(a) Wealth tax‑‑‑

‑‑‑‑ Property‑‑‑Title, divestment of‑‑‑Effect‑‑‑If a person had already been divested of his title in the property, the property could not be considered to be belonging to him.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 3, 2(m) & 17‑‑‑Charge of wealth tax‑‑‑Net wealth‑‑‑Wealth escaping assessment‑‑‑Property/land of the assessee was acquired by the Development Authority and assessee was promised exemption of 30% of the acquired land which was supposed to be allotted to the assessee‑‑ Assessee did not disclose the same in wealth tax return‑‑‑Department added the value of the exempt share of land in the net wealth of the assessee‑‑‑Validity‑‑‑Assessee was not owner of the land acquired by the Authority for wealth tax purposes, hence the Assessing Officer misdirected himself while treating the property acquired by the Authority as a part of wealth of the assessee‑‑‑After acquisition of land by the Authority, the property in question did not belong to the assessee and the same was not chargeable to wealth tax under S.3 of the Wealth Tax Act, 1963‑‑‑Appellate Tribunal rejected the appeal of the Department.

(1985) 155 ITR 277 and W.T.A. No.363/LB of 1995 ref.

1996 PTD (Trib.) 905 and 1997 PTD (Trib.) 1034 rel.

Mehboob Alam, D.R. for Appellant.

M. Anwar Pasricha for Respondent.

Date of hearing: 23rd November, 2001.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER). ‑‑‑Titled wealth tax appeals for the assessment years 1994‑95 to 1997‑98 have been directed against the combined impugned order, dated 15‑5‑2000 passed by the learned AAC, Appeal Range, Lahore. The ground which has been agitated by the revenue is that the learned First Appellate Authority was not justified to accept the declared value of the property by the assessee. Since in all the appeals common question of law and fact are involved, we intend to dispose of the same by this consolidated order.

2. Briefly stated the facts of the case are that the original wealth tax assessments were completed under section 16(3) of the Wealth Tax Act, 1963 (hereinafter calls as Act) at the net wealth of Rs.17,81,811 Rs.19,31,811, Rs.18,31,811 and Rs.20,55,811 respectively for the years under appeal. It was also noticed by the Assessing Officer that the 'assessee has paid a sum of Rs.2,55,811 towards development charges on 25‑7‑1990 for the exempt developed plots to be allotted to the assessee in Gujjarpura Scheme, Lahore in lieu of land acquired by LDA measuring 34 Kanals, 2 Marlas and 37 sq. ft., the assessee was allowed 10 % of exempt developed area measuring 10 Kanals, 4 Marlas and 148 sq. ft. vide a letter, dated 17‑6‑1990. Since the assessee in his wealth tax return did not disclose 30 % land which was supposed to be allotted the assessee subsequently, the Assessing Officer reopened the case under section 17 of the Act and after duly confronting to the assessee under the law, added the value of the land which comes to Rs.61,89,466 for each of the assessment year under appeal to the wealth of the assessee. On appeal, the learned First Appellate Authority directed to accept the declared version of the assessee for the reason that the land in question had already been acquired by the Government, hence not to be included in the taxable wealth of the assessee. Feeling aggrieved by the finding recorded by the learned First Appellate Authority, 'the Department is in appeal before us.

3. The learned D.R. appearing on behalf of the Department has vehemently contested the impugned finding of the learned First Appellate Authority. He submitted that not only the assessee was promised exemption of 30% of the acquired land but ultimately the LDA has allotted 8 plots to the assessee against the exempt share. It was also contended that the assessee did not contest the acquisition of land by the LDA which could prove that the assessee was forcibly deprived of possession of the land. Besides, the learned D.R. tried to seek strength from the observations made by the Assessing Officer in his Assessing Office.

4. In rebuttal, the learned A.R. averred at the bar that since the land has been acquired by the LDA, the assessee was not owner of the land. He submitted that land was acquired by the LDA in 1990 vide a letter, dated 17‑6‑1990 giving all the details and the conditions pertaining to the allotment of the plots in lieu of exempted 30% of the total land acquired by the LDA. Through the abovementioned letter the Assessee was also asked to pay Rs.2,55,811 as part of development charges for the exemptable area at the rate of Rs.50,000 per Kanal. He informed the Court that the assessee was allotted plots vide a letter, dated 2‑8‑1999. He contended that net wealth as defined by subsection (2) of section 16 of the Act refers to the wealth/property belonging to the assessee on the valuation date. He elaborated that since the land owned by the assessee had already been acquired by the LDA, the property in question did not belong to the assessee for the reason that the assessee could not deal with the property any more A complete and full owner. In support of his contention he relied upon the judgment of the Tribunal as well as the case‑law from the Indian jurisdiction. First case relied upon by the learned A.R. of the assessee was (1985) 155 ITR 277. In this case the property was compulsorily acquired by the Government under the Land Acquisition Act, 1894. In the assessment for the assessment year 1974‑75 the Assessing Officer assessed to tax under the head capital gains the compensation received by the assessee in respect of acquisition of land in three survey numbers by the City Improvement Trust Board. The learned AAC upheld the assessment in respect of two survey number but in respect of the third survey numbers he held that since the award was passed on March 29, 1973, the transfer took place during the accounting year relevant to the assessment year 1973‑74 and not, 1974‑75, and hence directed the ITO to modify the assessment relating to capital gains. The Tribunal upheld the assessment made by the ITO on the ground that the possession of the third survey number was taken on April 21, 1973 and the other two survey numbers on November 8, 1973; and both these dates fell within the accounting year ending March 31, 1974. On a reference it was held by the Honourable Division Bench of the Karnataka High Court that where the property is acquired under the Land Acquisition Act, 1894, the title to the lands vests in the Government under section 16 of the Act on the taking of possession of the land by the Deputy Commissioner pursuant to an award passed under section 11 of the Act. Therefore, since the possession of the lands was taken over on April 21, 1973, and November 8, 1973, i.e., during the previous year ending March 31, 1974, relevant to the assessment year 1974‑75, the capital gains were assessable in the assessment year 1974‑75.

5. Next judgment which was cited by the learned A.R. in support of his plea is reported as (1956) 74 Tax 56 (Trib.). In this judgment the assessee, a partnership firm entered into agreement to purchase a piece of land and a sum was advanced by the assessee. Seller conveyed the demised property in favour of a third party as nominee of the assessee and on the same day the assessee entered into an agreement with the third party to purchase the said piece of land. The assessee returned deficit wealth for the years under consideration and claimed that the land in question belonged to the third party. The Assessing Officer rejected the claim and created charge. The learned First Appellate Authority held that the assessee is not rightful owner of the land and deleted the charge. The Tribunal agreed with the finding recorded by the learned First Appellate Authority holding that the word "belonging" used in sub clause (m) of section 2 of the Act while defining "net wealth" refers to complete and full owner. It was also added that mere agreement to sell does not confer any right or title in the property.

6. Reliance was also, placed on an unreported case of the Tribunal passed in W.T.A. No.3631LB of 1995 for the year 1989‑90. The facts of the supra mentioned case are almost identical to the assessee's case wherein a plot situated in Defence Cooperative Housing Society was the subject‑matter of wealth tax proceedings. It was observed by the Tribunal that under the Wealth Tax Act it is the owner who is charged to wealth tax and the assessee whose property has already been acquired is not in fact owner of the property in those impugned years, unless the notification is cancelled by the Honourable High Court and property transferred back to him, the same cannot be considered to be as net wealth of the assessee under clause 2(m) of the Wealth Tax Act and consequently cannot be subjected to charge created by section 3.

7. Arguments heard and relevant orders alongwith case‑law cited at the bar perused. After hearing the arguments advanced by both the learned counsel, we find ourselves in full agreement with the contentions raised by the learned A.R. appearing on behalf of the assessee. Section 3 of the Act provides for charge of tax, to be known as wealth tax, in respect of the net wealth of an assessee on the valuation day. Sub‑clause (m) of section 2 defines "net wealth" to mean the amount by which the aggregate value computed in accordance with the provisions of the Act of all `assets' wherever located "belonging" to the assessee (underlining is ours (sic)) is in excess of the aggregate value of all debts owed by an assessee on the valuation date. However, for the purposes of disposal of these four departmental appeals (for the assessment years 1994‑95 to 1997‑98) we have been called upon to answer that if in the facts before us the assets in question belong to assessee so as to make it includable in the net wealth of the assessee in the judgment cited by the learned A.R. reported as 1996 PTD (Trib.) 905 the word "belonging" was exhaustively dealt by the Tribunal wherein it was observed that a property of a person, is that what is in his possession which is liable to wealth tax. Simple question which is to be resolved in the case before us is what is the state of affairs after the property of the assessee has been acquired by the Government. Though the Assessing Officer was of the view that 30% exempt share of the assessee all along belonged to the assessee but we would like to note that whether the 30% share of the assessee was ascertainable? Could the assessee sell or dispose of his 30% share at his own free‑will till the plots in lieu of exempt property were allotted to the assessee? Answer to all these questions would be in the negative. Obviously if a person has already been divested of his title in the property, the property could not be considered to be belonging to the assessee. Even perusal of letter, dated 17‑6‑1990 shows that the assessee was informed with regard to the acquisition of his property and was directed to deposit the development charges. Certain conditions have been laid down wherein it has been mentioned that dues will be payable in lump sum in the share of a bank draft within a period of six weeks from the issue of this demand notice, if the dues are not cleared within 3 months from the date of issue of this demand notice, the exemption of the plot is liable to be revoked and in such an event only cash compensation as assessed by the L.A.C. for your land will be payable to the assessee. It was also categorically mentioned that the assessee has to file an affidavit that the area claimed for exemption has not been sold, mortgaged or gifted to anyone by the assessee. Obviously, these two conditions mentioned in the LDA's letter does impose restriction on the title/ownership of the assessee. What would be the situation if the assessee fails to pay the development charges within the stipulated period. At the most he would be entitled to have the compensation at the rate prescribed by the LDA rules and is not entitled to have 30 % share of the land. It is also worth‑noting that the assessee was allotted plots against his 30% share of the acquired land on 4‑8‑1999 this would be the date when he became owner of 30% promised share of land. We would like to reproduce the observations made by the Tribunal in its Full Bench reported as 1997 PTD (Trib.) 1034 wherein it has been held that:

"The period between acquisition of land by a society and its transfer to members by whatever means in vogue which will give them control and seisin on the plot for free enjoyment or disposal, will per force of shifting over. Barring rare exception, neither the society nor a member may be liable for wealth tax during this period."

8. Perusal of supra paragraph also supports the contention raised by the learned A.R. that he was not owner of the land acquired by the LDA for wealth tax purposes, hence the Assessing Officer misdirected himself while treating the property acquired by the LDA as a part of wealth of the assessee.

9. In, the light of above discussion and the cases‑law cited above, we are of the considered view that after the acquisition of land by the LDA, the property in question did not belong to the assessee. Therefore, the same was not chargeable to wealth tax under section 3 of the Act.

10. For the foregoing reasons, we are not inclined to interfere in the impugned order which is hereby maintained.

11. Appeals of the department being devoid of any merit stand rejected.

C.M.A./M.A.K./229/Tax (Trib.)

Appeals rejected.