W.T.As. Nos. 1124/LB to 1126/LB of 1999, decided on 28th March, 2000. VS W.T.As. Nos. 1124/LB to 1126/LB of 1999, decided on 28th March, 2000., 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2621 (2000)

Wealth Tax Rules, 1963‑‑‑

‑‑‑‑Rr. 8(3) & 8(6)‑‑‑C.B.R. Circular No. 11 of 1994, dated 17‑7‑1994‑‑Plot on lease in Cantonment area. from the Government of Pakistan through Military Estate Officer‑‑‑Valuation of‑‑‑Value was assessed under R.8(3) of the Wealth Tax Rules, 1963 in accordance with the rates notified by' the District Collector ‑‑‑Assessee contended that value of plot was to be determined in accordance With R.8(6) and not under R.8(3) of the Wealth Tax Rules, 1963 as he enjoyed only tenancy rights and the owner of the plot was the Government of Pakistan‑‑‑Validity‑‑‑Lease deed executed between the Military Estate Officer representing Government of Pakistan and the lessee showed that the word "demise" had been used instead of word "lease" and the plot had been demised to the lessee with full, rights and liberty at all times to do all acts and things‑‑‑Word "demise" had been used again and again in connection with transfer of rights in the plots in the said deed of lease‑‑‑Plot had been demised in favour of lessee initially for a period bf 30 years with all rights of easements and appurtenances and the lease could be renewed at the option of the lessee for total period of 90 years‑‑‑Notorious fact was that the lands in cantonment which were given on long lease by the Government of Pakistan to the lessee were a subject of routine purchase and sale‑‑‑When the lessee sold the land to a purchaser, the purchaser stepped into the shoes of lessee with full rights and the lease deed was executed by the Government with that purchaser‑‑‑Such leased land could also be gifted, disposed of through will and was inheritable on the death of the lessee‑‑‑District Collector had notified the rates of these lands under the Stamp Act, 1899 for the purpose of registration‑‑‑Lands in the Cantonment areas were generally very expensive as compared to the lands situated in other areas due to better civic amenities, better standard of cleanliness, better position of security etc.‑‑‑Rights acquired in such lands were in nature of proprietary/ownership rights and these rights could be alienated through transfer/sale/gift/will/ inheritance etc. ‑‑‑Appellate Tribunal held that action of the Assessing Officer in making assessment of the value of assessee's plot under R.8(3) of the Wealth Tax Rules, 1963 was justified which had rightly been confirmed in appeal by the First Appellate Authority.

W.T.As. Nos. 150 to 154/LB of 1985‑86 not relevant.

M.R. Farooqi, ITP for Appellant.

Shahid Azim Khan, DR for Respondent.

Date of hearing: 28th March, 2000.

ORDER

MUHAMMAD SHARIF CHAUDHRY (ACCOUNTANT MEMBER). ‑‑‑Appeals have been filed by a wealth tax assessee to challenge appellate order dated 15‑4‑1999 passed by Commissioner, Income Tax/Wealth Tax, Appeal Zone, Sialkot on the issue of assessment of plots in the hands of the assessee. Appellant's A.R. and respondent's D.R. have been heard. Available records have been perused. All the three appeals are decided by this consolidated order in the light of the facts available on record and in the light of the pleadings made at the bar as follows.

2. It has been contended in the grounds of appeal that the learned Commissioner has. grossly erred in confirming the value a of leasehold plots which had been assessed by the Special Officer.

3. Brief facts of the case are that the assessee declared following plots in his wealth tax return:

(i) 20 Marla plot at Sarwar Road, Sialkot Cantt.

(ii) 1/4th share in 100‑Marla.plot at Sarwar Road, Sialkot Cantt. (Assessment Year 1997‑98 only).

These plots are situated in Sialkot Cantt. and the assessee had acquired these plots on lease from the Government of Pakistan through Military Estate Officers, Lahore. Value of the first plot was declared at Rs.4,300 whereas the value of share in the second plot was declared nil as it was gifted. The declared version was, however, rejected by the Wealth Tax Officer who proceeded to make valuation of these plots at the rates fixed by the District Collector, Sialkot in accordance with provisions of rule 8(3) of the Wealth Tax Rules of 1963. Against this treatment of the Assessing Officer an appeal was preferred by the assessee before the Commissioner of Wealth Tax, Appeal Zone, Sialkot. It was contended before the First Appellate Authority that the Assessing Officer had misconstrued the provisions of rule 8(3) read with Circular No.11 of 1994 as the plots belong to Government of Pakistan and the assessee was merely a lease holder of these plots. It was argued on behalf of the assessee that the value of these plots was to be determined in accordance with rule 8(6) and not under rule 8(3) as the assessee enjoyed only tenancy rights and the owner of the plots was the Government of Pakistan. However, this contention of the assessee was not accepted by the learned Commissioner who rejected the appeals and confirmed the assessed value of the plots with the following observations:

"I do not agree with the learned counsel in this regard. Rule 8(6) deals with life tenancies only which extinguish on the death of the tenant. In the instant case, the rights to use the land in cantonment area are transferred through an instrument executed between the President of Pakistan through Military Estate Officer and the purchaser. The word used in the instrument is `demise' and not lease. Moreover, the purchaser/lessee gets all proprietary rights including rights of assessment, appurtenances etc. The rights are transferable and inheritable without the consent of anybody other than the person in whose name the demise is executed. In the deed it is stated that the lessee shall include his heirs, executors, administrators, representatives and assigns. The rights are saleable on market rates and sale is liable to be registered with the Registrar of Properties. The Deputy Commissioner also notified the rates for all the area of Cantonment. The deed is renewable at the option of the lessee and lessor has no right to withdraw the rights given to the lessee. In view of these facts it is obvious that the legal position of land in the Cantonment area is an ownership for all practical purposes.

In this view of the matter the arguments advanced by the learned counsel are not tenable. The valuation having been made strictly in accordance with District Court rates, is therefore, confirmed."

4. It has been pleaded by the A.R. of the assessee that the Commissioner (Appeals) is not justified in confirming the action of the Assessing Officer in respect of assessee's above mentioned plots. The said plots have been obtained by the assessee on lease and the owner of the said plots is Government of Pakistan. According to the A.R. the value of these plots cannot be assessed in the hands of the assessee under rule 8(3) of the Wealth Tax Rules because rule 8(3) can be applied only in the case of immovable property which is owned by a taxpayer. The assessee being a lessee, the value of these leasehold plots should be made in his hands under rule 8(6) of the Wealth Tax Rules. In support of his arguments the A.R. has produced copies of lease deed and a judgment of the ITAT, Islamabad Bench in W.T.As. Nos. 150 to 154/LB of 1985‑86, dated 18‑7‑1991.

5. The above mentioned contentions of the assessee and the pleadings of his A.R. have been strongly rebutted by the D.R. of the respondent. It has been contended by the D.R. that the Assessing Officer as well as the First Appellate Authority have taken right view of the matter and they have rightly rejected assessee's contention regarding assessment of leasehold plots under rule 8(6) of the Wealth Tax Rules. According to the learned D.R. the rights of the assessee in respect of these plots tantamount to ownership and the value of the said plots has, therefore, rightly been assessed under rule 8(3) of the Wealth Tax Rules.

6. We have considered the contentions of both the parties and have appraised the arguments of their authorized representatives. We have also gone through the impugned appellate order. We find ourselves in full agreement with the learned Commissioner in holding that the value of assessee's leasehold plots cannot be assessed under rule 8(6) and the same has rightly been assessed under rule 8(3) of the Wealth Tax Rules. We endorse the reasons given by the learned Commissioner for rejecting assessee's claim and add that rule 8(6) can, by no stretch of imagination, be applied in the case of the plots of the assessee. Rule 8(6) of the Wealth Tax Rules reads as under:

"Life tenancies. ‑‑‑The value of life rights shall be determined on the basis of the value of the benefit derived by the assessee during the year ending on the valuation date multiplied by either the number representing the difference between sixty‑five and the age of the assessee (in completed years) on the valuation date or twenty‑five, whichever is the less."

Thus, rule 6, as reproduced above, deals with the method of valuation of life tenancy. Life tenancy, as the very name suggests, is extinguished on the death of the tenant. But the rights acquired by the assessee are transferable through sale and gift and are inheritable on the death of the assessee by his legal heirs. A perusal of the lease deed executed between the Military Estate Officer representing Government of Pakistan and the lessee shows that the word `demise' has been used instead of word `lease' and the plots have been demised to the lessee with full rights and liberty at all times to do all acts and things... The word `demise' has been used again and again in connection with transfer of rights in the plots in the said deed of lease. The plots have been demised in favour of lessee initially for a period of 30 years with all rights of easements and appurtenances and the lease can be renewed at the option of the lessee for total period of 90 years. The very fact that the assessee has sold his Plot No. l in the subsequent years and has obtained 1/4th share in Plot No.4 on gift from his father defines the nature of lease/demise of the plots in question. It is a notorious fact that the lands in Cantonment area which are given on long lease by the Government of Pakistan to the lessee are a subject of routine purchase and sale. When the lessee sells the land to a purchaser, the purchaser steps into his shoes with full rights and the lease deed is executed by the Government with that purchaser. This leased land can also be gifted, disposed through will and is inheritable on the death of the lessee. Keeping in view the such transactions, the District Collectors have notified the rates of these lands under the Stamp Duty Act for the purpose of registration. Lands in the Cantonment areas are generally very expensive as compared with lands situated in other area due to better civic amenities, better standard of cleanliness, better position of security etc. Rights acquired in such lands are in the nature of proprietary/ownership; rights and these rights can be alienated through transfer/sale/gift/will/ inheritance etc.

In view of the abovementioned discussion the action of the Assessing Officer in making assessment of value of assessee's plots under rule 8(3) is justified and that has rightly been confirmed in appeal by First Appellate Authority. The case‑law quoted by the learned A.R. of the assessee is not relevant to the case of the assessee, as in the quoted judgment of the ITAT, the matter related to a cinema house built on a piece of land belonging to the Ministry of Defence and given to the assessee as a grant resumable at any time The Tribunal held that the value of the land had to be excluded from the assets of the assessee as it did not belong to him. But in the cast of the assessee, as discussed above, the rights of long lease acquire: by the assessee tantamount to proprietary/ownership rights and the District Collectors have fixed rates of lands acquired in such a way in Cantonment areas under the Stamp Duty Act for registration of purchase and sale thereof. Therefore, the contention of the assessee that value of assessee's plot' should be made under rule 8(6) carries no substance and merit. The valuation has rightly been made under rule 8(3) of the Wealth Tax Rules. So far as the objection of the assessee that value adopted by the WTO is highly excessive and arbitrary is concerned, the same is also devoid of any merits because the ITO has rightly assessed the value on the basis of rates prescribed by District Collector in accordance with provisions of rule 8(3) of the Wealth Tax Rules. So, the values adopted by the WTO cannot be considered as highly excessive, harsh or arbitrary.

On the basis of the foregoing discussion, it would be fair if the appeals filed by the assessee are dismissed and the impugned appellate order is confirmed.

C.M.A./M.A.K.387/Tax(Trib.)

Appeals dismissed.