Messrs KHALID CONSTRUCTION CO. (PVT.) LTD., ISLAMABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2468 (2001)

Wealth Tax Rules, 1963

‑‑‑‑R.8(3)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Valuation of land and buildings‑‑ Valuation on the basis of Annual Letting Value‑‑‑Contention that the value of the plot be excluded from the value of the property adopted on the basis of Gross Annual Letting Value had been considered at length by the Income‑tax Appellate Tribunal, which had found that since the building was on rent its maximum value could be adopted at ten time of the Gross Annual Letting Value under the rules and that there was no provision for exclusion of the value of the plot from the value of the property worked out in said manner‑‑‑Contention was repelled by the Federal Tax Ombudsman‑‑‑Regarding the plea for adjustment of excess income‑tax payment against wealth tax demand, the complaint was advised to make an application to the concerned Assessing Officer, giving relevant particulars, who may then take necessary action if any income tax refund was found actually due to the complainant.

1999 PTD 1060 rel.

Khalid Malik, Managing Director and Syed Pervez Kosar, General Manager for the Complainant.

Nadir Mumtaz, D.C.I.T. for Respondent.

FINDING/DECISION

These are two almost identical complaints filed by a private limited company relating to valuation of property known as Khalid Plaza in its wealth tax assessments for the assessment years 1991‑92 to 1996‑97. The two complaints are disposed of through these consolidated findings as under:‑‑

C. No. 1456 of 2001

The complaint is rather vague and does not give the full facts. However, the main points as extracted from the complaint are as follows:

(i) The Wealth Tax Officer, Circle 2, Companies Zone, Islamabad has passed assessment orders for the wealth tax assessment years 1991‑92 to 1996‑97 which are bad in law and' contrary to the facts of the case.

(ii) The net value of the property, Khalid Plaza, Islamabad has not been correctly assessed because the land on which the building has been constructed does not belong to the complainant company but to one of its Directors, Mr. Khalid Malik. As per history of the case the value of the plot was to be deducted from the value of the property.

(iii) The value of the plot has also been assessed in the hands of the Director, Mr. Khalid Malik.

(iv) Wealth tax cannot be levied on two persons in respect of the same property.

(v) The Assessing Officer may be directed to assess the wealth of the complainant company after deducting the value of the plot from the total value of the property.

(vi) The advance .tax deducted in the account of the company has neither been adjusted against outstanding tax nor any refund has been given.

C. No. 1457 of 2001

This complaint is basically a, request for stay of recovery of demand. The main points in this complaint are as under:

(i) The Special Officer Wealth Tax, Circle 2, Companies Zone, Islamabad created wealth tax demand of Rs.967,041 in the complainant's case which is unjustified.

(ii) The plot on which the building is constructed belonged to a Director of the company and has been assessed to wealth tax in his own hands as well as in the hands of company.

(iii) Wealth tax cannot be levied on two persons with respect to the same property. This fact was accepted by the Commissioner of Income‑tax (Appeals) and the Special Officer may be directed to deduct the value of the plot from the estimated value of the property assessed in the hands of complainant company.

(iv) The advance tax deducted in the case of the complainant has not been adjusted/refunds.

(v) The Special Officer Wealth Tax, Circle 2, Company Zone, Islamabad be directed to keep recovery pending till decision by this Office.

2. The respondent's reply has been received and the representatives of the complainant and the respondent have attended and have been heard. It was stated on behalf of the respondent that it was correct that for the assessment years . 1988‑89 to 1990‑91 the CIT (Appeals) had directed that the value of the plot be excluded from the value of the property determined on the basis of G.A.L.V. in the complainant's case but for the assessment years 1991‑92 to 1996‑97 the order of the CIT (Appeals) (ordering the exclusion of the value of the plot) has been reversed by the Income‑tax Appellate Tribunal vide its order dated 4‑4‑2000. Copy of the said order was produced in which the Tribunal has relied on the Lahore High Court judgment reported as 1999 PTD 1060 while holding that the value of plot owned by the Director of the company was not to be excluded from the value of the building assessed in the hands of the complainant company. The complainant, however, pointed out that for the assessment years 1994‑95 to 1996‑97, the CIT (Appeals) in his order, dated 21‑9‑1999 in the case of Mr. Khalid Malik, Director had noted that the Assessing Officer had accepted the position that the plot in question belonged to Mr. Khalid Malik, and the CIT (Appeals) had directed that the value be adopted on the basis of rates specified by the District Collector for the purpose of stamp duty instead of being adopted on estimate basis as had been done by the Assessing Officer. It was stated on behalf of the complainant that this order of the CIT (Appeals) had attained finality and it is, therefore, not reasonable that the same property be included in the wealth of the Director as well as the complainant company for the same year(s).

3. The contentions of the two sides have been considered. The complainant's contention that the value of the plot should be excluded from the value of the property adopted on the basis of GALV has been considered at length by the Income‑tax Appellate Tribunal, which has held that since the building is on rent its maximum value can be adopted at ten times of the GALV under the rules and that there is no provision for exclusion of the value of the plot from the value of the property, worked out in this manner. The Tribunal has also observed that its view is supported by the Lahore High Court decision reported as 1999 PTD 1060. The Tribunal has thus reversed the findings of the CIT (Appeals) and has restored the orders of the Assessing Officer for the years 1991‑92 to 1996‑97 on this point. The complainant has not gone in reference/appeal before the High Court against the order of the Income- tax Appellate Tribunal which is thus final. It is, therefore, not possible to intervene in the matter. As regards the contention that there is an anomaly in so far as the value of the plot has also been assessed in the hands of the Director, the said assessment is not the subject of the two complaints filed by the complainant company apart from the fact that the Tribunal does not appear to have accepted the existence of such an anomaly.

4. As regards the contention that advance tax had not been adjusted/ refunded it was explained that in fact there was excess income tax payment by the complainant company and this excess, payment (income‑tax refund) may be adjusted against the wealth tax demand. The representative of the respondent stated that this can be looked into and the needful can be done under section 31E of the Wealth Tax Act in accordance with law and facts, if the complainant makes an application to this effect providing relevant particulars.

5. As a result the complainant's plea relating to the exclusion of the value of the plot from the value of the property estimated in the hands of the complainant Company stands rejected. Regarding the plea for adjustment of excess income‑tax payment against wealth tax demand the complainant may make an application in this regard to the concerned Assessing Officer, giving relevant particulars. The Assessing Officer may then take necessary action if any income‑tax refund is found actually to be due to the complainant.

6. Since findings/decision has been given in the two complaints as above, there is no longer any case for stay of recovery except to the extent that it is covered by the claim of any refund/adjustment referred to in para. 5 above. The two complaints stand disposed of as above.

C.M.A./M.A.K./336/FTO

Complaints disposed of.