(a) Wealth Tax‑‑‑

‑‑‑‑Valuation‑‑‑Valuation by bank for loan purpose‑‑‑Adoption of‑‑ Validity‑‑‑Neither the value of assessee's godown could be assessed on the basis of bank report nor it could be estimated in accordance with the history of the case without any cogent reason.

(b) Wealth Tax Rules 1963‑‑‑

‑‑‑‑R.8(3)‑‑‑Wealth Tax Act, 1963, Ss.7 & 46‑‑‑Valuation of land and building‑‑‑Value of godown was assessed by the Assessing Officer as adopted by the Bank for purpose of advancing loan‑‑‑Validity‑‑‑Method of valuation of assets and properties is prescribed by law according to its objective‑‑‑Valuation of assessee's godown as assessed by banker under banking laws for the purpose of advancing bank loan is neither binding on the Assessing Officer nor it has any persuasive value under the Wealth Tax Act, 1963‑‑‑Wealth Tax Act, 963 prescribed its own‑method of valuation of assets of the wealth tax assessees and binds wealth tax officers to follow the method in assessments‑‑‑Section 7 of the Wealth Tax Act. 1963 prescribes the method for determination of value of assets and states that the value of any asset, other than cash for the purpose of Wealth Tax Act, shall be estimated by the Assessing Officer in accordance with the Rules made under S.46 of the Wealth Tax Act, 1963‑‑‑Value of lands and building according to the Rules shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in its neighbourhood‑‑‑Value of any immovable pro perty (other than an open plot of land) could not be determined by the Assessing Officer at a sum higher than 10 times the gross annual rental value of such property except, with the approval of the Commissioner‑‑ Assessing Officer had based his assessment of value of assessee's godown on the report of the Bank and had not made a fair estimate of the Annual Letting Value of the said property after confronting the asses see‑‑‑Assessing Officer although had mentioned in his assessment order about the approval of the Commissioner but it was not known how the approval had been taken when no fair estimate of the Annual Rental Value of the property was made and when it was not indicated as to how many times the Annual Letting Value was multiplied‑‑‑Assessment made by the Assessing Officer was set aside by the Tribunal for de novo action‑‑‑Assessing Officer was directed to make a fair estimate of Annual Letting Value of the property and the matter be confronted to the assessee‑‑‑If the Assessing Officer intends to multiply the estimated Annual Letting Value by more than 10 times he should specifically indi cate this fact and get the approval from his Commissioner ‑‑‑Assessee's view point should also be incorporated in the assessment order‑‑‑Order should he speaking one and transparent ‑‑‑Assessee who was affected by the order should know and also the Commissioner who was giving approval should know about the fair estimate of Annual Letting Value of the property in question and they should also know as to how many times the Annual Letting Value was being multiplied.

(1996) 74 Tax 154 (Trib.) rel.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.2(16)(2)(ii)‑‑‑Debts‑‑‑Assessee got loan from bank against mortgage/pledge of wife's property‑‑‑Such liability was claimed by the assessee‑‑‑Disallowance‑‑‑Validity‑‑‑Liability relating to the property of the wife of the assessee should not be allowed to the assessee‑‑ Section 2(16)(ii) of the Wealth Tax Act. 1963, states .that while determining net wealth of an assessee, debts which were secured on, or which had been incurred in relation to, any asset in respect of which the wealth tax was not payable under the Wealth Tax Act were not to be excluded from the .total assets of an assessee held by him on the valuation date‑‑‑Debt in question had been secured on assets of his wife by the assessee and that asset had not been offered for wealth tax in the hands of the assessee, and therefore, the said debt could not be allowed to the assessee.

Ahmed Kamal for Appellant.

Khurshid Ahmed for Respondent.

Date of hearing: 1st March, 2002.

ORDER

MUHAMMAD SHARIF CHAUDHRY (ACCOUNTANT MEMBER).----‑‑‑Cross appeals have been filed, four in number, two by the assessee and two by revenue against the appellate order, dated 9‑12‑2000 passed by Commissioner Income‑tax/Wealth Tax Appeal Zone‑IV, Lahore under section 23 of the Wealth Tax Act for the years 1997‑98 and 1998‑99. Grounds of appeal and issues raised being identical, all the four appeals are disposed of by this consolidated order in the light of the arguments given by the authorized representatives of both the parties and after considering the relevant facts and records as under:

Issue of valuation of godown:

2. Value of godown was declared by the assessee at Rs.450,000 in his wealth tax returns. The godown had been mortgaged with bank and its value for the purpose of loan was assessed by the bank at Rs.27,61,762. The Assessing Officer proceeded to adopt this value as assessed by the bank with the approval of his (Zonal) Commissioner under Wealth Tax Rule 8(3). In appeal the learned Commissioner (Appeals) reduced the value to Rs. 20 lacs.

3. With the order of the learned Commissioner both the parties are dissatisfied. It has been contended by the AR of the assessee that the Wealth Tax Officer had no justification to assess the value of the godown in question on the basis of bank report. According to him he should have made the valuation under Wealth Tax Rules or on the basis of the history of the case. On the other hand the learned D.R. has submitted that the value of the godown as estimated by the bank should be assessed under Wealth Tax Act in the hands of the assessee, as the assessee has derived benefit in getting loan from the bank. In the opinion of the D.R., the contention of the A.R. of the assessee that the value estimated by the bank is excessive and that is only for the purpose of bank loan needs to be discarded, as it would amount to giving double benefit to the assessee. It would mean, as asserted by the D.R., that whenever an assessee wants to get loan he may disclose the value at higher side whenever he is subjected to wealth tax on the value of his asset he may reduce its value. The D.R. has further submitted that the relief allowed by the Commissioner to the assessee by reducing the value of the godown from Rs. 27,61,762 to Rs.20 lacs is absolutely unjustified.

4. We have considered the contentions of both the parties and have appreciated the facts available before us. We do not agree with the rival point of view expressed by the authorized representatives of the A parties before us. Neither the value of assessee's godown can be assessee on the basis of bank report nor it can be estimated in accordance with the history of the case without any cogent reasons.

5. In fact method of valuation of assets and properties is prescribed by every law according to its needs and objectives. Therefore, the valuation of assessee's godown as assessed by a banker under banking laws for the purpose of advancing bank loan is neither binding on the Wealth Tax Officer nor it has any persuasive value under the Wealth Tax Act. The Wealth Tax Act of 1963 has prescribed its own method of valuation of assets of the wealth tax assessees and it binds its wealth tax officers to follow this method in their assessments. Section 7 of the Wealth Tax Act of 1963 prescribes the method for determination of value of assets and states that the value of any asset, other than cash, for the purpose of this act, shall be estimated by the Deputy Commissioner iii accordance with the Rules made under section 46 of the Act. Rules under section 46 of the Act have been made and these rules are called Wealth Tax Rules of 1963. Rule 8(3) of these Rules deals with method of valuation of immovable properties. According to this Rule the value of lands and buildings (excluding agricultural land) shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the said locality. However, the value of any immovable property (other than an open plot of land) cannot be determined by the DCWT at a sum higher than 10 times to gross annual rental value of such property except with the approval of the Commissioner. The ITAT has held in so many of its reported judgments such as (1996) 74 Tax 154 (Trib.) that while making valuation of the immovable constructed property a fair estimate of the ALV of such property should be made and the value determined of such property should not exceed 10 times of the ALV.

6. We have noticed in this case that the Wealth Tax Officer has merely based his assessment of value of assessee's godown on the report of a bank. He has not made a fair estimate of the ALV of the said property after confronting the assessee. Although he has mentioned in his assessment order about the approval of the Commissioner but it is not known how the approval has been taken when no fair estimate of the annual rental value of .the property was made and when it was not indicated as to how many times the ALV was being multiplied. In view of this situation it would be fair if the assessment made by the Wealth Tax Officer is set aside for de novo action. The Wealth Tax Officer is directed to make a fair estimate of ALV of assessee's property and the matter should be confronted to the assessee. If he intends to multiply the estimated ALV by more than 10 times he should specifically indicate this fact and get the approval from his Commissioner. Assessee's view point should also be incorporated in the assessment order. The order should be speaking and transparent. The assessee who is effected from the order should know and also the Commissioner who is giving approval should know about the fair estimate of annual rental value of the property in question and they should also know as to how many times the ALV is being multiplied.

The issue of liabilities:

7. This issue has been raised by the assessee only and not by the revenue. It has been contended that the First Appellate Authority had no lawful justification to set aside and remand the case back to the Assessing Officer on claim of liabilities as the claim was fully verifiable and it should have been allowed. According to the assessee, the bank liability belongs to appellant only and it has got no concern whatsoever with appellant's wife. It has been strongly pleaded by the A.R. of the assessee that the assessee had got loan from the bank against the mortgage/pledge of his wife's property. Assessee's wife is' filing her wealth statements and she is not claiming the liability in question.

8. From the assessment order of the Wealth Tax Officer it transpires that he has disallowed the liability relating to property of assessee's wife with the following remarks:

"As per clause (ii) of subsection (16). of section 2 of the Wealth Tax Act, 1963 debits which are secured on or which are incurred in relation to any asset in respect of which wealth tax is not payable under the act are not allowable. Hence claim of liability on pro‑rata basis is only allowable to the extent of assessee's assets and not the assets of wife Mst Shamsa Khawar "

9. In appeal the learned CWT has set aside the issue of liability with the following remarks:

"The above liabilities were allowed to the extent of the appel lant's assets and not to the assets which are owned by wife of the appellant. However, the Assessing Officer has not recorded in the assessment order the list of assets (alongwith their values) owned by the appellant and the lists which are owned by the appellant's wife. Therefore, the matter under consideration is remanded to the Assessing Officer with the directions to decide it afresh keeping in view the above observations."

10. We have considered the contentions of the assessee ,wd the arguments of the A.R. in the light of the facts available or record We do not agree with the contention of the A.R. of the assessee that the liability in question which relates to the property of the wife of the assessee should not be allowed to the assessee. Section 2(16)(ii) of the Wealth Tax Act, states that while determining net wealth ref an assessee, debts which are secured on, or which have been incurred in relating to, any asset in respect of which the wealth tax is not payable under this act are not to be excluded from the total assets‑of an assessee held by him on the valuation date. The debts in question has been secured on assets of his wife by the assessee and that asset has not been offered for wealth tax in the hands of the assessee. Therefore, the said debt cannot be allowed to the assessee. Hence in our view the action of the Wealth Tax Officer was correct. However, the department has not raised any ground in its appeal memo on this issue. So, we cannot restore the order of the Assessing Officer. In these circumstances it would be fair of the grounds of the appeal raised by the assessee against the appellate order of the learned Commissioner are rejected on this issue and the impugned appellate order is maintained.

C.M.A./M.A.K./366/Tax(Trib.)Order accordingly.