NASIR-UD-DIN VS MUHAMMAD BASHIR
1999 P T D 1060
[Lahore High Court]
Before Mian Allah Nawaz and Ch. Ijaz Ahmad, JJ
Miss ITRATH QAZILBASH
Versus
SPECIALIOFFICER OF WEALTH TAX, CIRCLE 22, ZONE-A, LAHORE and 2 others
Wealth Tax. Appeal No.326 of 1998, heard on 28/10/1998.
(a) Wealth Tax Act (XV of 1963)---
----Ss.2(5)(i), 2(16) & 27---Wealth Tax Rules, 1963, R.8(3)---"Property Definition---Valuation of rented property---Land was on lease with assessee---Superstructure on land was constructed by assessee---Assessing Officer determined the net wealth of the assessee with reference to Gross Annual Letting Value---Appeal---Contention by assessee was that sub rule (3) of R.8 of the Wealth Tax Rules, 1963 clearly enacts that formula of letting value was applicable when the building and land were owned by assessee--Validity---Held, superstructure raised by assessee on land owned by a Trust fell within the ambit of S.2(5)(i), Wealth Tax Act, 1963 and had to be valued for the purpose of calculation of net wealth of the assessee and order of Appellate Authorities was upheld.
Iram Ghee Mills Ltd. v. Income-tax Appellate Tribunal I.T.A. No. l l of 1998 ref.
Dr. M.B. Anakalsaria v. Commissioner of Wealth Tax, Karachi 1992 SCMR 1755 rel.
(b) Wealth Tax Act (XV of 1963)---
----S.2(5)---"Property"---Meaning---Superstructure on land---Language of S.2(5) of Wealth Tax Act, 1963 covers the property of any description whether movable/immovable, corporeal or incorporeal---Expression "property" would not exclude the superstructure raised on land unless and until it was so excluded by clear provision of law.
(c) Wealth Tax Rules, 1963---
----R.8(3)---Valuation of land and building---Expression 'and' used after land' and before 'building'---Connotation was disjunctive and not conjunctive ---Assessee was only owner of superstructure on land---Net wealth of assessee was assessed on the basis of Gross Annual Letting Value ---Assessee contended that sub-rule (3) of R.8 of Wealth Tax Rules, 1963 apply when assessee was the owner of land as well as building-- Contention was repelled and assessed value was confirmed by the High Court.
Saifi Development Corporation Ltd. v. Workers' Union PLD 1965 (W.P.) Kar. 347; Muhammad Hussain v. Additional District Judge, Lahore PLD 1966 Lah. 128; Salehon and others v. The State PLD 1969 SC 267 and Miss F. Dubash v. Sindh Labour Appellate Tribunal, Karachi PLD 1978 Kar. 278 fol.
(d) Interpretation of statutes---
---- Words "or", "either" and "and "---Different uses of these words and substitution for each other in different situations elaborately explained.
Crawford's Construction of Statute ref.
(e) Wealth Tax Rules, 1963---
----R.8(3)---Provision of sub-rule (3) of R. 8 of the Wealth Tax Rules, 1963 is of a facilitative character and provides methodology for calculation of net wealth of property.
(f) Words and phrases---
----"Property"--Meaning.
Ch. Anwarul Haq for Appellant.
Shafqat Mahmood Chauhan for Respondent.
Date of hearing: 28th October, 1998.
JUDGMENT
MIAN ALLAH NAWAZ, J.---This judgment will concern twelve third Income Tax Appeals/Nos.326 to 337 of 1998. All of these appeals, it is to be noted, emanate from similar factual backgrounds. Ch. Anwar-ul -Haque, Advocate/the learned counsel for appellants advanced his arguments in Tax Appeal No-326 of 1998 and represented that the same shall be in other appeals. All of these appeals, so, are being disposed of by single order.
2. Material background of these appeals, at the outset, may be noted. That Mst. Itrat Abbas, Ali Abbas, Rehana Abbas, Raza Abbas, Ali Hassan and Baqir Ali/all Qazilbash are the co-owners of ' Ali Complex' situated at 23-Empress Road, Lahore. This complex was constructed by them on the land owned by Ali Hassan Qazilbash Trust. The aforesaid land was on lease with them. In years 1994-95 and 1995-96, they filed returns under the provisions of Wealth Tax Act, 1963. The returns, so submitted by appellants, are detailed in the chart which is as follows:---
| Name of Assessee | Assessment year | Declared amount | Rent received | Amount on which assessee was held liable to pay W.Tax/Rental value |
| | | Rs. | Rs. | Rs. |
| Itrat Abbas Qazilbash | 1994-95 | 4,600,000 | 6,27,588 | 62,75,880 |
| -do- | 1995-96 | 49,00,000 | 8,76,619 | 8,766,190 |
| Ali Abbas Qazilbash | 1994-95 | 4,942,580 | 67,690,80 | 6,679,080 |
| -do- | 1995-96 | 5,400,000 | 90,248,60 | 9,024,860 |
| Rehana Abbas Qazilbash | 1994-95 | 5,400,000 | 1,273,125 | 12,731,250 |
| -do- | 1995-96 | 5,000,000 | 9,32,708 | 9,327,080 |
| Baqir Ali Qazilbash | 1994-95 | 4,450,000 | 7,57,276 | 7,572,760 |
| --do-- | 1995-96 | 4,000,000 | 9,59,338 | 9,593,380 |
| Raza abbas Qazilbash | 1994-95 | 6,300,000 | 1,449,644 | 14,496,440 |
| -do- | 1995-96 | 6,800,000 | 2,089,053 | 20,890,530 |
| Ali Hassan Qazilbash | 1994-95 | 6,100,00 | 153,287 | 15,323,870 |
| -do- | 1995-96 | 5,600,000 | 7,57,276 | 7,572,760 |
2. The learned Assessing Officer did not accept the value of net wealth of each assessee as declared by the appellants and determined their wealth with reference to letting value of their share of complex. This was done by him by passing two separate orders. The aforesaid formula was adhered in each return. Feeling dissatisfied, the appellants tried their luck before the First Appellate Authority as well as Second Appellate Authority but in vain. Resultantly, these twelve appeals have come to this Court under amended section 27 of Wealth Tai Act, 1963 (shortly referred to as the Act).
3. Ch. Anwar-ul-Haq, the learned counsel for appellants, while assailing the decision of the three forums below, urged as follows:---
Firstly:--That the learned first assessing officer, the First Appellate Authority and Appellate Tribunal erred to apply sub-rule (3) of Rule 8 of Wealth Tax Rules, 1963 which clearly enacts that formula of letting value is applicable when the building and land are owned by assessee. On the strength of the above contention, it was suggested that neither the Assessing Officer nor the Appellate Authority nor the Appellate Tribunal had jurisdiction to levy wealth tax on superstructure of Ali Complex owned by appellants.
Secondly;that the superstructure owned by them was not covered by expression 'asset' as defined by sub-clause (2) of the Act. No other point was urged.
4. Respondents' learned counsel strongly supported the impugned orders and submitted that the questions of law raised by appellants were not tenable as these related to domain of facts. He relied upon decision of this Court rendered in I.T.A. No.11 of 1998 (Iram Ghee Mills Ltd. v. Income tax Appellate Tribunal) to contend that the aforesaid appeals be dismissed.
5. From the above-noted outlines of these appeals and. arguments advanced by learned counsel for parties, the following questions of law arise for consideration/answer:---
(1)Whether on the facts and circumstances of these cases, the complex, belonging to the appellants, did not fall within the term 'net wealth' as defined by section 2(16) of the Act?
(2)Whether on the facts and circumstances of these cases, was the tribunal justified in confirming the valuation of superstructure of complex at 10 times of the 'GARY' under sub-rule (3) of Rule 8 despite the fact that appellants were/are not owners of land underneath the complex?
As regards the first question, suffice it to note that its answer hinges upon section 3 of the Act, the scope of expression 'net wealth' used in section 2(16) and word 'asset' as defined in section 2(5) of the Act. The Act was promulgated on 30th June, 1963 with an object to levy tax on wealth. Section 3 is a charging provision. It says that there shall be charged for every assessment year a tax on the net-wealth on the corresponding valuation date of every individual at the rate specified in schedule. Shortly, it casts the tax liability on the net wealth owned on the valuation date by individual or a Hindu undivided family/whether citizen of Pakistan or non-citizen of Pakistan/resident of Pakistan or non-resident of Pakistan, if it exceeds the prescribed amount. The "net wealth" is defined in section 2(16) (ibid). It is as follows:---
"(16) 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggrevate value of all the debts owned by the assessee on the valuation date other than--
(i) debts which under section 6 are not to be taken into account; and
(ii) debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth tax is not payable under this Act;
(iii) 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 that wealth tax is charged on such right, title or interest."
The expression 'assets' is defined in section 2(5)(i) in the following terms:---
(5) "assets" includes---
(i) in the case of an individual and a Hindu undivided family, property of every description movable or immovable, except---
(a) growing crops, grass or standing trees on agricultural land; and
(b) any building owned or occupied by a cultivator or receiver of rent or revenue out of agricultural land;
Provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of rent or revenue by reason of his connection with the land requires as a store house or an outhouse;"
A bare reading of section 2(5)(i) shows that 'assets' embraces property of every description/movable or immovable/corporeal/incorporeal/excluding agricultural land, growing crops, grass or standing trees on such land or any building owned or occupied by cultivator of, or receiver of a rent of revenue out of an agricultural land. Property is not defined in section 2 of the Act. We have no option but to follow the dictionary meaning of this expression. Black's Law Dictionary (Fifth Edition) defines this phrase as follows:-
"Property: That which is peculiar or proper to any person; that which belongs exclusively to- one. In the strict legal sense, an aggregate of rights which are guaranteed and protected by the Government. Fulto Light, Heat and Power Co. v. State, 65 Misc. Rep. 263, 121 N.Y.S. 536. The term is said to extend to every species of valuable right and interest. More specifically, ownership; the unrestricted and exclusive right to a thing; the right to dispose of a thing in every legal way, to possess it, to use it, and to exclude everyone else from interfering with it. That dominion or indefinite right of use or, disposition, which one may lawfully exercise over particular things or subjects. The exclusive right of possessing, enjoying, and disposing of a thing. The highest right a man can have to anything; being used to refer to that right which one has to ands to tenements, goods or chattels, which no way depends on another man's courtesy.
The word is also commonly used to denote everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; everything that has an exchangeable value or which goes to make up wealth or estate. It extends to every species of valuable right and interest, and includes real and personal property, easements, franchises, and incorporeal hereditaments, and includes every invasion of one's property rights by actionable wrong. Labberton v. General Gas Co. of America, 53 Wash. 2d 180, 332 P.2d 250.
Property embraces everything which is or may be the subject of ownership, whether a legal ownership or whether beneficial, or a private ownership. Davis v. Davis, Tex. Civ. App., 495 S.W.2d 607, 611. Term includes not only ownership and possession but also the right of use and enjoyment for lawful purposes. Hoffman v. Kindealy, Mo., 389 S.W.2d 475, 752."
A reading of section 3 of Act alongwith section 2(5) and section 2(16) will show that every thing which can fall within the ambit of expression 'property' belonging to' assessee on the valuation date shall be taken into account in computation of net wealth for charging wealth tax. Section 2(5) is to be given a broader meaning as its language is to cover the property of any description whether movable/immovable, corporeal or incorporeal. This expression, so, does not exclude the superstructure raised on the land unless arid until it is so excluded by clear provision. We have not been shown such provision of Act. On the above analysis we have no hesitation in holding that superstructure/complex owned by the appellants, on the land belonging to. Trust falls within the scope of expression ' assets' and so will be taken as net wealth for computation of their liability. The contention raised by learned counsel for appellants had hardly any merits whatsoever. We are fortified in this view by the rule laid down in Dr. M.B. Anakalsaria v. Commissioner of Wealth Tax, Karachi (1992 SCMR 1755). In this case, appellant was an assessee. He did not declare value of 'goodwill' in return filed by him to this Act. The assessing officer estimated value of 'goodwill' and included it in the net wealth of appellant. Against this decision, appellants' lodged appeals, which were accepted by the appellate authorities/finding that goodwill' was not the part of the assets owned by him. This finding was upheld by the tribunal. On these circumstances the question was referred to High Court. This Court agreed with the findings of tribunal and opined that 'goodwill'; was not asset within the terms of section 2(5) of Act. The matter went to Supreme Court. The apex Court did not agree with the conclusion of the High Court and answered that the goodwill of appellants' company was part and parcel of assets owned by him at the relevant time.
Speaking for the Bench his lordship Mr. Justice Sajjad Ali Shah (as he then was) held:---
"From what is stated above about goodwill, it appears beyond dispute that it does mean popularity of any business or trade sometimes appearing as one of its assets with a marketable money value attracting customers on accounts of its local position or reputation for efficiency or any other such purpose or convenience."
In this report it was also held:---
"It is noteworthy that Legislature in order to describe 'assets' has used word 'includes' which shows that intention of the Legislature is to leave the scope wide enough to include property of every description which is movable or immovable except the property which is specified expressly not to be included in the definition. In the book Salmond on Jurisprudence' twelfth Edition, by P.J. Fitzgerald at page 413, property is described as 'corporeal and incorporeal'. Corporeal property is the right of ownership immaterial things while incorporeal property is any other proprietary right in rem. Incorporeal property is divided into parts; (1) jura in re alien or encumbrance whether over material or immaterial things (for example, leases, mortgages, and servitudes), and (2) jura in re propria over immaterial things (for example, patents, copyrights, and trade marks). In the first-mentioned corporeal property as stated above are included rights of ownership in material things such as land and chattels. Author of the book mentioned above, went further in the distinction between movable and immovable property and in that context stated that in all legal systems these two classes of objects are to some extent governed by different rules though in no system is the difference so great as in British system. Conserved in its legal aspect an immovable property is termed as piece of land including elements, such as a determinate portion of earth's surface, the ground beneath the surface down to the centre of the world, column of space above the surface, objects which are on or under the surface in its natural state; for example, minerals and natural vegetation and lastly all objects placed by human agency on or under the surface, with the intention of permanent annexation. Distinction between movable and immovable is in truth and in fact applicable to material objects only. "
From whatever has been discussed above, we are in no manner of doubt that superstructure raised by appellants on land owned by Qazilbash Trust fell within the ambit of section 2(5) of the Act and has to be valued for the purposes of calculation of net wealth of the appellants. The first question is, so, answered in negative against appellants.
6. Having answered the first question, we now come to second one. The second point is built by appellants on the language of sub-rule (3) of Rule 8 of Wealth Tax Rules, 1963, which were notified on 16th October, 1963. The relevant sub-rule (3) is as follows:---
"The value of lands and buildings excluding agricultural land, shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the said locality:
Provided that the Deputy Commissioner shall not, except with the prior approval of the Commissioner, determine the value of any property at a sum higher than ten times the gross annual rental value of such property and, where such property is an open plot of land, at a sum higher than the value specified by the Collector of the District for the purposes of calculation or charging of stamp duty under the Stamp Act, 1899 except where such plot is purchased through an open auction or through invitation of bids or offers."
The stress of appellants is on expression 'and' used after 'lands' and before 'building'. This sub-rule will apply when assessee is the owner of land as well as building; that the expression 'and' was used in conjunctive sense. We are unable to accept this line of arguments. It is well-settled, rule of construction of Statutes that ordinarily words like 'and, or and either are used in disjunctive sense. Reference be profitably made to paragraph 188 of the Construction of Statute by Crawford:---
"In ordinary use the word or is a disjunctive that marks an alternative which generally corresponds to the word either. In face of this meaning, however, the word ' or' and the word 'and' are often used interchangeably. As a result of this common and careless use of the two words in legislation, there are occasions when the Court, through construction, may change one to other. This cannot be done if the statute's meaning is clear, or if the alteration operates to change the meaning of the law. It is proper only in order to more accurately express, or to carry out the obvious intent of the Legislature, when the statute itself furnishes cogent proof of the error of the Legislature, and especially where it will avoid absurd or impossible consequences, or operate to harmonize the statute and give effect to all of its provisions. Accordingly, the word 'or', as used in a statute which provided that the owner or operator of a motor vehicle should not be liable to a guest in case of an accident unless the accident was intentional on the part of the owner of operator, or caused by his headlessness 'or' reckless regard of the rights of others, was interpreted to mean 'and' since otherwise the statute would have effected no change in existing liability. The substitution of these two words for each other is also permissible in criminal statutes, although some authorities hold otherwise. It is suggested, however, that a substitution should not be made where it would aggravate the offence or increase the punishment. The Court should be extremely reluctant in a criminal statute to substitute disjunctive words for conjunctive words, and vice versa if such action adversely affects the accused."
7. The above rules were followed by our Courts in Saifi Development Corporation. Ltd. v. Workers' Union (PLD 1965 (W.P.) Karachi 347), Muhammad Hussain v. Additional District Judge, Lahore (PLD 1966 Lah. 128), Salehon and others v. The State (PLD 1969 SC 267) and Miss F. Dubash v. Sindh Labour Appellate Tribunal, Karachi (PLD 1978 Kar. 278).Applying this test to language of sub-rule (3) of Rule 8 of Wealth Tax Rules. 1963, it is crystal clear that this rule relates to calculation of the valuation of the land and buildings for computing the net wealth of assessee within the terms of section 3 read with section 2(5) and section 2(16) of the Act. This rule is of a facilitative character and provides methodology for calculation of net wealth. As already held, section 3 does not discriminate between corporeal and incorporeal property, the land and buildings over it and applies to property of every kind. We are of a considered conclusion that the phrase/word "and" used in sub-rule (3) of Rule 8 is of a disjunctive character. Whatever it mandates is that the Deputy Commissioner shall estimate the value of the lands and building with due regard to nature and size of the property, the amenities available and the price which similarly situated property may fetch in the open market. The Deputy Commissioner/Assessing Authority is empowered to evaluate the land/building on the basis of its letting value. However, he is prohibited from exceeding 10 times letting value of the properties of assessee without prior consent of the Commissioner. This is the only embargo/fetters on his power. The impugned orders of the hierarchy clearly show that neither the first Assessing Authority nor the First Appellate Authority nor the Appellate Tribunal violated the above limitation. The impugned orders/decisions will show that rent received by the appellants were made basis of the value of the land on the relevant time by the Assessing Authority. This being the position, we are clear that impugned orders do not suffer from any error of law apparent on the face of record.
8. For the foregoing reasons, we find that appellants have made no case calling for interference under amended section 27 of Act. (See Iram Ghee Mills Ltd. v. Income Tax Appellate Tribunal decided by this Court in I.T.A. No.11 of 1998). These appeals accordingly fail and are dismissed with no order as to costs.
C.M.A./I-81/LAppeals dismissed.