) Residential Houses/Apartments, (II) Commercial Buildings and (III) Open Plots. Market value of houses/apartments which have never been let out in the past were 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 the view the gross annual letting value of similar property in that or the nearest locality.

4. Mr. Ebrahim Dahodwala has further pointed out that the valuation table issued by the Collector of Karachi for the year 1994 reads as follows:

KARACHI

VALUATION TABLE

1994

(Minimum value)

5. Mr. Dahodwala has pointed out that there is difference in the language by the CBR in its circular and the notification issued by the Collector and, therefore, confusion has taken place. He has pointed that in the valuation table issued by the Collector of Karachi valuation of open plots in the residential, commercial and industrial categories have been given separately while the valuation of built up residential properties, commercial properties and industrial properties have been given separately and the value of built up flats has been placed in another category. Elaborating his point of view he has submitted that the Collector of Karachi has not given cost of construction in the case of built up properties but has given a consolidated and average value of the built up properties, which expression includes land and building both. According to Mr. Dahodwala the rationale of this valuation is that after construction is raised on a plot of land, the land and building make a composite, property and thereafter, the value of land cannot be taken separately as the land does not remain available for independent use as in the case of open plot. Moreover, when the entire valuation table issued by the Collector of Karachi is seen, it appears that the value of open residential plot in Category II is given at Rs.867 while the value of built up residential property is given at Rs.1461 per sq.yd. On the other hand the value of built up flats per sq. ft of covered area is given at Rs.231 and thus if the value of per sq.yd is taken it comes to Rs:2,079. He has further explained that the value of built up residential property given at Rs.1,461 is lesser than the value of built up flats for the reason that in case of plots there is no open land. So far the built up flat is concerned, the value of covered area is considered only, while arriving at the value of built up residential property an average of the covered area as well as open area has been token. He has further submitted that in the Circular issued by the C.B.R. it has been stated that in the case of residential house the value of land shall be taken equal to the value specified by the District Collector for the purpose of Stamp Duty and the value of building itself would be computed at the rates of cost of construction adopted by the District Collector for the purpose of Stamp Duty. These instructions are defective in the sence that the Collector has not given separate valuation of the land in the case of built up properties and likewise separate rate of the cost of construction has not been adopted by the District Collector but in the case of built up properties the entire property as such has been considered for the purpose of valuation. Thus, the instructions issued by the C.B.R. are not workable. He has submitted that while adopting the valuation as issued by the Collector for the purpose of Stamp Duty the Defective nature of the instructions issued by the C.B.R. is to be ignored because it is absolutely un-workable and confusing.

6. On the other the learned D.R. has supported the orders of learned two officers below submitting that they are in consonance with the directions issued by the C.B.R.

7. We have carefully considered the contentions raised by the learned representatives for the parties. We have gone through the instructions issued by the C.B.R. and valuation table notified by the Collector of Karachi. We are persuaded to agree with the submissions of Mr. Ebrahim Dahodwala because when we read the provisions contained in Rule 8(1) and Rule 8(3), we find that the value of lands and buildings is to be determined on the valuation date meaning thereby the estimated price which it will fetch if sold in the open market on the valuation date. The competent Authority for determining the value of properties for the purpose of sale is collected under the Stamp Act who has issued the valuation of a built up property in the valuation table according to which the Stamp Duty at the time of sale of the property shall be charged. Thus, keeping in view the principle that if there is any ambiguity in respect of fiscal and tax basis it at is to be resolved in favour of assessee, We hereby direct that the valuation of property should be taken as given in the valuation table issued by the Collector of Karachi. Since the value declared by the appellant is already on higher side on the value of property computed in accordance with the valuation table issued by the Collector of Karachi for the year 1994, therefore, the assessing officer is directed to accept the declared value. The appeal is allowed accordingly.

M.B.A./523/Trib. Appeal allowed.