(a) Wealth Tax Rules, 1963‑‑‑

‑‑‑‑S. 8(3)‑‑‑Valuation of land and building‑‑‑Procedure‑‑‑Steps to be taken by Assessing Officer for valuing the lands and buildings stated.

Assessing Officer has to take following steps for valuing the lands and buildings:‑‑‑-

Assessing Officer is to determine the value of lands and building 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.

Assessing Officer is to determine the gross annual rental value (GARY) of the property which means the sum for which the property might reasonably be expected to let from year to year.

If G.A.R. fixed by the Assessing Officer is higher than the rent actually paid or payable by the tenants of the building, then the Assessing Officer has to seek approval of his I.A.C. for taking this amount of G.A.R.V. of the building.

Assessing Officer is to compare the value determined by him with the G.A.R.V. as fixed by him according to the prescribed procedure and where the value of the building is higher than 10 times of the G.A.R.V. he is to seek the approval of Commissioner for taking this value.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 3A(6)‑‑‑Wealth Tax Rules, 1963, R.8(3)‑‑‑Valuation of assets for wealth tax purpose‑‑‑Value of property was declared 10 times of the rent received‑‑‑Assessing Officer had valued the property on the lines the value of undisclosed asset was made under S.3A(6) of the Wealth Tax Act, 1963‑‑‑Validity‑‑‑Assessment was set aside with the direction that assessment will be re‑framed by valuing the said property in accordance with the procedure explained in R.8(3) of Wealth Tax Rules, 1963.

Raees‑ul‑Hassan for Appellant.

Rehmatullah Wazir, D.R. for Respondent.

Date of hearing: 17th October, 2001.

ORDER

MUHAMMAD AKHTAR NAZAR MIAN (ACCOUNTANT MEMBER). ‑‑‑These wealth tax appeals for the assessment years 1997‑98 and 1998‑99 are directed against the order of CWT(A), dated 1‑7‑2000. Valuation of Property No.6. Timber Pond, Keamari, Karachi and Property No.123, Old Clifton, Karachi is the subject‑matter of the appeals. At the time of hearing the learned A.R. did not press the valuation of Property No.6, Timber Pond, Keamari, Karachi and therefore, the dispute presently is only with reference to the value of Property No. 123, Old Clifton, Karachi.

2. Both the learned representatives have been heard and orders of the authorities below perused.

3. Value' of the Property No. 123, Old Clifton, Karachi was declared by the appellant at Rs.2.4 million on the basis of rent received at Rs.0.24 million. The Assessing Officer valued the said property .in each of the two years at Rs.9,333,468 on the lines the value of undisclosed asset is made under section 3A(6) of the Wealth Tax Act. However, while passing the order for the year 1998‑99 the Wealth Tax Officer discussed that the gross annual rental value declared by the appellant at Rs.240,000 was low as it was fixed through collusive arrangement with the tenant Messrs Petro Commodities (Pvt.) Ltd. in which the appellant held majority shares. It was further alleged by .the W.T.O. that there were 5 other companies housed in the same premises but the assessee denied any rent from these companies. The Assessing Officer, however, determined the values at Rs.9,333,468 with the approval of his I.A.C.

4. It is argued by the learned A.R. that reference to section 3A(6) in both the years under appeal is misplaced because that section deals with the valuation of the properties specifically of assets undisclosed for which amnesty has been given. According to the learned A.R. this section cannot be applied for evaluating the properties which have already been disclosed by the appellant.

5. The learned D.R. supports the value adopted by the W.T.O. as confirmed by the CWT(A).

6. After hearing the learned representatives, we are of the opinion that section 3A undoubtedly relates to valuation of undisclosed assets which were declared under the amnesty scheme but there is no denying the fact that this method of valuation of property may be very near to the actual value of the properties at the relevant time. It is, however, pertinent to note that in the case of the appellant the properties have to be evaluated as prescribed in rule 8(3) of the Wealth Tax Rules, 1963. The method prescribed under rule as explained below is to be followed by the Wealth Tax Authorities.

7. For the facility of reference rule 8(3) of the Wealth Tax Rules, 1963 is reproduced hereunder:‑‑‑

(3) Lands and buildings. ‑‑‑The value of land 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:

Provided that the Deputy Commissioner shall not, except with the prior approval of the Commissioner, determine the value of any property at a sum higher than ten times the gross annual rental value of such property and, where such property is an open plot of land, at a sum higher than the value specified by the Collector of the District for the purposes of calculation or charging of stamp duty under the Stamp Act, 1899 except where such plot is purchased through an open auction or through invitation of bids or offers:

Provided further that any amount by way, of advance or security which is not adjustable against the rent payable by the tenant shall be taken into consideration for determining gross annual rental value.

Explanation. ‑‑‑For the purposes of this sub‑rule, "gross annual rental value" means the sum for which the property might reasonably be expected to let from year to year:

Provided that the Deputy Commissioner shall not, without the prior approval of the Inspecting Additional Commissioner, estimate the gross annual rental value at a sum higher that the rent paid or payable by the tenant.

8. As is clear from the plain reading of the rule referred supra the D.C.W.T. for valuing the lands and buildings is to take following steps : ‑‑‑

(i) He is to determine the value of lands and buildings 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;

(ii) He is to determine the gross annual rental value (G.A.R.V.) of the property which means the sum for which the property might reasonably be expected to let from year to year;

(iii) If G.A.R.V. as fixed by the D.C.W.T. is higher than the rent actually paid or payable by the tenants of the building, then the D.C.W.T. has to seek approval of his I.A.C. for taking this amount of G.A.R.V. of the building; and

(iv) He is to compare the value determined by him as at serial No. l above, with the G.A.R.V. as fixed by him according to the prescribed procedure and where the value of the building is higher than 10 times of the G.A.R.V. he is to seek the approval of Commissioner for taking this value.

9. This being so both the assessments are set aside, so far as the valuation of the Property No.‑123. Old Clifton, Karachi is concerned.

The assessment will be re‑framed by the D.C.W.T. by valuing the said property in accordance with the procedure explained in para. 8 (supra).

10. Consequently both appeals succeed to the extent and in the manner indicated above.

C.M.A./M!.A.K./198/Tax (Trib.) ??????????????????????????????????????????? Order accordingly.