2001 P T D (Trib.) 1981
[Income-tax Appellate Tribunal Pakistan]
Before Khalid Waheed Ahmed, Judicial Member and
Mahmood Ahmed Malik, Accountant Member
W.T.As. Nos.991/LB of 1996, 679/LB to 682/LB of 1998, decided on 23/12/2000.
(a) Wealth Tax Rules, 1963---
----R.8(3)---Valuation of lands and buildings---Rented property valuation of---Value of rented out property was adopted higher than the Gross Annual Letting Value by the Department on the plea that property could fetch more rent than the one declared---Validity---Appellate Tribunal remanded the case back to the Assessing Officer for de novo assessment with the direction that the valuation of the property in question be made on the basis of Gross Annual Letting Value of the- property according to the provisions of R.8(3) of the Wealth Tax Rules, 1963---Order of the Assessing Officer was set aside by the Appellate tribunal accordingly.
(b) Wealth Tax Act (XV of 1963)---
----Secod Sched., Part 1, Cl. (1), proviso---Exemption---One house half share of .each spouse---- Exemption was claimed both by the husband and wife for their respective shares in the Returns being self-occupied---Department allowed the exemption to one of the spouses of his share and rejected the other on the ground that option could be exercised either of the spouses under the proviso of Cl.12(l) of Part I of the Second Sched. of the Wealth Tax Act, '1963---Assessee contended that it was the option which was to be exercised by either of the spouses which did not mean that the exemption was not available to the other spouse being co-owner in respect of self-occupied residential house---Validity---Appellate Tribunal found that exemption under Cl.12(1) of Part I of the Second Sched. to the Wealth Tax Act, 1963 was available to one of the assessees in the -case of co-owners of self-occupied house being the husband and wife.
Chamber's Twentieth Century Dictionary ref.
(c) Wealth Tax Act (XV of 1963)---
----Second Sched., Part 1, C1.12(1), proviso---Exemption---Co-ownership of one self-occupied house other than husband and wife--Exemption of respective shares separately---Contention was that provision of law was apparently not rational and was discriminatory because in the case of co owners of self-occupied house other than the husband and wife, the exemption under C1.12(1) of Part I of the Second Sched. to the Wealth Tax Act, 1963 could be claimed by both of the owners---Held, adjudication upon the vires of the provisions of the statute was beyond the jurisdiction of the Income-tax Appellate Tribunal.
(d) Wealth Tax Rules, 1963---
----R. 8(3)---C.B.R. Circular No.4 of 1994, dated 13th. February, 1999--- C.B.R., Circular No. 11 of. 1994, dated 17th July, 1994---Valuation of lands and buildings---Value of half share in house was adopted on the basis of cost of construction and value of land fixed by the District Collector for the purpose of stamp duty---First Appellate Authority set aside the assessment on account that separate valuation of plot and building was improper-- Validity---Appellate Tribunal upheld the order of the First Appellate Authority with the direction that the valuation of the property be adopted strictly in accordance with R.8(3) of Wealth Tax Rules, 1963.
1999 PTD (Trib.) 394 ref.
Ijaz Ali Bhatti, A.R. for Appellant (in W.T.As. Nos.991/LB of 1996, 679/LB and 680/LB of 1998).
Sh. Muhammad Hanif, D.R: for Respondent (in W.T.As, Nos.991/LB; of 1996, 679/LB and 680/LB of 1998).
Sh. Muhammad Hanif, D.R for Appellant (in W.T.As Nos. 681/LB and 682/LB of 1998).
Ijaz Ali Bhatti, A.R. for Respondent (in W.T.As. Nos.681/LB and 682/LB of 1998).
Date of hearing: 2nd May, 2000.
ORDER
KHALID WAHEED AHMED (JUDICIAL MEMBER).---The above-titled five appeals pertain to the assessment years 1995-96, 1996-97 and 1997-98.
Assessment Year 1995-96
2. For the assessment year 1995-96, only the assessee, an Individual, impugns the order, dated 2-04-1996 passed by the learned CIT (A), Zone-I, Lahore to contest the valuation of her 1/2 share in property situated at 74-G, Gulberg-III, Lahore. According to the assessee, the said property was assessed at Rs.10,00,000 whereas it was given on rent Q Rs.2,000 per month. The plea of the assessee, as per grounds of appeal, is that as per rules, the value of 1 /2 share of the property in question should have been assessed according to the rent, she was receiving.
3. During the previous year, the property (74-G, Gulberg III, Lahore) was assessed as follows:
| Assessment yearValue DeclaredValue Assessed 1989-90Rs.50,000Rs. 2,50,000 1990-91Rs.50,000Rs. 2,50,000 1991-92Rs.50,000Rs. 2,80,000 1992-93Rs.50,000Rs: 3,10,000 1993-94Rs.50,000Rs. 3,10,000 1994-95Rs.50,000Rs. 3,10,000 1995-96Rs.50,000Rs.10,00,000 |
4. At first appellate stage, the findings of the learned CIT(A) while rejecting the first appeals of the assessee in respect of the property (74-G, Gulberg-III, Lahore) were as follows: ,
"In assessment year 1995-96 the action of the Assessing Officer in adopting value of 1/2 share in residential House No.74-G, Gulberg III, Lahore at Rs.10,00,000 keeping in view the nature, size and location as well as emenities available and sale value of the property and C.B.R's. Circular No.7 of 1994, dated 10-7-1994 is found in order and is confirmed. It may be mentioned that if this property is given on'rent it can fetch more rent than Rs.2,000 as disclosed by the appellant."
5. Before this Appellate Tribunal, the contention of the learned A.R. for the assessee is that the value for the assessment year-1995-96 may be assessed as per history of the instant case. According to the learned A.R., the value of the property in question adopted at Rs.10,00,000 by the Assessing Officer and confirmed by the learned CIT(A),was unjustified and highly excessive.' Learned A.R. stated that the valuation adopted was without any basis and against the provisions of Rule 8(3) of the Wealth Tax Rules, 1963.
6. On the other hand, learned D.R., supported the assessment as well as the first appellate orders with the contention that the value adopted for the assessment year 1995-96 at Rs.10,00,000 in respect of the 1/2 share in the property located in the area of Gulberg was not only reasonable but rather on the lower side. Learned D.R. further submitted that the learned CIT(A) has rightly observed that the property could fetch rent more than Rs.2,000 per month as disclosed by the assessee.
7. Arguments of both the parties have been heard and the relevant orders perused. The contention of the assessee, as per grounds of appeal, is that the property in question was given on rent Q R's.2,000 per month. No basis for adoption of the value of Rs.10,00,000 has been given by the Assessing Officer. The contention of the learned A.R. that the valuation of the property should have been adopted on the GAALV appears to be responsible.
8. Under the circumstances of the instant case, it is deemed fair to remand back the case to the Assessing Officer for de novo assessment with the direction that the valuation of the property in question for the assessment year 1995-96 be made on the basis of GALV of the property according to the provisions of Rule 8(3) of the Wealth Tax Rules, 1963. The case for the assessment year 1995-96 stands set aside accordingly.
Assessment Years 1996-97 and 1997-98
9. For the assessment years 1996-97 and 1997-98, both the assessee as well as the Revenue impugn the combined cider, dated 6-4-1998 passed by the learned CIT and WT(A), Zone-I, Lahore. Common grounds of appeals have been taken by the assessee for both the years 1996-97 and 1997-98 which are being reproduced below:
(i)That the value of 1/2 share in 74-G, Gulber-111, Lahore determined at Rs.27,40,000 by the Assessing Officer and subsequently setting aside of the same by the learned CIT (Appeals) was unjustified, without any basis. The value determined is excessively high, without any basis, and justification.
(ii)That the learned CIT (Appeals) was not right in not allowing the exemption of 1/2 portion of house in the hands of the petitioner.
(iii)That the exemption has illegally been denied to the appellant in terms of clause (XII)(I) of para. I of the Second Schedule to the
10. Similarly, the Revenue has also taken the following common grounds of appeals for the assessment years 1996-97 and 1997-98:
(I)That the learned CIT (Appeals) was not justified to set aside the valuation of 1/2 share in 74-G, Gulberg-Ill, Lahore without recording the' basis of valuation and cost of construction, as the same were assessed on the basis of rates and cost of construction as per existing rules. ,
(II)That the learned CIT (Appeals) was not justified to direct to adopt the value of 71-A, Ahmed Block, New Garden Town, Lahore without any cogent reasons.
(III) That the learned CIT (Appeals) was not justified to direct to accept the declared value of 1/6th share in Property No.59-A, Gulberg-III, Lahore without any cogent reasons.
(IV) That the learned CIT(A) was not justified to reduce the business capital from Rs.4,50,000 to Rs.4,25,000 for the assessment year 1996-97 and from Rs.5,00,000 to Rs. 4,50,000 for the year 1997-98".
11. The main and foremost contention of the assessee for these two years (1996-97) and (1997-98) is that the exemption claimed under clause 12(1) of Part-I of the Second Schedule to the Wealth Tax Act, 1963 should have been allowed in respect of the 1 /2 share in Property bearing No.74-G, Gulberg-III, Lahore which is 3 Kanal, 13 Marla's house. Learned A.R. for the assessee has submitted before this Appellate Tribunal that. the assessee was entitled to the claim of exemption on account of being under self-occupation of the assessee for residential purpose. Learned A.R. contended that exemption under clause (12)(1) of Part-I of the Second Schedule was available for one house. Learned A.R. based this argument on the meaning of the word one residential house and submitted that by the use of word one residential house, exemption in respect of a complete house should have been allowed. In this regard, learned A.R. referred to the meanings of the word "one" as per the Chambers Twentieth Century Dictionary and submitted that the same means a single and undivided Unit. Learned A.R. of the assessee further submitted that the exemption in respect of the other one-half share was already claimed and allowed in the case of other co-owner i.e. the husband of the instant assessee who has exercised the option for exemption in respect of the house. It is the contention of the learned A.R. it was the option which was to be exercised by either of the spouses and it does not mean that the exemption was not available to the other spouse being co-owner in respect of the self-occupied residential house. Learned A.R. also referred to the Guidelines for filling in Wealth Tax Form-A at Serial No.7(k) printed on the backside of the Wealth Tax Return Form-A (W. T. 1 Rev. l) and contended that the exemption on account of the house being under self-occupation for the purpose of residence was available in respect of one house. Learned A.R. also submitted that the CIT(A) was not justified in setting aside the valuation of Rs.27,40,000 determined by the Assessing Officer which was highly excessive and without any basis. Learned A.R. further contended that the valuation of the property adopted by the Assessing Officer on the basis of the Value of land and cost of construction adopted separately was against the provisions of Rule 8(3) of the Wealth Tax Rules. In this context, learned A.R. referred to the case law reported as 1999 PTD (Trib.) 394. Wherein the separate valuation of the plot and building thereon was held improper. Learned A.R. also submitted the copy of the Site Plan of the house and the Assessment Order in the case of the assessee for the assessment year 1994-95 and contended that the valuation of Rs.14,40,000 made by the Assessing Officer in respect of the 1/2 share of the residential house at Gulberg, Lahore was reduced to Rs.3,10,000 by the learned CIT(A).
12. On the other hand the contention of the learned D.R. is that the claim of exemption was rightly disallowed by the authorities below. According to the learned D.R.., the exemption under clause (12)(1) of Part I of the Second Schedule to the Wealth Tax Act,, 1963.is.allowable to either of the two spouses and not to both the spouses. Learned D.R. further contended that the valuation of 1/2 share of Property bearing No.74-G, Gulberg-III, Lahore adopted at Rs.27,40,000 by the Assessing Officer was justified. According to the learned D.R., the valuation was made on the basis of cost of construction and value of land fixed by the District Collector for Stamp Duty Purposes. Learned D.R. stated that the value adopted at Rs.27,40,000 of the 1 /2 share in. Property No. 74-G, Gulberg-111, Lahore built on 3 Kanals, 13 Marlas was reasonable and the CIT(A) was not justified to set aside the issue .because according to the learned D.R. the valuation was adopted in view of the instructions contained in C.B.R.'s Circular Nos.7 and 11 of 1994. Learned D.R. further submitted that the CIT(A) was not justified in directing to allow the value of Property No,71-A, Ahmad Block, New Garden Town, Lahore at Rs.14,40,000 for the assessment year 1997-98. According to the learned D.R., the valuation adopted by 10% increase over the last year was reasonable and justified. Learned D.R. also objected to the directions of the learned CIT(A) to accept the declared value of 1/2 share in Property No.59-A, Gulberg-III, Lahore. According to the learned D.R.., the property in question is situated in the most posh locality of the town i.e. Main Boulevard Gulberg, Lahore near Kabana Restaurant and the capitalized value of Rs.30,00,000 adopted by the Assessing Officer was not in any way excessive or unreasonable.
Arguments advanced by learned representatives of both the parties have been heard and the relevant orders perused. The exemption claimed in respect of 1/2 share in Property No.74-G, Gulberg-111, Lahore was disallowed by the authorities below because the exemption under clause (12)(1) was allowable to either of the two spouses and not to both the spouses. The main emphasis of the learned A.R. of the assessee ison the word 'One' Residential House' appearing in the clause 12(1) (supra). According to the learned A.R.., the exemption is to be allowed in respect of the one house, option for which may be exercised by either of the spouses. Before proceeding further, the relevant provisions of clause (12) are being reproduced below:
"Wealth Tax Act, 1963.
12(1) one residential 'house, owned and occupied by the assessee for purposes of his own residence, where the assessee opts to exclude such house from his assets;
Provided that such option may be exercised by either of the spouse."
Exemptions-have been provided. to the assets or class of assets or person or class of persons under section 5 of Wealth Tax Act, 1963 by specifying the same in the Second Schedule to the Wealth Tax Act, 1963. Part-I of the Second Schedule enumerates the situations where wealth tax is not payable by the assessee in respect of the assets specified therein. Thesub-clause (1) of clause (12) of the Second Schedule as reproduced above clearly indicates that the exemption to the assessee was available in respect of the one residential house owned- and occupied by the assessee for the purpose of his own residence. Through the proviso to .the sub-clause a restriction has been laid down for exercising of the Option with the Claim of Exemption by either of the spouses. The contention of the learned A.R. that the exemption has been allowed on the basis of a Unit i.e. one residential house is not sustainable. Under the provisions of sub-clause (1). of clause (12) of Part-I of the Second Schedule, the exemption has been allowed to an assessee in respect of an asset which is the residential house and not on the basis of the property/Unit. Even otherwise, the contention of the learned A.R. that the Option exercised by one of the spouses will cover both of the assessees is not plausible. Both the husband and wife are assessed separately as two different assessees each of whom being independent are at liberty to claim exemption or not. It may be cases where the exemption is claimed by one of the spouses and it is not claimed by the other spouses. In such a case, the latter cannot be bound by the action of the former. In our view, the exemption under clause (12)(1) of Part-I of the Second Schedule to the Wealth Tax Act, 1963 is available to one of the assessees in the case of co-owners of self-occupied house being the husband and wife. The contention of the learned A.R. that this provision of law is apparently not rational and discriminatory because in the case of co-owners of self-occupied house other than the husband and wife, the exemption under clause (12)(1) of Part-I of Second Schedule to the Wealth Tax Act, 1963 can be claimed by both of them carries weight. However, the Tribunal cannot consider this aspect of the law because to .adjudicate upon the vires of the provisions of the statute is beyond the jurisdiction of this-Tribunal. With regard to the setting aside of the order on the issue of valuation of the 1 /2 share id Property No.74-G, Gulberg, Lahore, the order of the CIT(A) is fully justified .in view of the Case Law quoted by the learned A.R. of the assessee. As admittedly the property was on rent during the assessment year 1995-96, the setting aside of the assessment on the issue of valuation of 1/2 share in Property No.74-G Gulberg-III, Lahore is upheld with the direction that the valuation of the said property be adopted strictly in accordance with the Rule 8(3) of Wealth Tax Rules, 1963 and in view of the directions given for the assessment year 1995-96 (supra). The directions of the learned CIT(A) to accept the declared value on the basis of rent deed in respect of the Property No.59-A. Gulberg III, Lahore with the observations that the determination of GALV without the approval of the Commissioner was not sustainable is held to be justified and, therefore, upheld.
14. The contention of the Revenue with regard to the valuation of Property No.71-A, Ahmed Block, New Garden Town, Lahore for the assessment year 1996-97 is misconceived. For the assessment year 1997-98 the directions of the learned CIT(A) to adopt the value at Rs.14,40,000 against the value adopted without the approval of the Zonal Commissioner is also upheld being justified under the circumstances ofthe case.
15. The more reduction allowed in the Business Capital adopted by the Assessing Officer without any basis is also not disturbed.
16. As a result, the appeals of the Revenue for the assessment years 1996-97 and 1997-98 having no merit are hereby dismissed while the appeals of the assessee for the assessment years 1995-96, 1996-97 and 1997-98 stand disposed of in the manner -As mentioned in the foregoing paragraphs.
C.M.A./M.A.K./77/Tax(Trib.) Order accordingly.