W.T.AS. NOS.359/LB OF 1985-86; 360/LB OF 1985-86; 180/LB OF 1988-89; 340/LB VS W.T.AS. NOS.359/LB OF 1985-86; 360/LB OF 1985-86; 180/LB OF 1988-89; 340/LB
1998 P T D 2054
[Income-tax Appellate Tribunal Pakistan]
Before Nasim Sikandar, Judicial Member and Nazeer Ahmad Saleemi, Accountant Member
W.T.As. Nos.359/LB of 1985-86; 360/LB of 1985-86; 180/LB of 1988-89; 340/LB, 341/LB of 1985-86, 214/LB to 216/LB of 1987-88 and 1255/LB to 1257 of 1991-92, decided on 02/04/1998.
(a) Wealth Tax Act (XV of 1963)---
----S. 2(e)(ii), Explanation---Interpretation of S.2(e)(ii). Explanation-- Proper function of Explanation to S.2(e)(ii) of the Wealth Tax Act of 1963-- Property and purpose---Burden of proof---Principles---Where a property is let out on the valuation day or in the immediate past, the burden to negate the presumption qua purpose shall be on assessee---View that in order to create an AOP a volition on the part of constituent members was a necessary element is qualified and subject to certain changes---Essentials.
By introducing the Explanation to section 2(e)(ii) with retrospective effect, the Revenue appears to have attempted to plug the holes and lacunas in the drafting of the provision.
An explanation to a provision is not a substantive but a declaratory one.
Proper function of an explanation was to make plain or elucidate and not to add or subtract from a provision to which it is added. The Explanation could never be construed to be tantamount to a charging provision with retrospective effect. An Explanation functions to explain the meaning and effect of the main provision and it works to clear up any doubt or ambiguity in it.
Besides removing a doubt or an ambiguity an explanation might create rights and obligations and that it might enlarge or curtail the provision of the main statute.
The Explanation to section 2(e)(ii) of the Wealth Tax Act when seen from various angles, makes it clear that the charging provision with respect to the property held by an A.O.P. has not undergone any substantial change. The property and the purpose as explained in the explanation will still place a burden on the Revenue to establish that in cases of the present nature, the immovable property was held for the "purpose" of letting out or "business" of letting out. In the first situation the "purpose" will be established if a property is actually let out on the valuation day or in the immediate past. Although the burden of proving the "purpose" to hold an immovable property for letting out primarily lays upon the Revenue yet when the immovable property is rented out on the valuation day or in the immediate past, the initial burden on the Revenue shall stand discharged. It shall, thereafter be for the assessee to prove the contrary that the property was not held for the "purpose" of letting out. Since in the present case it is admitted that the subject-matter of the trusts is immovable property and that at the valuation day it was let out and the rent was being assessed to income-tax in the hands of the beneficiaries, there is no need to address the issue any further.
However, the view that in order to create an AOP a volition on the part of constituent members was a necessary element is qualified and subject to certain changes. In certain situations element of volition can outlive the desire and may be presumed to have lasted longer than intended. The principal intention or volition on the part of the original owner will apparently stand conveyed alongwith rented out property or the one held for the purpose of letting out. A person to whom an immovable property in occupation of tenants is conveyed by transfer or through inheritance cannot be allowed to say that he did not share the purpose with the transferor or was not concerned with the intention held by the conveyor of property or the deceased owner. This presumption in fact is another way to express the opinion that where a property is let out on the valuation day or in the immediate past the burden to negate the presumption qua purpose shall be on the assessee.
B.P. Biscuit Factory Limited Karachi v. W.T.O. 1981 PTD 217: N. V. Shanmughan and Company v. C.I.T. (1971) 108 ITR 555; CITAP v. Trustees of H.E.H. Nizam's Family (1977) 108 ITR 555; M/s. Colony Textile Mills Limited Lahore v. Commissioner of Sales Tax PLD 1976 Lah. 243; Abdul Jamil v Registrar of Trade Union West Pakistan PLD 1971 Lah. 220; Kishan Singh v. Prem Singh and others 1939 Lah. 587; Rai Sahib Pak Chand M Mohota v. The Labour Court of State AIR 1968 Bom. 151; N.V. Shanmugham and Company v. CIT Madras (1971) 81 ITR 310; B.P. Biscuit Factory Karachi v. W.T.O. and another 1996 SCMR 1470; B.P. Biscuit Factory v. W.T.O. 1981 PTD 217; Narain Swedeshi Weaving Mills v. Commissioner of Excess Profits Tax (1954) 26 ITR 765; 1995 PTD 1027 CIT Karachi v. Asbestos Cement Industries and others 1993 PTD 459; 1986 PTD (Trib.) 805; 1995 PTD 614 and 1989 PTD (Trib.) 20 ref.
(b) Interpretation of statutes---
---- Explanation added to a section----Function.
An explanation to a provision is not a substantive but a declaratory one.
Proper function of an explanation was to make plain or elucidate and not to add or subtract from a provision to which it is added. The Explanation could never be construed to be tantamount to a charging provision with retrospective effect. An Explanation, functions to explain the meaning and effect of the main provision and it works to clear up any doubt or ambiguity in it.
Besides removing a doubt or an ambiguity an explanation might create rights and obligations and that it might enlarge or curtail the provision of the main statute.
1986 PTD (Trib.) 805; 1995 PTD 1027 and 1995 PTD 614 ref.
(c) Wealth Tax Act (XV of 1963)---
----S. 2(m), Explanation (iii) ---C.B.R. Circular No.C.1568-S(WT)/80, dated 22-9-1980---Any immovable property---Concept---Expression "any immovable property" has to be interpreted as a unit of property identifiable from rest of the kind on account of its size, nomenclature, or recognition as an independent unit by allocation of distinct letters and figures numbers and makes in public record---"Any immovable property" encompasses and includes even the smallest possible unit of corpus called property as well as the skyscrapers, high rising buildings, plazas and similar heaps of cement and concrete as also big farms---Share of an individual in an immovable property can never be uncertain or unspecific, it is always ascertained or is capable of being ascertained---Immovable property owned by a person as a co-owner only with reference to its share in the total corpus and by way of a registered deed, shall be a case of member of AOP---Where, however, an independent registered deed, be that of partition or sale, mentions a specific and identifiable portion of a total whole, with metes and bounds, the owner shall not be taken as a member of AOP---Principles.
The phrase "any immovable property" is so wide that generally speaking it will encompass and include even the smallest possible unit of a corpus called property as well as the skyscrapers, high rising buildings, plazas and similar heaps of cement and concrete as also big farms. There hardly appears any doubt that the aforesaid provisions making association o1 persons liable to tax, were introduced in order to discourage avoidance of wealth tax by owners of huge buildings, plazas and shopping centres who tended to escape an assessment to wealth tax by introducing owners of smaller units. That used to be done in the guise of introducing purchasers of shops, flats and rooms etc. or by involving a registered document in favour of a number of persons. Whether such purpose has actually been achieved is to be seen by the Revenue. It is however, clear that the sword of AOP struck harder on those assessees who were never designed to be touched.
The phrase "any immovable property" will have to be interpreted as a unit of property identifiable from rest of the kind on account of its size, nomenclature, or recognition as an independent unit by allocation of distinct letters, figures, numbers or marks in public records. Otherwise the total crest or mass of earth is one unit of immovable property. The fragmentation of the one whole unit of immovable property will not be complete if the smaller units are not capable of being owned and possessed by an equally identifiable legal or artificial persons. This however, is not easily achievable in view of the changes that have occurred in feudal concept of property and its transfer. The determination of a particular property as one unit in order to make all the co-owners as an AOP is practically impossible at times. After introduction of the new class of assessees, an AOP, the Revenue made several attempts to clear the mystery shrouding the concept. The CBR Circular C. No. 1568-S(WT)/80, dated September, 22, 1980 is one of such attempts.
The concept still remains unclear as in the view of the Revenue if four persons purchase four different but contiguous houses or different flats in a multi-storeyed building, though otherwise distinguishable from each other, may still constitute an AOP. The stress on registration of a property in the name of more than one persons naturally provides for the negative. It means that if separate sale-deeds are executed and got registered then various co-owners will not constitute AOP although they would have had if they had joined in the one registered deed. The practice on the part of the assessing officers/W.T.Os. further complicated the concept. They created terms like "specific and identifiable portions" of a property to accept that a registered deed did not constitute an AOP and proceeded to reject the same when so desired, by using equally ambiguous terms of "unspecific portion" etc. The fault certainly lies in the general words used in the Explanation (iii) of S.2(m) of the Wealth Tax Act and then half cooked interpretation by Circular letters including C. B. R. Circular No. 1568-S(WT)/80, dated 22-9-1980. The Revenue conveniently forgets that the share of an individual in an immovable property can never be uncertain or unspecific. It is always ascertained or is capable of being ascertained. Every co-sharer in an immovable property owns the smallest particle constituting that property to the extent of his interest. Therefore, to say that in some cases the share of a co-sharer was specific and in other case it was not so, is essentially incorrect. As long a unit of immovable property is jointly owned by more than one co-owner mere mention of a specific portion or its possession by one of the co-owners, will not make him an independent owner of that portion in which the other will continue to have proportionate title subject to some legal advantages which comes alongwith possession. It will be noted that without a partition the possession of one co-owner is deemed as possession of all others as far the third parties are concerned. Their position, inter se, is also not much different. A possession of a specific portion out of joint property even to the extent of one's interest is held on behalf of all the other co-sharers till such portion devolves and falls to the possessing co-owner by way of a partition, surrender or conveyance recognized by law. Therefore, the legal position remains that a co-sharer will continue to be so even if created by a separate sale-registered deed or even if he is in possession of a particular portion thereof with or without the consent of other co-owners. The moment he becomes independent owner of an identifiable portion of the property, again with or without permission he ceases to be a co-owner and therefore, the question of his being a member of the AOP does not arise at all. To become a separate and independent owner in an erstwhile joint property is possible only by way of partition, surrender or conveyance of the remaining share in favour of a co-owner. After happening of this legal incidence of significance between co-owners, each of them and the property falling to his share will be an independent and separate unit of property. The consequence that follows would be that partitioned portion will be capable of exercise of all incidences of ownership including possession to the exclusion of the rest of the world as well as the previous co-owners. The principle being that a person is an independent owner of a specific portion or part of a bigger whole if he can exercise his proprietary rights independent of the others and can legally transfer a specific portion alongwith its possession. Also that in case of his death or (dissolution/liquidation if an artificial juridical person) the defined property so devolves upon the successor without reference to the parts owned by other persons.
An immovable property owned by a person as a co-owner only with reference to its share in the total corpus and by way of a registered deed shall be a case of a member of an AOP. However, where an independent registered deed, be it of partition or sale, mentions a specific and identifiable portion of a total whole, with metes and bounds, the owner shall not be taken as a member of AOP.
In the present case three different and independent trusts were created by way of three separate trust deeds which were duly registered in accordance with law. The contention of the assessee that every beneficiary was to be succeeded by his legal heirs without reference to the beneficial ownership of other two beneficiaries has also not been challenged by the Revenue. Therefore, the assessing officer locked them into an AOP without appreciating material on record. Every trust was an independent legal person with a designated natural person as a beneficiary and as a trustee as a legal owner. There was, therefore, a special aspect of these trusts that they had only one legal owner the erstwhile owner who retained himself as a trustee in all the three trust deeds and for all the three beneficiaries. In other words there was only one natural person who was legal owner of the subject-matter of the trust property. The three beneficiaries had beneficial interest to the extent it was conceded to them in the respective trust deeds. Therefore, in the circumstances the ratio settled in the said reported judgment of the Islamabad Bench cited as 1989 PTD (Trib.) 364 was fully attracted to the facts of each trust.
1995 PTD (Trib.) 1027; 1989 PTD (Trib.) 364 and W.T.As. Nos. 14 to 16(IB)/1984-85 ref.
(d) Interpretation of statutes---
---- Title of a provision---Significance---Mere title of a provision or a section in the statute or statutory document does not by itself make same a special provision to override rest of them---Principles.
(e) Wealth Tax Act (XV of 1963)---
----Chap. V [Ss. 19 to 22]---Assessment in special cases---Liability---Import and application of Chap. V, Wealth Tax Act, 1963---Association of persons- Taxability---If an AOP is liable to pay, wealth tax under any provision of Act, its status or extent of tax liability will not be affected by S.21, Wealth Tax Act, 1963.
Chapter V of the Wealth Tax Act provides for "liability to assessment in special cases" and covers sections 19 to 22. The heading and the subject-matter dealt with in these sections provide for certain particular situations but there is nothing special in them to say that these provision have an awe of superiority over the other provisions. A special provision can override only a general provision but where there is no general provision any other provision cannot be designated as such to assume overriding effect vis a-vis another provision designated as a special provision. A special provision will override another provision of general kind of the same subject and dealing with similar situation. A provision providing for taking of an action in a particular manner and in a particular situation does not mean that other provisions on the subject which do not relate to that particular situation will become redundant or be taken as overridden. In the kind of provisions which provide for payment of tax by representatives of person (section 19), dissolution of firm, AOP etc. (section 19-A), proceeding against companies under liquidation (section 19-B), assessment after partition of Hindu Undivided Family (section 20), assessment when assets are held by Courts of Wards etc. (section 21), and assessment of persons residing abroad nothing appears to have overridden any other provision of the Act. These provisions are only of their kind and are meant only to supplement the general provisions providing for charge and assessment of certain kinds of assessees. All the provisions contained in Chapter V are necessarily of procedural nature except for section 19 which partakes of substantive provision as well. Section 21 like rest of them in the Chapter V is a machinery provision providing that in the given situation in which a trustee, receiver or manager etc. holds property in representative character "the Wealth Tax shall be levied upon and recoverable from the Court of Wards Administrator-General, official trustee receiver, manager or trustee, as the case may be in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf the assets are held and the provisions of this Act shall apply accordingly". The last words of the provision support the view that these are supplementary to other provisions of the Act and are not in any manner "special" to exclude any one or more of the other provisions. These are rather to be read with the charging as well as other machinery provisions. Therefore, if an AOP is liable to pay wealth tax under any provision of the Act its status or extent of tax liability will not be affected by section 21 which simply provides for levy and recovery of wealth tax "in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf assets are held". The total import of section 21 accordingly being that wealth tax can be levied and recoverable both from the persons of holders of assets as well as those who held them for others.
To say that provisions of section 21 had in any way changed the provision with regard to creation of AOP or framing of an assessment in the status is not correct nor these can be read in isolation or in disregard to other provisions of the Wealth Tax Act.
Sh. Bashir Ahmad and Jamil Hussain for Appellant.
Mrs. Fiza Muzaffar, D.R. and Shafqat Mahmood Chohan L.A. for Respondent.
Date of hearing: 15th November, 1997
ORDER
NASIM SIKANDAR (JUDICIAL MEMBER).---The assessee is a secular trust created to own and derive benefits of a building situated at Zafar Ali Road, Lahore. Three different deeds were executed to create three beneficiaries namely Mst. Mussarat Rassaque, Tausif Rassaque, and Munib Rassaque. The first beneficiary was to hold half of the demised property while the remaining two, her sons, to share the other half in equal share. The erstwhile owner Dr. Abdul Rassaque, husband of the first beneficiary and father of the remaining two being the trustee.
2. According to the consolidated assessment order recorded for the years 1982-83 to 1983-84 framed on 21-9-1985 no taxable wealth was disclosed in the returns filed for these two years. The reason for such non disclosure being that the trust was not liable to wealth tax as it was "not engaged in the business of construction and sale or letting out of immovable properties". Also that the AOP was not assessable as such in view of the provisions as contained in section 21(3) of the Wealth Tax Act, 1963, The assessing officer was however not impressed. He remarked "suffice it to say, such arguments were also raised, considered but were rejected by a Court in Pakistan namely, Karachi High Court in a case under the Wealth Tax Act itself reported as B.P. Biscuit Factory Limited, Karachi v. W.T.O. 1981 PTD 217. The learned High Court has held that the reasonable interpretation put on the amended clause 2(e)(ii) is that "assets" defined therein include immovable property held or possessed for the purpose of the business of construction or sale or letting out of property. In the presence of this direct authority, there is hardly any justification to refer to any other foreign case -law which is not even remotely relevant here". Also he noted that the assessee trust had all along been assessed to wealth tax. It was further observed that even in the immediate preceding two years namely 1980-81 and 1981-82 the trust filed returns to declare net wealth or the value of the subject-matter of the trust property at Rs.12,00,000 each.
3. While holding the interpretation of the assessee as placed upon section 2(e)(ii) and Explanation to the subsection as impertinent the assessing officer also sought strength from the prescribed form of return under Rule 3 of the Wealth Tax Rules, 1963 which, in his view, left no doubt that buildings let out or available for letting out were assessable in the hands of firms, companies and AOPs. The contention of the assessee that in its case the provisions of section 21 of the Act were attracted was also found untenable at law. A reference to an order of CIT(A) Zone-III, Lahore recorded on 4-6-1983 in favour of another trust also failed to move the Assessing Officer. He went on to say:--
"Respectfully I am unable to follow the said decision because the learned CIT(A) has given the said direction looking only to the provisions of section 21 but has completely lost sight of the newly added provisions of section 2(e)(ii) and Explanation (iii) to section 2(m) of the Wealth Tax Act. Before the said new provisions of law, every individual was assessable to wealth tax in respect of only his share in a jointly held property, as is the position under the income-tax. All that the provisions of section 21 are meant and intended is that the tax in respect of the property held under trust etc. should be levied and recovered in the like manner as it would be leviable upon the beneficiaries separately. Thus, the beneficiaries of any trust do not enjoy the position of the superiority compared to the ordinary individuals. If, under the newly added legal provisions; the ordinary individuals holding the same property jointly are assessable to wealth tax as A.O.P. and not separately, then equally the various beneficiaries are also assessable to tax in the status of A.O.P. under the aforesaid special provisions of law which were added with effect from the assessment year 1979-80. "
4. Having said so he proceeded to assess the net wealth of the trust at Rs.7,00,000 and Rs.9,00,000 respectively in the years 1982-83 and 1983-84.
5. Learned First Appellate Authority CIT(A), Zone-III, Lahore by way of its order dated 18-12-1985 thought it otherwise. By recalling its order which was earlier relied upon by the assessee before the assessing officer and recorded in respect of another trust namely M/s. Naqi Estate it was directed "that the beneficiaries be assessed separately and independently of their respective definitive and determinate share". Earlier the Appellate Authority made a specific mention of two reported judgments of the Supreme Court of India namely (1971) 81 ITR 310 re: N.V. Shanmughan & Company v. CIT and (1977) 108 ITR 555 re: CITAP v. Trustees of H.E.H. Nizam's Family. Following portion of the order in the last-cited case re: Trustees of H.E.H. Nizam's Family at page 595 of the report was reproduced to allow the impugned relief:
"It is also necessary to notice the consequence that seem to flow from the proposition laid down in section 21, subsection (1), that the trustee is assessable ' in the like manner and to the same extent' as the beneficiary. The consequences are three-fold. In the first place it follows invitably from the proposition that there would have to be as many assessments on the trustee as there are beneficiaries with determinate and known shares, though, for the sake of convenience, there may be only one assessment order specifying separately the tax due in respect of the trustee would have to be made in the same status as that of the beneficiary whose interest is sought to be taxed in the hands of the trustee. This was recognised and laid down by this Court in N. V. Shanmugham & Co. v. CIT (1971) 81 ITR 310 (SC) and, lastly, the amount of tax payable by each beneficiary in respect of his beneficial interest, if he were assessed directly. Vide Padmavali laykrishna Trust v. Commissioner of Wealth Tax (1966) 61 ITR 66 at 73, 74 (Guj.) Trustees of Patlibai R.F. Mulla Trust v. Commissioner of Wealth Tax (1979) 66 ITR 653 at 657, 658 (Bom.) and Chintamani Ghesh Trust v. Commissioner of Wealth Tax (1971) 80 ITR 131 (All.)"
6. The assessee and the Revenue are in cross-appeals in these two years. The assessee still maintains and wishes its contention to be accepted that it is merely deriving income from property but is not engaged in any business nor it holds an asset on which it would be liable to pay wealth tax under section 3 read with clauses (e) and (m) of section 2 of the Wealth Tax Act, 1963. The Revenue on the other hand assails the impugned relief describing the same as contrary to clause (m) of section 2 of the Act.
7. In the year 1987-88 the assessing officer again refused to frame assessment in the manner directed by the First Appellate Authority in the years 1982-83 and 1983-84 on the ground that the department was in appeal against that order. Also opined that "observations of the learned CIT(A) are legally restricted to the assessment order in respect of which the appeal was decided". Further that "the department still feels that provisions of Explanation to section 2(m)(iii) are very much attracted in this case". An assessment was accordingly made at net wealth at Rs.4,40,000. Learned First Appellate Authority this time on 10-9-1988 rejected both the contentions of the assessee that it was not an AOP holding the property in question for any of the purposes mentioned in Explanation to section 2(e)(ii) and that at best separate assessments could be made in the hands of the trustee to the extent of interest of the beneficiaries. This makes the assessee an appellant in the year 1987-88 as well.
8. As noted above the Revenue is in cross-appeal in the years 1982-83 and 1983=84. Besides it is also in appeal in the years 1984-85 to 1986-87 and then 1988-89 to 1990-91. In all these years the learned First Appellate Authority with reference to its earlier order dated 18-12-1985 recorded in the years 1982-83 and 1983-84 partly allowed relief to the assessee directing that "since the issues are identical the beneficiaries be assessed separately and individually on the respective definitive and determinate share". In the last order of the Appellate Authority dated 26-12-1991 same findings were repeated by mentioning the ratio settled in the case of the Trustees of H.E.H. Nizam's Family. In all these years the assessing officer had earlier refused to accept the said two submissions made for the assessee. Therefore, the Revenue assails the appellate order in all the these years and would like to have the assessment orders restored.
9. Before us the assessee is represented by Mr. Jamil Hussain, Advocate assisted by Riaz Bashir, ITP and Sh. Bashir Ahmed, Advocate and the Revenue by Mr. Shafqat Mahmood Chohan, Legal Advisor assisted by learned D.R. learned counsel for the assessee repeats both the contentions which were earlier made before. the authorities below; that the assessee trust does not hold the property for the "purpose" of any kind of "business" contemplated in section 2(e)(ii) and the explanation added to it with retrospective effect by Finance Act, 1991 and that separate assessments ought to have been framed in the hands of the trustee to the extent of the interest of the beneficiaries as they were owners in equity by way of three separate, independent and identifiable portion having been devolved upon them by way of three different trust deeds. In the view of the learned counsel the assessee trust in fact is a combination or collection of three different trusts although it has been named in all the three cases after the name of the last owner who retained himself as a trustee during his lifetime. Further claims that the Revenue never attempted to establish it as a fact that the trust was engaged in letting out of property as "business". According to the learned counsel for the assessee without such finding no assessment in the status of an AOP could be made. Elaborating his contention with regard to application of section 21 of the Act to the facts of the case he contends that the charging provision namely section 3 clearly indicates that it is "subject to the other provisions of this Act". That other provisions in the view of the learned counsel include sections 19 to 22 being special provisions excluding the general provisions. Even the definition clause as contained in section 2 he points out is subject to the context which in the other previsions of the Act provide "otherwise". In the case of the assessee it is stated that the said otherwise is provided in section 21 of the Act thereby excluding even the definition of the word 'asset' as contained in section 2(e) of the Act. Informing that the rental income on income-tax side is being assessed in the hands of the beneficiaries separately it is submitted that in wealth tax respective share in property ought to have been treated separately and independently either through the trustee or directly.
10. In support of the interpretation of definition of assets as contained in section 2(e) of the Wealth Tax Act reliance is placed upon PLD 1976 Lah. 243 re: M/s Colony Textile Mills Limited, Lahore v. Commissioner of Sales Tax. In that case the construction of word "include" was examined to hold that "it may be equivalent to mean and include and that case it may afford an exhaustive explanation of the meaning which, for the purpose of the Act must invariably be attached to these words or expressions". Also relies upon PLD 1971 Lah. 220 re: Abdul Jamil v. Registrar of Trade Unions, West Pakistan wherein their Lordships of Lahore High Court ruled that want of drafting skill should not affect correct interpretation when it does not go to the root of the matter. The next case relied upon is AIR 1939 Lah. 587 re: Kishan Singh v. Prem Singh and others. This case is cited in support of the proposition that the explanation added to section 2(e)(ii) in 1991 did not change the scope of the provision which provided for a restrictive meaning to the word "assets". Another case cited on the point is AIR 1968 Bom. 151 re: Rai Sahib Pak Chand M. Mohota v. The Labour Court of State of Mahrashtra at Nagpur. The case from Supreme Court of India cited as (1971) 81 ITR 310 re: N.V. Shanmugham & Company v. CIT, Madras is also cited wherein the nature and meaning of an association of persons were examined in the light of sections 3 and 41 of the late Income Tax Act of 1922. The issue before the honourable Court being if during pendency of suit for dissolution of a firm the profits or income received by the receivers appointed by the Court could be held to be the profits of an "association of persons". Their Lordships held that "the fact that there were three receivers did not make them an association of persons". However the proposition was decided in favour of the Revenue holding that "profits were earned on behalf of the persons who had a common interest created by the order of the Court and were on that account "an association of persons". Also relies upon PLD 1967 SC 524 re: CIT East Pakistan, Dacca v. The Engineers Limited, Dacca to contend that if there is a conflict between a general provision and a particular or specific provision the latter must prevail over the former. This case has been relied upon to support the contention as earlier noted that provisions of section 21 being specific and providing for particular situation overrule the general provisions provided for levy and mode of making of assessment. Reference in this regard is also made to the judgment of the Supreme Court of Pakistan in Civil Appeal No. 140 of 1981 now reported as 1996 SCMR 1470 re: B.P. Biscuit Factory, Karachi v. W.T.O. and another which reversed the judgment and order of the Karachi High Court earlier relied upon by the assessing officer and cited as 1981 PTD 217 re: B.P. Biscuit Factory v. W. T. O. It is claimed that addition of the above explanation to section 2(e)(ii) after the judgment of the Supreme Court has not materially changed or affected the ratio settled by the Court while accepting the appeal of the assessee. On the proposition that the assessee in the prevailing facts could not be said to be engaged in business of letting out strength is sought from the principle laid down in (1954) 26 ITR 765 re: Narain Swedeshi Weaving Mills v. Commissioner of Excess Profits Tax. The facts in that case are however so peculiar that the ratio settled therein cannot be extended to the legal as well as factual situation falling for our consideration in this case. Lastly learned counsel for the assessee repeats his reliance upon the judgment of the Supreme Court of India in re: Trustees of H.E.H. Nizam's Family (supra) which persuaded the First Appellate Authority to direct "that the beneficiaries be assessed separately and independently on their respective definitive and determinate share".
11. Mr. Shafqat Mahmood Chohan learned Legal Advisor however is of the view that the assessee trust comprising of three beneficiaries is an A.O.P. and is clearly covered by the provision as contained in section 3 read with sub-clauses (e) and (m) of section 2 of the Wealth Tax Act. Further submits that mere fact that the demised property is let out makes it liable to wealth tax as the intention and purpose of law is fully answered when the facts of the case are seen in their totality. He is critical of the relief allowed by the First Appellate Authority in the years 1982-83 and 1983-84 which became a basis for allowing relief in subsequent years. In the view of the learned Legal Advisor the ratio settled in re: The Trustees of H.E.H. Nizam's Family was misconstrued. According to him most visible distinction being that in the reported judgment the subject-matter of trust was totally different from the one in this case. It is argued that in the present case it is holding of immovable property for the purpose of business of letting out which makes it chargeable to tax while in the reported judgment only certain sums of allowances were earmarked for the present or future beneficiaries. Mr. Shafqat Mahmood Chohan also opposes the invocation of the proposition settled in that reported judgment for the reason that in the Indian Wealth Tax Act no provision parallel to the explanation to section 2(m) is available. Also refers to the history of legislation and addition of the explanation to section 2(e)(ii) in the background of the judgments of the Karachi High Court and of the Supreme Court of Pakistan in re: Messrs B.P. Biscuit Factory. He finds fortified in his position by pointing out that explanation added to the said provision in the year 1990-91 was in fact taken from the judgment of the Supreme Court of Pakistan in re: B.P. Biscuit Factor), (supra). Being se. learned Legal Advisor continues no room for any doubt has been left as to the status of the assessee as well as the chargeability to tax of the property in question.
12. As to the application of section 21 to the facts of the case in hand again he challenges the relief allowed to the assessee. He is firmly of the view that section 21 is not a charging provision as it refers only to mode of assessment in the hands of a trustee. In this regard the words used in the provision "in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf the assets are held" are stressed. It is stated that these words clearly imply that section 21 is a machinery section which does neither prescribe a charge nor it modifies rest of the provisions of the Act which pertain to the charge or the mode of assessment. Further explains that the portion of judgment in re: The Trustees of H.E.H. Nizam's Family also makes it clear that a trustee is liable to tax exactly in the same manner and to the same extent as a beneficiary would be liable. To the learned L.A. it appears a simple case where a trust which answers the requirement to constitute an A.O.P. hold a property which is letted out on rent and thus, makes it squarely coverable by the aforesaid provision of the Act. It is also emphasised that number of beneficiaries being more than one and the subject-matter of the trust admittedly being immovable property fetching rent no reason under the sky existed to sustain the relief allowed to the assessee. The other reported cases relied upon by the assessee are distinguished on the ground that none of them addresses the issue involved before us. Making a reference to the cases relied upon with respect to precedence of special provisions over general provisions he maintains that the alleged special provisions are so designated only in order to distinguish, them from normal cases and that these did not in any manner amount to lay down anything which could exclude the general charge, practice, procedure and the method of assessment. Learned L.A. does not find a single word used in section 21 which could be said to operate either to decrease the liability of a trust or for that matter of a beneficiary much less to say of a part or total exemption in their favour. From this he further concludes that machinery provisions normally do not assume the status of special provisions nor these take precedence over similar machinery provisions of any other kind. The cases relied upon with respect to the legal effect and connotation of an explanation to a provision are also attempted to be distinguished with somewhat similar submissions. Main argument being that explanation to section 2(e)(ii) is explanatory in nature and was meant to remove a doubt, if there existed any, as to the purpose of holding and the use to which an immovable property was put by a firm, association of persons or ,a body of individuals whether incorporated or not and a company.
13. Having considered the arguments from both sides we are favourably poised, for most of the part, towards the assessee. The two provisions of law namely section 2(e)(ii) read with their Explanation and section 2(m) read with explanation (iii) thereof have already been dilated and ruled upon by us in various cases. The history of the relevant provisions making an A.O.P. chargeable to tax till that time were examined by us in 1988 PTD (Trib.) 1027. Therefore, it is not needed to be repeated. However, in a nutshell it can be stated that the first provision in its present form was brought about by an amendment introduced by Wealth Tax (Amendment) Ordinance, 1980, It was to take effect from the date of promulgation of Finance Ordinance, 1979. The second provision namely explanation to sub-clause (m) of subsection (2) was inserted by Finance Ordinance, 1979. At that time it had only two sub-clauses (i) and (ii). The first sub-clause (i) was substituted by Finance Act, 1985. However, the relevant clause namely sub-clause (iii) to explanation was added by Finance Ordinance, 1980 providing that "where the right, title or interest to or in any immovable property other than agricultural land vests in more than one person, such persons shall, in respect of such property, be assessed as an association of persons and the value of such right, title or interest shall not be included in the net wealth of an individual (provided wealth tax is charged on such right, title or interest)" The explanation added to section 2(e)(ii) in the year 1991 was a result of the judgment of the Supreme Court of Pakistan in re: B.P. Biscuit Factor (supra) and was given retrospective effect from the date of enforcement of Wealth Tax Act. Learned Legal Advisor is right in pointing that the idea of this explanation part of wording and the substance was taken from the said judgment of the Supreme Court. In that judgment their Lordships while interpreting provisions of section 2(e)(ii) remarked:--
"However, the definition does not seem to be very happily worded. It can be interpreted as referring to three different categories of immovable properties, to wit--
(i) immovable property held for the purpose of ... letting out of property.
(ii) immovable property held for the purpose of business of ... letting out of property, and
(iii) immovable property held for the purpose of business of construction and sale or business of construction and letting out, of property.
There is a slight difference between properties falling in categories (i) and (ii); thus the property of an assessee who carries on business of letting out its properties will fall in category No.(ii) whereas the property of an assessee who occasionally leases out the space not immediately needed by him will fall in category No.(i). The last category, that is, category No.(iii) relates to the properties of those assessees who are engaged in the business of construction of properties for the purpose either of sale or of letting out."
14. By introducing the explanation to section 2(e)(ii) with retrospective effect the Revenue appears to have attempted to plug the holes and lacunas in the drafting of the provision as pointed out by the apex Court. As to the effect of an explanation and its addition with retrospective effect the superior Courts have laid down definite principles of interpretation. According to the Supreme Court of Pakistan in re: CIT, Karachi v. Asbestos Cement Industries and others 1993 PTD 459 an explanation to a provision is not a ,substantive but a declaratory one. In 1986 PTD (Trib.) 805 a Full Bench of this Tribunal on various judicial authorities held that proper function of an explanation was to make plain or elucidate and not to add or subtract from a provision to which it is, added. The learned Members of the Full Bench also were of the view that the explanation could never be construed to be tantamount to a charging provision with retrospective effect. An explanation, according to their Lordships of the Patna High Court in 1995 PTD 1027 functions to explain the meaning and effect of the main provision and it works to clear up any doubt or ambiguity in it. The Honourable Judges of the Karachi High Court in 1995 PTD 614 re: Evershine Paints v. CIT were of the view that besides removing a doubt or an ambiguity an explanation might create rights and obligations and that it might enlarge or curtail the provision of the main statute. The ratio settled in the aforesaid judgments of the superior Courts including that of Patna High Court 1995 PTD 1027 when', juxtaposed with the ratio settled by Supreme Court of Pakistan in re: CIT, Karachi v. Asbestos Cement Industries (supra) and re: Evershine Paints (supra) it appears that the superior Courts in Pakistan look at an explanation in a more objective manner. The view adopted by the Indian Courts is slightly restricted as compared with the superior Court in Pakistan.
15. The Explanation to section 2(e)(ii) when seen from various angles, however, makes it clear that the charging provision with respect to the property held by an A. O. P. has not undergone any substantial, change. The property and the purpose as explained in the explanation will still place a burden on the Revenue to establish that in cases of the present nature., the immovable property was held for the "purpose" of letting out or "business" of letting out. In the first situation which is relevant before us the "purpose" will be established if a property is actually let out on the valuation day or in the immediate preceding past. Although the burden of proving the "purpose" to hold an immovable property for letting out primarily lays upon the Revenue yet as said above when the immovable property is rented out on the valuation day or in the immediate past, the initial burden on the Revenue shall stand discharged. It shall, thereafter be for the assessee to prove the contrary that the property was not held for the "purpose" of letting out. Since in the case before us it is admitted that the subject-matter of the trusts is immovable property and that at the valuation day it was let out and the rent was being assessed to income-tax in the hands of the beneficiaries. we need not address the issue any further.
16. The nature of an AOP introduced by way of the aforesaid provisions and then subsequently refined by changing the definition of asset and by adding sub-clause (iii) to Explanation to section 2(m) simultaneously in the year 1980 was considered by us in a reported judgment cited as 1989 PTD (Trib.) 20 Mr. Farhat Ali Khan, then Chairman explained the concept in the light of this provision in these words:--
"In the domain of tax law the Legislature has introduced certain entities which could be subjected to tax. Ordinarily a business can be run or a property can be held by a natural person or a juristic person. However, for tax purposes certain concepts have been introduced which, though neither natural person or juristic person would still be taxed of their income or for their wealth. The entities like a Hindu undivided family, a registered partnership and unregistered partnership, and association of persons and a body of persons could be cited in this connection. Though aforesaid concepts do not convey the idea of juristic personality yet they are given status of entities which could be subjected to tax. The argument that the properties held by cooperative Societies or Companies could be taxed as properties belonging to Association of persons referred to as A.O.P. does not, therefore, appear to be correct. Both the cooperative Society and a Company have been conferred upon the juristic personality and are capable of running some business or holding some wealth. On the other hand an AOP is nothing but an entity in the realm of Tax Laws. In order to create an AOP there should not only be a violation on the part of the individuals but it should also be for the purposes of some common adventure with the intention of earning profit. If certain number of persons are going on a street they are nothing but a crowd. Now suppose they stop at a place where immovable property is being put on auction. They still remain a crowd. If they individually start offering bids they would still be treated as part of the crowd but if more than one of them come together and decide to purchase the property in equal shares so that they can share the rent yielded but it in equal shares and indeed they succeed in purchasing it they will constitute what we call in tax is as an AOP. For an Assessing Officer if abovenoted facts are established then he would tax them as AOP irrespective of the fact that they are related to each other and inherited the money from their ancestors as these facts shall be wholly irrelevant for tax purposes. "
17. However, the view that in order to create an AOP a volition on the part of constituent members was a necessary element is qualified and subject to certain changes. As is evident from the ratio settled in re: N. V Shanmugham & Co. v. CIT, Madras (supra) in certain situations element or volition can outlive the desire and may be presumed to have lasted longer than intended. Although the Supreme Court of India settled the law with respect to an income-tax matter yet on wealth tax side the principle can be extended to properties which were inherited, or were conveyed to the assessee by earlier owners. The principle intention or volition on the part of the original owner will apparently stand conveyed alongwith rented out property or the one held for the purpose of letting out. A person to whom an immovable property in occupation of tenants is conveyed by transfer or through inheritance cannot be allowed to say that he did not share the purpose' with the transferor or was not concerned with the intention held by the convenyor of property or the deceased owner. This presumption in fact is another way to express the aforesaid opinion that where a property is let out on the valuation day or in the immediate past the burden to negate the presumption qua purpose shall be on the assessee.
18. The next issue that emerges is the nature of the right, title or interest to or any immovable property as contemplated in sub-clause (iii) of the Explanation to section 2(m) of the Act. The phrase "any immovable property" is so wide that generally speaking it will encompass and include even the smallest possible unit of a corpus called property as well as the sky scrapers, high rising buildings, Plazas and similar heaps of cement and concrete as also big farms. There hardly appears any doubt that the aforesaid provisions making association of persons liable to tax were introduced in order to discourage avoidance of wealth tax by owners of huge buildings, Plazas and shopping centres who tended to escape an assessment to wealth tax by introducing owners of smaller units. That used to be done in the guise of introducing purchasers of shops, flats and rooms etc. or by involving a registered document in favour of a number of persons. Whether such purpose has actually been achieved is to be seen by the Revenue. It is however, clear that the sword of AOP struck harder on those assessees who were never designed to be touched.
19. The phrase "any immovable property" will have to be interpreted as a unit of property identifiable from rest of the kind on account of its size, nomenclature, or recognization as an independent unit by allocation of distinct letters, figures numbers or marks in public records. Otherwise the total crest or mass of earth is one unit of immovable property. The fragmentation of the one whole unit of immovable property will not be complete if the smaller units are not capable of being owned and possessed by an equally identifiable legal or artificial persons. This however, is not easily achievable in view of the changes that have occurred in feudal concept of property and its transfer. The determination of a particular property as one unit in order to make all the co-owners as an AOP is practically impossible at times. After introduction of the new class of assessees, an AOP, the Revenue made several attempts to clear the mystery shrouding the concept. The CBR Circular C. No. 1568-S(WT)/80, dated September, 22, 1980 is one of such attempts. It reads:--
"It has already been clarified vide Board's Letter No.1502 S(ET)/80, dated the 20th July, 1980 that as a consequence of this amendment---
(i) in all cases where a property unit stands registered in the name of more than one individual, the unit will be treated as a property owned by an AOP and shall be assessed in the hands of AOP; and
(ii) the shares held by an individual in such a property and taxed in the hands of the AOP shall neither be taxed in his own hands nor consider6d for the purposes of clubbing together of property held by the individual, his/her spouse and minor children.
For the convenience of the tax-payers, it is further clarified in continuation of these instructions that--
(i) under section 2(e) of the Wealth Tax Act, in the case of associations of persons, wealth tax is leviable only on such immovable property as is held for the purpose of the business of construction and sale or letting out of property;
(ii) the right, title or interest to or in any immovable property is determinable in the eye of law on the basis of position obtaining in Government records. The registration documents shall, therefore, be treated as the final evidence in this regard;
(iii) under section 3 of the Wealth Tax Act, wealth tax is chargeable on the net wealth of every individual Hindu undivided family, AOP etc. Every AOP is therefore, liable to pay wealth tax on the aggregate value of all units of immovable property held by it on the valuation date; and
(iv) an association of persons is a legal entity independent of and separate from the entity of the members constituting such an association. The debts owed by any of the members of the AOP shall, therefore, not be deductible from the value of assets owned by the association.
The return of net wealth on behalf of the AOP may be filed by any member of the AOP. Recovery of tax in the case of member of associations of persons shall be made in accordance with the provisions of section 31-A of the Wealth Tax Act under which where any tax payable by a member of an association of persons in respect of his share of wealth cannot be recovered from him, the Wealth Tax Officer tray notify the amount of such tax to the association and thereupon, notwithstanding anything contained in any law for the time being in force, the tax shall be payable by the association."
20. The concept still remains unclear as in the view of the Revenue if four persons purchase four different but contagious houses or different flats in a multistoreyed building though otherwise distinguishable from each other may still constitute an AOP. The stress on registration of property in the name of More than one persons naturally provides for the negative. It means that if separate sale-deeds are executed and got registered then various co -owners will not constitute AOP although they would have had if they had. joined in the one registered deed. The practice on the part of the assessing officers/W.T.Os. further complicated the concept. They created terms like "specific and identifiable portions" of a property to accept that a registered deed did not constitute an AOP and proceeded to reject the same when so desired, by using equally ambiguous terms of "unspecific portion" etc. The fault certainly lies in the general words used in the Explanation (iii) of the Wealth Tax Act and then half-cooked interpretation by Circular letters including the one mentioned above. The Revenue conveniently forgets that the share of an individual in an immovable property can never be uncertain or unspecific. It is always ascertained or is capable of being ascertained. Every co-sharer in an immovable property owns the smallest particle constituting that property to the extent of his interest. Therefore, to say that in some cases the share of a co-sharer was specific and in other case it was not so is essentially incorrect. As long a unit of immovable property is jointly owned by more than one co-owner mere mention of a specific portion or its possession by one of the co-owners will not make him an independent owner of that portion in which the other will continue to have proportionate title subject to some legal advantages which comes alongwith possession. It will be noted that without a partition the possession of one co-owner is deemed as possession of all others as far the third parties are concerned. Their position inter se is also not much different. A possession of a specific portion out of joint property even to the extent of one's interest is held on behalf of all the other co-sharers till such portion devolves and falls to the possessing co-owner by way of a partition, surrender or conveyance recognized by law. Therefore, the legal position remains that a co-sharer will continue to be so even if created by a separate sale-registered deed or even if he is in possession of a particular portion thereof with or without the consent of other co-owners. The moment he becomes independent owner of an identifiable portion of the property, again with or without permission he ceases to be a co-owner and therefore, the question of his being a member of the AOP does not arise at all. To become a separate and independent owner in an erstwhile joint property is possible only by way of partition, surrender or conveyance of the remaining share in favour of a co-owner. After happening of this legal incidence of significance between co-owners each of them and the property falling to his share will be an independent and separate unit of property. The consequence that follow would be that partitioned portion will be capable of exercise of all incidences of ownership including possession to the exclusion of the rest of the world as well as the previous co-owners. The principle being that a person is an independent owner of a specific portion or part of a bigger whole if he can exercise his propriety rights independent of the others and can legally transfer a specific portion alongwith its possession. Also that in case of his death or (dissolution/liquidation if an artificial juridical person) the defined property so devolves upon the successor without reference to the parts owned by other persons.
21. By that at it may, the above view adopted by the Revenue, to some extent appears to have received recognition from the Tribunal. The view in a nutshell being that an immovable property owned by a person as a co-owner only with reference to its share in the total corpus and by way of registered deed shall be a case of a member of an AOP. However, where an independent registered deed, be it of partition or sale, mentions a specific and identifiable portion of a total whole, with metes and bounds, the owner shall not be taken as a member of AOP. Following two cases illustrate the view of the Tribunal. In the first case cited as 1988 PTD (Trib.) 1027 the assessee failed before a Full Bench of this Tribunal even by employing the aforesaid mode of avoidance of wealth tax. In that case five persons purchased a plot and raised a multi-storeyed building thereupon. It was rented out to various tenants. The five owners then gifted their shares in percentage of the total to their sons and daughter retaining smaller shares with them. Before the Full Bench a contention was raised that the original and subsequent owners made by way of gift deed had specific share in the property and therefore, could not be assessed as an AOP. The submission was repelled. Mr. Muhammad Mujibullah Siddiqui, Judicial Member, as he then was, considering the history of legislation on the subject as also the requirements for the formation of an Association of persons to conclude on the factual aspect of the issue as under:--
"Applying the principles enunciated in para. 23 of the order to the facts of the present case we find that the property in question, i.e. Messrs P ... H ... C ... if owned by twenty individuals with definite shares. However, the shares of each co-owner are not specified and ascertainable as no owner can say with exactitude that such and such portion of the building is owned by him. No portion of the building has been let out and can never be let out in the present circumstances by any individual co-owner and likewise the income did not accrue to any of the individual co-owners directly in the year 1979-80 which position is continuing so far. It means that the income first devolved jointly on all the co-owners in the name of Messrs P... H... C... and, thereafter, the income was distributed among the co- owners in proportion of their respective shares. "
22. In the second case 1989 PTD (Trib.) 364 the assessees owned a commercial building which was subsequently partitioned by way of a registered deed. The assessing officer treated them as an AOP. The First Appellate Authority sustained the order of the assessing officer. On the basis of the registered partitioned deed examined in the perspective of the aforesaid Circular No. 1568-S(WT)/80, dated 22-9-1980 a Division Bench of the Tribunal at Islamabad rejected the contention of the Revenue. It was accordingly found that the property under consideration passed on to the different parties with effect from the registration partition deed and, therefore, on the valuation dates falling on 30-6-1982 and 30-6-1983 the property could only be charged to tax in the respective hands of the parties in their individual capacity and not in the status of an AOP. It will also be seen that before the execution and registration of the partition deed the status assigned to co-owners in the year 1981-82 as that of AOP was maintained. In that case the learned Benchers also referred to an order of the Tribunal in W.T.As. Nos.14 to 16(IB)/1984-85, dated 23-12-1985 whereby in similar circumstances the First Appellate Authority had allowed the status of an individual to the assessee when the property had been divided and registered in individual names.
23. The above two cases as said above, illustrate that the interpretation of the Revenue has by and large been accepted by this Tribunal. In the case before us we find that three different and independent trusts were created by way of three separate trust deeds which were duly registered in accordance with law. The contention of the assessee that every beneficiary was to be succeeded by his legal heirs without reference to the beneficial ownership of other two beneficiaries has also not been challenged by the Revenue. Therefore, the assessing officer locked them into an AOP without appreciating material on record. Every trust was an independent legal person with a designated natural person as a beneficiary and as a trustee as a legal owner. There was, therefore, a special aspect of these trusts that they had only one legal owner Dr. Abdul Razzak, the erstwhile owner who retained himself as a trustee in all the three trust deeds and for all the three beneficiaries. In other words there was only one natural person who was legal owner of the subject-matter of the trust property. The three beneficiaries had beneficial interest to the extent it was conceded to them in the respective trust deed. Therefore, in the circumstances the ratio settled in the said reported judgment of the Islamabad Bench cited as 1989 PTD (Trib.) 364 was fully attracted to the facts of each trust. Accordingly we find no fault with the directions made by the First Appellate Authority in the aforesaid order recorded on 18-12-1985 in the years 1982-83 to 1984-85 though for slightly different reason. The same order shall be followed in the rest of the assessment years.
24. As far the application of section 21 is concerned we are not persuaded to accept the interpretation of the assessee. The ruling relied upon by the First Appellate Authority in the aforesaid order, dated 18-12-1985 is not attracted to the case in hand for the basic reason that the facts as well as Lithe ratio settled in the reported judgment re: The Trustee of H.E.H. Nizam's Family are distinguishable. There is no doubt that special provisions override general provisions a statute. However, mere title of a provision or a section in the statute or statutory document does not by itself make it a special provision to override rest of them. The case before us is even simpler. Chapter V of the Wealth Tax Act provides for "liability to assessment in special cases" and covers sections 19 to 22. The heading and the subject- matter dealt with in these sections provide for certain particular situations but there is nothing special in them to say that these provisions have an awe of superiority over the other provisions. It will be noted that a special provision can override only a general provision but where there is no general provision any other provision cannot be designated as such to assume overriding effect vis-a-vis another provision designated as a special provision. A special provision will override another provision of general kind of the same subject and dealing with similar situation. A provision providing for taking of an action in a particular manner and in a particular situation does not mean that other provisions on the subject which do not relate to that particular situation will become redundant or be taken as overridden. In the kind of provisions before us which provide for payment of tax by representatives of persons (section 19), dissolution of firm, AOP etc. (section 19-A), proceeding against companies under liquidation (section 19-B), assessment after partition of Hindu Undivided Family (section 20), assessment when assets are held by Courts of Wards etc. (section 21), and assessment of persons residing abroad nothing appears to have overridden any other provision of the Act. These provisions are only of their kind and are meant only to supplement the general provisions providing for charge and assessment of certain kinds of assessees. All the provisions contained in Chapter V as noted above are necessarily of procedural nature except for section 19 which per takes of substantive provision as well. We are, therefore, of the view that section 21 like rest of them in the Chapter V is a machinery provision providing that in the given situation in which a trustee. receiver or manager etc. holds property in representative character "the wealth tax shall be levied upon and recoverable from the Court of Wards Administrator-General, official trustee receiver, manager or trustee as the case may be in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf the assets are held and the provisions of this Act shall apply accordingly". The last words of the provision support our view that these are supplementary to other provisions of the Act and are not in any manner "special" to exclude any one or more of the other provisions. Neither the learned counsel has pointed out general provisions which stood overridden nor there exist any. These are rather to be read with the charging as well as other machinery provisions. Therefore, if an AOP is liable to pay wealth tax under any provision of the Act its status or extent of tax liability will not be effected by section 21 which simply provides for levy and recovery of wealth tax "in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf assets are held". The total import of section 21 accordingly being that wealth tax can be levied and recoverable both from the persons of holders of assets as well as those who held them for others. Same has been the conclusion of their Lordships of the Supreme Court of India in re: Trustees of H.E.H. Nizam's Family as is evident from part of the order mentioned in the order of the First Appellate Authority and reproduced in para. 5 ante. To say that provisions of section 21 had in any way changed the provision with regard to creation of AOP or framing of an assessment in the status is not correct nor these can be read in isolation or in disregard to other provisions of the Wealth Tax Act. With regard to trust at page 595 of the report in the said decision of the Supreme Court of India the legal position was further clarified:---
"Now wherever there is a trust, it is obvious there must be beneficiaries under the trust, because the very concept of a trust connotes that though the legal title vests in the trustee, he does not own or hold the trust properties for his personal benefit but he holds the same for the benefit of others, whether individuals or purposes, It must follow inevitably from this premise that since under subsections (1) and (4) of section 21 it is the beneficial interests which are taxable in the hands of the trustee in a representative capacity and the liability of the trustee cannot be greater than the aggregate liability of the beneficiaries, no part of the corpus of the trust properties can be assessed in the hands of the trustee under section 3 and any such assessment would be contrary to the plain mandatory provisions of section 21. "
25. The facts of the present case warranted invocation of the ratio or application of the principle settled in the said decision of the Supreme Court only if it was first held that the share of each beneficiary was known and determinable. To appreciate the exact principle of law laid down in that judgment two things must be kept in mind. First that issue of constitution of an AOP was not a moot point in that case and secondly the subject-matter of the various trusts before the Court was not immovable property but certain amounts of money with known shares of present or future beneficiaries. Therefore, it was finally held that an assessment on the beneficiaries directly or through the trustee- could be trade only to the extent of the interest of the beneficiaries which were clearly determinable on the valuation date. It will thus, be seen that the learned First Appellate Authority reached the right conclusion but without considering the first two aspects namely the extent of interest of the beneficiary in the trust property and secondly its relation to other beneficial owners. However, since we have found that there were three different trusts and that there interest in the properties was determinable we would hold that the ratio of the aforesaid case in ultimate analysis supports the relief allowed by the First Appellate Authority.
26. For these and other reasons earlier discussed we conclude that addition of Explanation to section 2(e)(ii) after judgment of the Supreme Court of Pakistan in re: Messrs B.P. Biscuit Factory has only explained the provision and has not substantially changed the legal position as it existed before the amendment; that the view of the Revenue as to the status of AOP vis-a-vis a joint property is far from being clear; that the Revenue assigned the status of an AOP to the assessee in the present case without considering the facts in detail including the vital point that rental income was being assessed in the hands of the beneficiaries; that in cases of properties let out on the valuation date or in immediate past the burden of proof qua "purpose" to hold them will shift to the assessee; that provisions of section 21 provide only for certain kinds of cases wherein assessment could be framed either on the holders of the assets or the persons on whose behalf the assets are and that provisions of section 21 do not override any other provision of the Wealth Tax Act, The direction of the First Appellate Authority as made in its order, dated 18-12-1985 for the assessment years 1982-83 and 1983-84 "that the beneficiaries be assessed separately and independently in their respective definitive and determinate share" is maintained. It shall be followed in other assessment years as well.
27. The assessee succeeds in these terms only. All the departmental appeals shall accordingly be dismissed.
M.B.A. /528/Trib. Order accordingly.