W.I.AS. NOS.9031LB TO 908/LB OF 1999 VS W.I.AS. NOS.9031LB TO 908/LB OF 1999
2001 P T D (Trib.) 2579
[Income-tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Judicial Member and
M. Munir Qureshi, Accountant Member
W.T.As. Nos.903/LB to 908/LB of 1999, decided on 16/03/2000.
Wealth Tax Act (XV of 1963)---
----Second Sched. Part I, Cl. 7(ii) & S.5(i)(xv)(ii)---Exemption---Assets created out of encashment of Foreign Exchange Bearer Certificate---If Foreign Exchange Bearer Certificates were purchased by the assessee himself against the draft received by him from outside Pakistan and subsequently an asset had been created on its encashment, the same was fully covered under the exemption Cl. 7(ii), First Part of Second Sched. of the Wealth Tax Act, 1963---Facts of the case were not disputed to the extent that the amount having been undisputedly received by the assessee through normal banking channel its conversion into FEBC would not amount to creation of another asset.
1997 PTD (Trib.) 1928 rel.
1995 PTD (Trib.) 1112; 1991 PTD (Trib.) 135-and 1999 PTD (Trib.) 1494 ref.
Javed lqbal Khan, F.C.A. for Appellant.
Sh. Muhammad Hanif, D.R. for Respondent.
Date of hearing: 14th March, 2000.
ORDER
KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---The appeal has been filed by the assessee. The same is against the claim of exemption of Rs.24,01,500 under section 5(1)(xv) of the Wealth Tax Act. The other ground relates to charge of additional tax under sections 31-B and 31-BBB of the Wealth Tax Act, 1963.
2. The facts in brief are that the assessee encashed FEBC and created assets against the same on which exemption was claimed. These FEBCs were earlier acquired through remittances abroad. The departmental contention is that creation of FEBC is the first asset and no encashment of the same amounts to creation of another which is not exempt under law. The departmental reliance which has been followed by the learned CIT (Appeals) was on the earlier judgments of the ITAT including a recent judgment reported as 1997 PTD (Trib.) 1928. The other judgments have been reported as 1995 PTD (Trib.) 1112 and 1991 PTD (Trib.) 135. The order of the learned CIT is, dated 22-9-1998. Until this date the judgments in field were the same as are mentioned by learned First appellate authority However, the issue is finally put to rest by the D.B. of the ITAT in the case reported as 1999 PTD (Trib.) 1494. This judgment was produced by a learned A.R. before us wherein the above Full Bench judgment, was considered as a judgment per incuriam. The reasons being the relevant law was not produced before the honourable Bench and also for the reasons that proper assistance was not provided to the Court. The relevant para. of the said judgment is as follows:--
"It is only, sub-clause (ii) which allows one time conversion of the exempt asset i.e. foreign exchange, into any other asset. In other words the foreign exchange brought or remitted in prescribed manner enjoys exemption not only for itself but also in respect of an asset created out of it. The distinction and the purpose behind the sub-clause is not far to seek. It is to see that exemption is allowed only in respect of and to encourage bringing of both assets and foreign exchange to Pakistan. However, in order to frustrate unproductive use of the facility it has been provided that the assets both cash, matter or material remain identifiable. It should be so where it accompanied an assessee while entering Pakistan or was sent and remitted to Pakistan to another person. The noticeable difference between the two clauses is that while under sub-clause (i) the asset in its original shape including cash foreign exchange is exempt whereas in sub-clause (ii) one time conversion of identifiable foreign exchange to another asset is also permissible for exemption. '
3. The learned DR, however, was riot in agreement with above finding. It was pointed out to him that the department had conceded to the extent that the FEBC is a promissory note as defined in section 4 of Negotiable Instrument Act. He said it would still not cover the asset created on encashment of FEBC. He produced before us a judgment reported as 2000 PTD 322 H.C. He said that the learned High Court in this judgment have considered the creation of assets from encashment of FEBC as not exempt.
4. We have gone through contents and facts of the referred judgment.
It is our respectful observation that facts of the case are entirely different and the judgment of the High Court in no manner gives a finding different from the one given in the DB referred by us supra reported as 1999 PTD (Trib.) 1494. The requirement for exemption is that the money should come from abroad through normal banking channel. However, if a person purchases FEBC from open market and claims exemption of the assets created on its encashment the judgment referred by learned DR shall apply in full. We need not mention here but for the satisfaction of learned DR we do not hesitate in saying that it is in fact confirmation of the finding of the Tribunal given in the said case. The Honourable High Court has observed that the assessee has failed to prove that the FEBC encashed by him had come into his possession through normal banking channel. At nowhere the honourable High Court has said that money received through normal banking channel in the shape of FEBC and subsequently converted into some other asset is not exempt. For the satisfaction of the department we reproduce here the relevant para. of the order that speaks as follows:---
"For the reasons given above and the discussions, we are unable to accept the contention of Mr. Rehan Hassan Naqvi, and hold that the case of the applicant/assessee is governed by sub-clause (ii) of clause (xv) of section 5 of the Wealth Tax Act and he would have been entitled to claim exemption from levy and charge of wealth tax on the certificates if he could have established or proved that the money/funds utilized by him in acquiring the certificates were received by him in Pakistan or were-brought into Pakistan through normal banking channels. Since he has failed to establish this necessary condition, we hold that the applicant/assessee is not entitled to the exemption claimed by him and the Appellate Tribunal as well as the two officers below were justified in rejecting the claim of the applicant/assessee and refusing to grant him exemption from charge to wealth tax on the certificates/proceeds of the certificate."
5. In view of the clear finding we have no hesitation in holding that if FEBC are purchased by the assessee himself against the draft received by him from outside Pakistan for purchase of said FEBCs and subsequently an asset has been created on its encashment, the same is fully covered under the exemption clause 7(ii) of the first part of the Second Schedule earlier section 5(i)(xv)(ii). The facts in the present case are not disputed to the extent that the amount has been so received by the assessee from normal banking channel thus, its conversion into FEBC does not amount to creation of another asset. The asset created is the one which is acquired after encashment of FEBC, into Pakistani money. The earlier judgments that the asset created on encashment of FEBC are not exempt, also give a correct view, where the same have not been acquired through normal banking channels. As a result, therefore, we modify both the earlier assessments to this extent and set aside the case for de novo consideration of the Assessing Officer. This set aside, however, is only to confirm the fact that the FEBCs under discussion have been acquired by conversion of the Foreign Exchange sent for purchase of the same. On legal premises the finding of the DB vide 1999 PTD (Trib.) 1494 is, therefore, fully applicable. The ITO is directed follow the directions after verification of the facts as above. .
C. M. A. /M. A. K./84/Tax(Trib.) Order accordingly.