BEFORE MUHAMMAD AKHTAR NAZAR MIAN, ACCOUNTANT MEMBER AND SYED KABIRUL HASAN, JUDICIAL MEMBER VS BEFORE MUHAMMAD AKHTAR NAZAR MIAN, ACCOUNTANT MEMBER AND SYED KABIRUL HASAN, JUDICIAL MEMBER
2002 P T D (Trib.) 345
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Akhtar Nazar Mian, Accountant Member and Syed Kabirul Hasan, Judicial Member
W.T.As. Nos. 608/KB and 609/KB of 1999-2000, decided on /08/2001.
Wealth Tax Act (XV of 1963)---
----Ss. 5(1)(xv)(ii) & 17-B---C.B.R. Letter C.8(9)-WT/IT-V/79, date 30-6-1985---C.B.R. Letter ITJ/(42) of 1985, dated 22-8-1985- Exemption---Assessee had created immovable assets out of foreign remittances received and had claimed exemption---Assets were partially disposed of in the subsequent assessment years but assessee had claimed that exemption was still available to the extent of receipt of foreign remittances which the Assessing Officer allowed---Inspecting Additional Commissioner, revised the assessment order on the ground that the exemption was available only on the first conversion of foreign remittances into assets and that no exemption was available if an asset created out of foreign remittances was .converted into another fore subsequently---Validity---Exemption was available under S.5(1)(xv) of the Wealth Tax Act, 1963 to all assets fulfilling the conditions require( therein for those years irrespective of number of conversions such asset had undergone---Order of the Inspecting Additional Commissioner was set aside by the Appellate Tribunal with the direction that Assessing Officer may allow the exemption to the 'extent the foreign remittance were received by the assessee during these years or the relevant previous years so that the effect of exemption did not go beyond the year in which the remittance was received and the five succeeding years notwithstanding the number of conversions of assets that take place in these years.
1999 PTD (Trib.) 135; 1997 PTD (Trib.) 1928 and (1999) 7! Tax (Trib.) 150 distinguished.
W.T.A No. 533/KB of 1999-2000 rel.
Iqbal Abadan, C.A. for Appellant. Dr. Fazal Abrejo, D.R. for Respondent.
Date of hearing: 9th August, 2001.
ORDER
MUHAMMAD AKHTAR NAZAR MIAN (ACCOUNTANT MEMBER).---For the assessment years 1997-98 and 1998-99 assessments were originally made by Deputy Commissioner of Wealth Tax on 18-5-1998 and 25-2-1999 respectively. Previously the assessee had created immovable assets out of foreign remittances received and claimed exemption under section 5(1)(xv)(ii) of the Wealth Tax Act, 1963. These assets were disposed of partially in the assessment years 1997-98 and 1998-99. The assessee claimed that the exemption was still available to her to the extent of the receipt of foreign remittances as was clarified by the C. B. R. vide C.8(9)-WT/IT-V/79, dated 30th. June, 1985. The Assessing Officer accepted the contention and allowed exemption accordingly.
2. These assessments for the assessment years 1997-98 and 1998-99 were revised by the I.A.C. of Wealth Tax vide his orders, dated 11-4-2000 because according to the I.A.C. the exemption was available only on the first conversion of foreign remittances into assets and that no exemption was available if an asset created out of foreign remittances was converted into another form subsequently. He placed reliance on the judgments of the I.T.A.T. cited as 1999 PTD (Trib.) 135; 1997 PTD (Trib.) 1928 and (1999) 79 Tax 150 (Trib.) these orders of the I.A.C. Wealth Tax are under appeal before us. Both the learned representatives for the assessee and the department have been heard.
3. The learned A.R. has stated that the I.A.C. had no jurisdiction to take action under section 17B of the Wealth Tax Act, 1963 in view of the Board's instructions contained in the Board's Circular quoted supra. He pleaded that instructions of the Board are binding on the authorities below and, therefore, the I.A.C. exceeded his power in going beyond the instructions of the C.B.R. For the sake of convenience relevant portion of the Board's Circular quoted supra is reproduced below:---
"II Foreign Remittances.
The existing clause (xv) of section 5(1) required the person claiming exemption of assets brought into Pakistan to remain a non-resident for its exemption period. Under the existing provisions assets brought from abroad enjoyed exemption so long as they remained in the same form, except for the remittances invested in purchase of shares: of public companies. Under the revised clause (xv) there is no restriction regarding the residential status of the assessee and the assets would remain exempt for 6 years even if they changed form."
2. However, the following precautions need to be taken by the Assessing Officer, namely:---
(i) The owner of the remittances be determined as he would be an assessee who would alone enjoy the exemption for the subsequent five years.
(ii) The value of the remittances be determined in the first year and the exemption period of the following five years be incorporated in the body of the assessment order.
(iii) As provided for in the new proviso to clause (xv), in the case of conversions the portion of the foreign remittances be determined, and only that portion be allowed during the exemption period.
4. The learned D.R. supported the action of the I.A.C. stating that in the cases quoted by the I.A.C. in his order the I.T.A.T. had observed that exemption was available only to the assets created for the first time out of remittances, notwithstanding the fact that in all those cases the discussion was made with reference to the creation of asset on encashment of Foreign Exchange Bearer Certificates (F.E.B.Cs.).
5. We have considered the views of both the learned representatives. The said clause (xv) of section 5(1) was substituted by the Finance Act, 1985. While introducing the Finance Bill, 1985 the Finance Minister in his speech had stated as quoted below:---
"At present, non-residents are allowed exemption from wealth tax in respect of assets brought into Pakistan for a period of 5 years. This exemption has been extended to both the residents and non-residents with an allowance for multiple conversion."
6. In the Notes on clauses which forms a part of the Finance Bill it was explained that:---
`Clause 3(3) - Seeks to amend section 5,
(a) ...................
(b) to remove the distinction of resident and non-resident for exempting foreign remittances, and there would be no restriction on the number of conversions; and
(c)................
7. On the' explanation of these Notes on clauses the National Assembly passed the Finance Bill, 1985 in the form of Finance Act, 1985 (Act No. I of 1985). The relevant clause of the Finance Bill was adopted by the National Assembly as such in the Finance Act, 1985. This means that the Legislature intended to give the meanings to this clause as was explained in Notes on clauses attached with the Finance Bill.
9. We have noted that F.E.B.Cs. have been given special exemption as appearing in clause 9 (iii), Part I of the Second Schedule or previously under section 5(1) of the Wealth Tax Act, 1963. This was necessary because purchase of F.E.B.C. was possible even otherwise than on receipt of foreign remittance by the assessee and also since F.E.B.Cs, were bearer-it was not required of the bearer to prove that he had received the foreign remittances. Thus the provisions of section 5(1)(xv) were not applicable in such circumstances. The amount received on encashment of F.E.B.Cs. has not been specifically exempted as has been done in clause (8A) of Part I of the Second Schedule to the Wealth Tax Act, 1963 in case of rupee amounts created on encashment of U.S. Dollar- Bearer Certificates and Foreign Currency Bearer Certificates. It is in these circumstances that the Board had rightly explained in the Letter ITJ/(42) of 1985, dated 22-8-1985 that exemption did not apply to the amount received on encashment of F.E.B.Cs.
9. Since the cited cases pertaining to creation and encashment of F.E.B.Cs. have never been argued before the learned I.T.A.T. on the above lines, the conclusions drawn in cases cited in para. 2 (supra) are of no help to the department. Our finding is that the exemption is available under section 5(1)(xv) to all assets fulfilling the conditions required therein for those years irrespective of number of conversions these assets take place. The only precautions which the Assessing Officer is to observe are mentioned in para. 2 of the Circular quoted supra. This Tribunal has taken similar view while deciding W.T.A. No. 533/KB of 1999-2000 on 31-5-2001. The whole discussion made in the cases quoted by I.A.C. becomes irrelevant in the circumstances of this case.
10. In view of the facts stated above both the appeals succeed and the action taken by the authorities below on the issue is set aside with the direction that D.C.I.T. may allow the exemption to the extent the foreign remittances were received by the appellant during these years or the relevant previous years so that the effect of exemption does not go beyond the year in. which remittance was received and the five succeeding years, notwithstanding the number of conversions of assets that take place in these years.
C.M.A./M.A.K./147/Tax (Trib.) Appeals accepted.