W.T.OS. NOS.239/KB TO 242/KB OF 1999-2000 VS W.T.OS. NOS.239/KB TO 242/KB OF 1999-2000
2001 P T D (Trib.) 2957
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman and
Muhammad Mahboob Alam; Accountant Member,
W.T.Os. Nos. 239/KB to 242/KB of 1999-2000, decided on 09/08/2000.
Wealth Tax Act (XV of 963)---
----Second Sched., C1.7(ii)---S.R.0.140(1)/91, dated 25-2-1991, R.7-- Exemption---Dollar Bearer Certificate ---Encashment of---Exemption was not allowed to the assessee on the ground that assets were created out of sale of Dollar Bearer Certificates in the secondary market and not through proper banking channel in spite of encashment certificate issued by the Bank--Validity---Dollar Bearer Certificates were properly surrendered to the office of issue and the relevant provision as contained in R.7 of the rules issued under S.R.0.140(I)/91, dated 25-2-:991 was properly complied with by the assessee---Rupee .proceeds having been realised by the office of issue and credited to the accounts of the assessee constituted a sufficient evidence of encashment of such certificates---Rupee value realised on conversion of Dollar Bearer Certificates was to be exempted in terms of provision of C1.7(ii) of the Second Sched. to the Wealth Tax Act, 1.963---Disallowance by the Assessing Officer was deleted by the Tribunal.
Jawed Zakaria for Appellant.
Khalid Siddiqui, D.R. for Respondent.
Date of hearing: 9th August, 2000.
ORDER
MUHAMMAD MAHBOOB ALAM (ACCOUNTANT MEMBER).---The four appeals have been filed against the CIT(A)'s combined Order Nos.365 to 368. The following common grounds have been taken in these appeals.
"(1) That the learned CIT(A)'s has erred in not allowing exemption to the appellant in respect of assets created out of foreign currency remitted through official banking channel.
(2) That the learned CIT(A)'s has erred in not allowing exemption to the appellant in respect of assets created from encashment .of Dollar Bearer Certificate acquired from foreign currency remitted through banking channel.
(3) That the learned CIT(A)'s has erred in not accepting the value of agriculture property declared a Rs.16 per produced index.
(4) That without prejudice to above the rate of produced index adopted at the rate of Rs.38 apart from being unjust is also very, harsh and excessive."
2. The learned counsel for the appellant has been heard. The main objection raised by the appellant is against the disallowance of exemption claimed under clause 7(ii) of the Second Sched. to the Wealth Tax Act and excessive valuation of agricultural property.
3. In respect of first ground it has been pointed out by the learned counsel that the officers below were not justified in disallowing the exemption claimed under clause 7(ii) of the Wealth Tax Act when it is admitted fact that foreign remittances were received through proper banking channels and assets created out of Dollar Bearer Certificates were also from the same foreign remittances. The learned D.R. has on the other hand supported the view taken by the learned CIT(A) in holding that the exemption under clause 7(ii) of the Second Sched. was not available to the assessee because the assets were created out of sale of Dollar Bearer Certificate in the secondary market and not through proper banking channel. '
4. The matter has been considered and the impugned orders have been perused. The fact that remittances have been received through proper banking channel has not been disputed by the Department., The only point for consideration has been that Dollar Bearer Certificate cannot be held to have been encashed as they were not surrendered to the office of issue and were instead sold to secondary market. The relevant portion in the assessment order containing the basis for disallowance trade by the Assessing Officer is reproduced as under:---
The fact that remittances have been received through proper banking channel is not denied. The fact of sale in the secondary market whereby the Government did not derive any benefit which it would have had the DBCs been encashed from the office of the issue. Further sale in the secondary market does not mean conversion. The asset in the form of DBCs is intact however, it has changed hands. The person holding DBCs on purchase shall be eligible for exemption in the DBCs. are encashed from the office of the issue, in case exemption is allowed in the hands of the assessee, it would amount to exempting an asset twice. As the sake rules out conversion, exemption cannot be allowed. Reference is drawn to ITAT's order WTAs Nos.311/KB to 320/KB, 326/KB to 329/KB of 1997-98, No.5/KB to 8/KB, 57/KB & 58/KB of 1998-99, dated 9-12-1998 wherein the foreign exchange Bearer Certificates are held to be foreign exchange and encashment into Pakistani Rupee is treated as first conversion. However, in this case there is no encashment hence no conversion taken place. The assessee has not surrendered his title to the DBCs, before the State but shifted the right to some other person, who shall be liable to exemption in the case of surrender of the entitlement/possession of the Dollar Bearer Certificate which shall stand converted at the time local currency is issued by the office of the issue/Federal treasury against the said certificate.
In view of the above facts, the assessee is not of considered to be entitled to exemption under clauses 7(1) and. 7(ii) of the 2nd Schedule to Wealth Tax Act, 1963. Hence claim on this account is disallowed.
5. The view-point of the Assessing Officer was- confirmed by the learned CIT(A) with the following observations:---
.....On perusal of record of the case and giving due consideration to the submissions of the learned counsel for the appellant I am of the view that the Assessing Officer was quite justified in not allowing the exemption to the appellant under clause 7(ii) of the Second Sched. of the Wealth Tax Act because the assets were created out of sale of Dollar Bearer Certificate in the open market and not through proper banking channel. By way of the sale of Dollar Bearer Certificates in the secondary market, the Government was deprived of the benefit which it would have had if the Dollar Bearer Certificates were surrendered with the office of issue. The ratio of the case-law cited by the learned counsel does not apply in the facts and circumstances of this case as in the cited case the transaction was through proper banking channel and not through the secondary market. I, therefore, see no reason to interfere and the treatment meted out by the Assessing Officer is hereby upheld."
6. On going through the observations of the learned Assessing Officer and learned CIT(A) as reproduced above, it is seen that the exemption has been disallowed by them solely on the ground that Dollar Bearer Certificates were not properly encashed and were rather sold in the secondary market which was held to be a shifting of right to some other persons and not surrendering the title to these Dollar Bearer Certificates before th ' State. Contesting these findings of the officers below, the learned counsel for the appellant has referred to the encashment certificate issued by the Bank of America whereby the following confirmation has been made by the Bank:---
"We certify having issued DBC's amounting to US $ 104,000 by debiting your Term Deposit Account No.6208-069577-177 with us. The DBC's were subsequently sold into secondary market at a rate of Rs.51,77 = 1 = US $ and the proceeds of Rs.3,504,080.00 were credited to your Pak Rupees Account No.6208-082529-001 ".
7. The learned counsel has then referred to the rules relating to the issue and encashment of Dollar Bearer Certificates as contained in S.R.O. No.140(1)/91, dated 25-2-1991. The relevant Rule 7 relating to encashment of DBC's makes as under:---
...the Certificates may be encashed at any time from any office of issue. "
8. It has been pointed out that the Certificates were duly surrendered to the office of issue who after realising the same credited Rupee proceeds to the account of the assessee. In this manner the encashment has properly been claimed to have been made as per above rule 7 relating to issue and encashment of Dollar Bearer Certificates. The certificates had been duly surrendered to the office of issue. That the rupee value was realised through sale in the secondary market by the Bank acting as office of issue is pleaded to be of no consideration to the assessee who was only required to surrender, the certificates to the office of issue for realising such rupee value.
9. After going through the prescribed rules for the issue and encashment of Dollar Bearer Certificates and the confirmation issued by the office of issue with whom the certificates were surrendered, we are inclined to agree with this explanation of the learned counsel for the appellant. The Dollar Bearer Certificates are held to have been properly surrendered to the office of issue and the relevant provision as contained in Rule 7 of the Rules issued under SRO 140(1)/91, dated 25-2-1991 quoted above is held to have properly been complied by the assessee. The rupee proceeds having been realised by the office of issue and credited to the accounts of the assessee is held to have constituted a sufficient evidence of encashment of such certificates. As such the rupee value realised on conversion of Dollar Bearer Certificates is held to be liable for exemption in terms of provision of clause 7(ii) of the Second Sched. to the Wealth Tax Act, 1963. The disallowances made by the officers below on this ground is deleted for all the four years under appeal.
10. The other ground taken by the appellant relates to valuation of produce Index unit has not been applied as the agricultural land was in fact barani on which a lower index was applicable. The learned counsel for the appellant has admitted that no proper evidence for this purpose could be produced before the officers below for the reason that such evidence could not be obtained from the concerned authorities in time. However, the relevant, documents had now been produced from the local record office and it has been pleaded that the matter may be set aside for re-adjudication by the Assessing Officer, after taking-into consideration, the actual category to which the agricultural land pertained. The learned counsel has shown us the relevant extract from the land record obtained by him from the concerned authorities and it is seen that not the entire agricultural land is irrigated and it would be proper if valuation is made after applying the correct index as applicable. As these documents were not placed before the officers below and were not subjected to examination by them and as the assessee was also handicapped in filing such evidence at the time of proceedings before them, it is considered proper to set aside the matter for re-examination by the Assessing Officer after allowing proper opportunity to the appellant, and we do accordingly.
11. All the four appeals succeed to the extent and in the manner mentioned above.
C.M.A./M.A.K./111/Tax(Trib.) Appeals succeeded.