W.T.AS. NOS.816/IB OF 1998-99 AND 175/1B OF 1999-2000 VS W.T.AS. NOS.816/IB OF 1998-99 AND 175/1B OF 1999-2000, 2000 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2433 (1999)

Wealth Tax Act (XV of 1963)---

----Ss. 16, 14C, 14B, 14(1)(d), 13A & 13D---Assessment---Tax on ownership of certain immovable assets---Collection of tax at source in case of rented property---Advance payment of tax---Assessing Officer determined value of the house on the basis of Gross Annual Letting Value and included the value While computing the net wealth of the assessee---Tax liability or the net wealth so determined was calculated at the normal rates--- Assessing Officer also determined the tax under S. 14C ,in the Wealth Tax Act, 1963 in respect of the house and added same to the tax liability in respect of net wealth ---Assessee contended that assets referred to in S.14(1)(d) of the Wealth Tax Act, 1963 constituted a separate block of assets to be taxed under the provision of S.14C of the Wealth Tax Act, 1963---First Appellate Authority directed that house in question be excluded front net wealth arid be treated as a separate block of asset for levy of tax under relevant provision of law---Validity---Assets referred to in S.14(1)(d) did not constitute a separate block, of assets for wealth tax Purposes--- Section 14C(1) simply provided that a person who owned an immovable asset referred to in S.14(1)(d) shall pay wealth tax at the rates specified in paragraph B of Part II of the First Sched. of Wealth Tax Act, 1963 and there was nothing in S. 14C to suggest that tax paid under the said section was the final discharge of tax liability in respect of the assets---Section 14C(2) read with S.13D(2) of the Wealth Tax Act 1963 indicated that tax under S. 14C was in the nature of advance tax---Tax under S. 14C, therefore, could only be construed as advance tax and not as final tax liability in respect of assets referred to in S.14(1)(d)---Tax under S. 14C having been found to be advance tax, it could, not be reckoned in calculation of final -tax liability on "net wealth "----"Final tax liability" referred to tax liability on the basis of nit wealth comprising of taxable assets including the assets referred to in S.14(I)(d) of the Wealth Tax Act, 1963-- Section 14C(2) provides that where final tax liability exceeded the amount of tax paid under Ss.13A & 13D of the wealth Tax Act, 1963, such amount; was adjustable against, final tax liability---Tax paid under S. 14C would also be adjustable even in a case where final tax liability in respect of net wealth was less than the amount of tax paid under S. 14C of Wealth Tax Apt, 1963- Assessing Officer, therefore, rightly included the value of the house in the net wealth of the assessee---Assessing Officer could not however, add the tax under S. 14C in- respect of the house, to tax liability determined on the net wealth---If the assessee paid tax under S.14C in accordance with the provisions of S.13D(2)', she has entitled to adjustment of the said tax against the tax liability determined on net wealth---Orders of 'the Authorities below were vacated and Assessing officer was directed to re-compute the tax liability in the light of order of the Appellate Tribunal.

Nadir Mumtaz Warraich, D.R. for Appellant.

Oliver Peter Pervez, FCA for Respondent.

Date of hearing: 14th October, 1999.

ORDER

MANSOOR AHMAD (ACCOUNTANT MEMBER). ---These two departmental appeals are directed" against the consolidated order dated 24-10-1998 by the learned CWT(A), Rawalpindi, in respect of assessment years 1997-98 and 1998-99.

2. Mr. Nadir Mumtaz Warraich, D.R., on behalf of the department and Mr. Oliver Peter Pervez, FCA, on behalf of the assessee, present. Parties have been heard.

3. The facts of the case are that the assessee, an individual, owns a house in Islamabad which was rented out at Rs.50,000 per month during the period relevant to the assessment year 1997-98 and at Rs.55,000 per month for the period relevant to the assessment year 1998-99. While making assessment under section 16(3), the Assessing Officer determined the value of the house at Rs.60,00,000 for the year 1997-98 and Rs.66,00,000 for the assessment year 1998-99 on the basis of GALV, and included this value in computing the net wealth of the assessee. The tax liability on the net wealth so determined was calculated at the normal tax rates. Thereafter, the Assessing Officer also determined the tax under section 14C, in respect .of the said house, and added it to the tax liability in respect of net wealth.

4. The assessments made in the aforesaid manner were challenged in first appeal. It was contended that the house in question could, not be included in the net wealth as the said property was covered by the provisions of section 14C. It was argued that the assets referred to in section 14(1)(d) constitute a separate block of assets to be taxed under the provisions of section 14C. Therefore, only other assets owned by the assessee could be included in determining net wealth for charge of wealth tax at the normal rates. Agreeing with this contention, the learned CWT(A) directed that the house in question be excluded from net wealth and it be treated as a separate block of assets for levy of tax under the relevant provisions of law. Through these appeals. The Department contests the order of the learned CWT(A).

5. The contention of the Department is that house owned by the assessee was includable in net wealth and chargeable to tax at the normal rates. At the same time, the house is also taxable under the provisions of section 14C, as a separate block of assets. Hence, the total tax liability has correctly been determined by the Assessing Officer.

6. The learned A.R. of the assessee of respondent supports the order of the learned CWT(A). He argues that in terms of section 14C(1), the assets referred to in section 14(1)(d) constitute a separate block of assets to be taxed at the rates specified in paragraph B of Part-II of the First Schedule. If an assessee owns some other assets as well those Bassets will be taxed under the normal provisions of law on the basis of their value constituting net wealth. He slates that section 3 authorises charge of wealth tax not only on the net wealth but also on assets. Since section 14c(1) start with non-obstante clause, other provisions of law are not applicable to the assets referred to in section 14(1)(d). As regards the provisions of section 14C(2), the learned A.R. states that tax under section 14C is adjustable against the total tax liability i.e. tax under section 14C plus tax liability on other assets. Therefore, the assets taxable under section 14C could not be included in the net wealth and the learned CWT(A) was justified to direct that the house belonging to the assessee be excluded from the net wealth.

7. We have considered the arguments of both sides. After examining the relevant provisions of law, we are of the view that the assets referred to in section 14(1)(d) do not constitute a separate block of assets for wealth tax purposes. Section 14C(1) simply provides that a person who owns an immovable asset referred to in section 14(1)(d) shall pay wealth tax at the rates specified in paragraph B of Part-II of the First Schedule. There is nothing in section 14C to suggest that the tax paid under this section is the final discharge of tax liability in respect of the aforesaid assets. On the other hand, section 14C(2) read with section 130(2) clearly indicates, that the tax under section 14C is in the nature of advance tax. Reference to charge of wealth tax in respect of assets, in section 3, appears to be only for the purpose of providing a legal cover for creation of advance tax liability' on the basis of ownership of the specified assets. We find this view to be fortified by the fact that wealth tax is levied in pursuance of Entry No.50 in Part-I of the Federal Legislative List in the Fourth Schedule to the Constitution which deals with taxes on the capital value of assets;- whereas taxes on immovable property are within the competence of Provincial Legislature. Therefore, tax under section 14C can only be construed as advance tax and not as final tax liability in respect of assets referred to in section 14(1)(d). Further, a comparison of the provisions of section 14B and 14C also shows that the Legislature did not intend to provide for final tax liability in respect of specified assets in terms of section 14C. Under the provisions of section 1413, the tax payable under that section has been declared to be the final discharge of the tax liability on specified assets, but this is not the position with respect of tax payable under section 14C which is only an advance tax adjustable against the final tax liability.

8. We also note that subsection (2) of the section 14C specifies that the advance tax is deemed to be the minimum tax payable under this section. We understand that this provision is intended to make the tax payable under section.14C as minimum amount of advance tax payable under the said section even if the assessee is not liable to pay advance tax under the provisions of subsection (1) of section 1313. We are not inclined to accept the preposition that tax under section 14C is the minimum tax payable where either no tax is payable on net wealth or the tax payable is less than the minimum wealth tax payable under section 14C. We have already clarified that tax under section 14C is only an advance tax and cannot be considered as final tax liability in respect of specified assets.

9. Finally, the argument of the learned A.R. that the "final tax liability determined under this Act", referred to in subsection (2) of section 14C means aggregate of tax under section 14C in respect of specified assets and tax payable in respect of other assets is also not acceptable. Since the tax under section 14C is held to be advance tax, it cannot be reckoned in calculation of final tax liability on "net wealth" which as per definition given in section 2(1)(16) means aggregate value of all assets belonging to an assessee. Therefore, "final tax liability" refers to tax liability on the basis of net wealth comprising of taxable assets including the assets referred to in section 14(1)(d). Although subsection (2) of section 14C provides that where the final tax liability exceeds the amount of tax paid under sections 13A and 1313, the said amount is adjustable against the final tax liability, but it 'is obvious that tax paid under section 14C would also be adjustable even in a case where final tax liability in respect of net wealth is less than the amount of tax paid under the aforesaid section.

10. In view of the foregoing. It is held that the Assessing Officer rightly included the value of the house in the net wealth of the assessee. However, he could not add the tax under section 14C in respect of the said house, to the tax liability determined on the net wealth. If the assessee has paid tax under section 14C, in accordance with the provisions of section 1313(2), she is entitled adjustment of the said tax against the tax liability determined on net wealth. The orders of the Authorities below are vacated and the Assessing Officer is directed to recompute the tax liability in the light of this order.

11. The departmental appeals partly succeed to the extent and in. the manner indicated above.

C.M.A./M.A.K./27/Tax(Trib.) Appeal partly succeeded.