W.T.AS. NOS.991/LB OF 1996, 679/LB TO 682/LB OF 19981981 W.T.A. NO.224/KB OF 1997-98 VS W.T.AS. NOS.991/LB OF 1996, 679/LB TO 682/LB OF 19981981 W.T.A. NO.224/KB OF 1997-98
2001 P T D (Trib.) 1551.
[Income-tax Appellate Tribunal Pakistan]
Before S. M. Sibtain, Accountant Member and Tahseen Ahmed Bhatti, Judicial Member
W.T.A'. No.224/KB of 1997-98, decided on 26/01/1999.
Wealth Tax Rules, 1963---
----R. 8(3) first proviso---Valuation of rented out property---Value of property was declared @ 10 times of gross annual letting-value ---Previous two years were assessed on the same basis ---Assessee himself declared higher value of its property in the income tax record on the basis of revaluation of such property by the valuer and surplus amount was included in the books of accounts as "surplus on revaluation of fixed assets" ---Assessing Officer assessed/adopted the higher value for wealth tax purposes of the said property as declared in the Income Tax record than the ten times of the gross annual letting value of such property under R.8(3) of the Wealth Tax Rules, 1963 which was upheld by the First Appellate Authority---Contentions of the assessee were that property was 80 years old and actually let out, that property should be assessed @ 10 times of its gross annual letting value in accordance with first proviso to R.8(3) of the Wealth Tax Rules, 1963 and that professional revaluation done by the valuer was purely notional and property was occupied by tenants which did not warrant the Assessing Officer to determine its value at a sum higher than ten times of its gross annual letting value---Validity---First Proviso to R.8(3) of Wealth Tax Rules, 1963 did not permit the Assessing Officer to assess the value of house property on any basis other than their gross annual rental value---Exception allowed in the first proviso to R. 8(3), Wealth Tax Rules, 1963 was the option to assess the value at more than ten times of the gross annual rental value with the prior approval of the Commissioner and while exercising such discretion reasons were to be recorded in writing---First Appellate Authority, misdirected itself in upholding the assessment which in circumstances was not sustainable in law---Order was set aside by the Appellate Tribunal with the directions to assess the value of property de novo keeping in view the ratio of decision by the Appellate Tribunal.
1989 PTD (Trib.) 859; W.T.A. No. 692/HQ.of 1990-91, dated 11-12-1993 and 1995 PTD (Trib.) 1445 rel.
Ghulam Din Zia v. CWT, Lahore 1990 PTD 442; P.V. Reddy v. CWT (1972) 85 ITR 132, 135; J. N. Boss v. CWT (1976) 104 ITR 83 (Cal.) and T.K. Pillar v. CWT (1964) 51 ITR 150 (Mad.) ref.
Z. H. Jaffri for Appellant.
Amjad Jamshed, D.R. for Respondent.
Date of hearing: 6th June, 1998.
ORDER
S. M. SIBTAIN, ACCOUNTANT MEMBER.---The impugned order is objected to, in this appeal, on the following grounds:
"That the learned Commissioner of Wealth Tax (Appeals) has erred in law and on facts in confirming the assessment, its mode and manner, its valuation and also further erred in not accepting the assessee/appellant's plea that the valuation of the subject property is to be made as per law read with Rule 8(3) of the Wealth Tax Rules and as per the case history."
2. We have heard the learned representatives of the two parties. Briefly the facts are that the appellant owns a building which is let out at a monthly rent of Rs.35,532. Thus, the GARV comes to Rs.426,384. The value for the purposes of W.T., therefore, is shown .as Rs.4,263,840 Q 10 times of GARY. It has disclosed the cost of its property at Rs.700,000. The value of property has been assessed in 1994-95 at Rs.3,684,384 and in 1995-96 at Rs.4,180,608 on the same basis. On going through the Income Tax records of assessee it has been noted by the learned DCWT that assessee itself has declared value of its property at Rs.10,645,619 with the following narration:--
"The Co. have professionally revalued their building as on August 25, 1994 as per report submitted by Amir Ali B. Lakdwalla, Architect Engineer and Estate Valuers, as a consequence of which the asset has been written up to Rs.11.115 Million. Revaluation surplus amounting to Rs.10.934 Million is included in the book value of building with corresponding amounts appearing as 'Surplus on revaluation of Fixed assets."
3. The learned DCWT, therefore, has asked the appellant to explain why the value of the property should not be determined at Rs.10,645,619. The appellant, as per impugned assessment order, has not offered any expla?nation. He, therefore, has obtained prior approval of the CWT, Companies Zone-V, Karachi vide Letter No. Jud-1/Cos-V/DFA-66/ 1997-98/716 dated 21-11-1997, to determine the value, at Rs.10,645,619 which is higher than ten times the GARV of such property, under sub-rule (3) of Rule 8 read with first proviso thereto.
4. The learned CWT (A) has upheld the impugned assessment relying upon the decisions reported in 1990 PTD 442 (Lah H.C) Ghulam Din Zia v. CWT, Lahore (1972) 85 ITR 132, 135 (A.P.) P.V. Reddy v. CWT and (1976) 104 ITR 83 (Cal.). The submission of the learned counsel that it is mandatory as per Rule 8(3) of the W.T. Rules that the value-should be worked out at 10 times of the GARY, in line with the past treatment, has not found his favour. He has further held that the decision in the case reported in 1989 PTD (Trib.) 859 and in unreported W.T.A. No.692/HQ of 1990-91, dated 11-12-1993 are distinguishable. The learned CWT(A) has observed in the impugned order that in 1989 PTD (Trib.) 859, the AO has enhanced the annual value for Income-tax purposes every year without considering the restrictions placed by the Rented Premises Ordinance, and the treatment is not approved by the Tribunal. He has further observed that in the unreported judgment (W.T.A. No.692/KB of 1990-91 etc (Assessment years 1979-80 to 1987-88), the contention of the learned A.R. is that the estimate of the WTO is based on no material or evidence particularly having regard to the fact that the building in question is very old. It is also argued in the aforesaid case that the allegation of Pugree is likewise based on presumption. In that case, the Tribunal has also noticed that the AO has not given any basis for deviation from past history. His reliance upon the decision in Ghulam Din Zia v. CWT, Lahore (supra) is in support of the view that under section 7(1), the price which the property would fetch if sold in the open market on the relevant valuation date has to be ascertained; and such an ascertainment has to be on the basis of evidence.
5. We have availed our self the benefit of perusal of the decision reported in 1990 PTD 442 (Lah. H.C.) and we find that in that case the value of a plot of land measuring 2 Kanals 18 Marlas, located at Davis Road, Lahore has been declared at original cost of Rs.130,000. The DCWT has assessed the value @ Rs.1,510,000 per Kanal. The CWT(A) has upheld it but the Tribunal has directed to assess the value @ Rs.1,000,000 per Kanal. The Honourable High Court, after dilating upon the principles of valuation laid down under sub rule (3) of Rule 8 of the W.T. Rules, has held:
"The Tribunal was conscious of the location and commercial nature of the plot but was also posted with the information by the petitioner that its frontage was only 80 feet. It was pleaded before the Tribunal that the Gain Tax Authority assessed its value approximately at Rs.13,800 per marla but at the same time the Tribunal was not oblivious of the observations of the Commissioner on the unsatisfactory mode of determination of sale price adopted by that department and concealment of real value trade by the parties entering into transaction of immovable property. It was also before the Tribunal that according to the Wealth Tax Officer the market value of such plots on Davis Road ranged between Rs.75,000 and Rs.1,00,000 per marla and that commercial plots at 'a considerable distance from Davis Road were sold during the. period under assessment at a price between Rs.30,000 and Rs.50,000 per marla. It was in the light of these facts that the Tribunal chose to fix the value at the rate of Rs.50,000 per marla and thus, took a lenient view as this much price, according to the Assessing Officer, could be fetched by a commercial plot located in an area of lesser significance. We do not think that this determination is divorced from the facts appearing on the record. Needless to state that even circumstantial evidence may be cogent enough to support an inference of facts and the facts admitted or proved may justifiably lead to further deduction of facts."
6. Further, in another case relied upon by the learned CIT (A), which is reported as (1972) 85 I.T.R. 132, 135 (A.P.) P.V. Reddy v. CWT, it is held that in case the Assessing Officer disagrees with the experts valuation and adopts another valuation, the same must be on the basis of some material
7. Regarding the plea taken before the learned CWT(A) that in the two immediately preceding years the value has been assessed @ 10 times of the GARY following the Proviso to sub-rule (3) of Rule 8 of W.T Rules, has not found favour with him because he has found that in the case reported as J.N. Boss v. CWT (1976) 104 ITR 83, 88-89 (Cat) it is held that the earlier accepted valuation can be departed from and the basis of the said valuation can be changed if there are materials to indicate that there has been either a change in the structure of the property or, in the interest of the property held by the co-sharers or the market value in respect of that property. He has further found that in (1964) 51 ITR 150 (Mad.) T.K. Pillai v. CWT it is held that the estimate must be as far as possible, reasonably approximate to the market value.
8. Mr. Z.H. Jafri, the learned Counsel of the appellant has submitted that the two learned officers below have not appreciated his submissions properly. Before us, he has again laid emphasis on the facts that it is an 80 year old property and it is actually let out. Thus, according to him, it should be assessed Q 10 times of its GARV, in accordance with first Proviso to sub?-rule (3) of Rule 8 of W.T. Rules. He submits that the professional revaluation done by the Architect, as desired by the appellant, is purely notional and, considering the fact that the property is occupied by tenants, it does not warrant that the DCWT should determine its value at a sum higher than ten tithes its GARV.
9. Further, he submits that none of the cases relied upon by the learned CWT (A) are on all fours with the appellant's case in the instant appeal. The provisions of law and Rules applicable to the assessee in the as reported as (1972) 85 ITR 132-135 (AP) and (1976) 104 ITR 83 (Cal.), Mr. Jafri are not in pari materia with the relevant provisions of and rules in Pakistan, applicable to the appellant in the instant year. Regarding the decision in 1990 PTD 442 (Lah. H.C), it is submitted that the valuation of a vacant plot of land is the issue considered in the case (supra while in appellant's case the issue is the valuation of a let out building the rule with regard to the valuation of such property is different from the rule for valuation of the plot of land, as evident from the first proviso to sub-rule (3) of Rule 8 of the Wealth Tax Rules, 1963.
10. Regarding the impugned observations of the learned CW (A) on the ratio of decision reported as 1989 PTD (Trio) 859 and in W.T.A. No.692/HQ of 1990-91, dated 11-12-1993 (supra), the learned counsel has submitted that in case of let out properties there can not be any other possible interpretation of the provision for determination of the value of any property at a sum higher than ten times the gross annual rental value of such property.
11. The learned Representative of-the Department at this juncture, has submitted that the discretion allowed to the DCWT, in the first proviso to sub-rule (3) of Rule 8, to determine the value of any property at a sum higher than ten times the GARY of such property with prior approval of the CWT envisages determination of value at the prevailing market rates. Mr. Zamarrud Hasan Jafri, on the other hand, submits that such an interpretation, if allowed to be given, to the discretion supra would amount to attributing discrimination and arbitrariness to the Proviso (ibid). On the contrary, he submits that the objection of the Proviso is to mitigate the hardship likely to be caused in such cases of let out properties by strict application of sub-rule (3) of Rule 8.
12. He continues to submit that the meaning of the term GARV, as used in the Proviso (ibid), given in the Explanation thereto, in case of vacant properties or self-occupied properties that are not claimed to be exempt would be the sum for which the property might reasonably be expected to let from year to year: However, in case of let out properties where the vacation of premises is the option of the tenant in accordance with the law, the only reasonable expectancy is the increase in rent @ 10 % of the rent once in three years. Thus, where the owner has not exercised his right to avail such enhancement in rent the DCWT can take cognizance of the fact and determine the value of such property at a sum higher than ten times the CARV of such] property with prior approval of the CWT. Any other interpretation of the discretion (supra) would amount to permitting discriminatory anal arbitrary assessments.
13. We have a given our careful consideration to the facts and circumstances of the case (supra). We find that the impugned order is not sustainable because the first Proviso to sub-rule (3) of Rule 8 does not permit the Assessing Officer, under any circumstances, to assess the value of house properties on an basis other than their gross annual rental value. The only exception allow therein is the option to assess the value at more than ten times of the G RV with the prior approval of the Commissioner. It is a settled principle that while exercising such discretion reasons are to be recorded in writing. Since the learned Assessing Officer, with the prior approval of learned CWT, has assessed the value of the let out house property on a basis other than the basis of GARY, the learned CWT (A) has misdirected i upholding the assessment order which is not sustainable in law.
14. Accordingly, the impugned order is set aside with the directions to assess the value of impugned property de novo keeping in view the ratio of decision in 1989 PTD (Trib.) 859, and in W.T.A. No: 692/HQ of 1990-91, dated 11-12-1993 and 1995 PTD (Trib.) 1445.
15. The appeal is allowed in the manner supra.
C.M.A./M.A.K./74/Tax(Trib.)???????????????????????????????????????????????? Appeal allowed.