(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 31B(1)(b)(ii), proviso‑‑‑Additional wealth tax‑‑‑Calculation of‑‑ Assessment years 1993‑94 to 1998‑99‑‑‑Returns were filed on 18‑2‑1999 and assessments were completed on 4‑3‑1999‑‑‑Period of pendency of assessment was not covered by the proviso to S.31B (1)(b)(ii) of the Wealth Tax Act, 1963‑‑‑Additional tax as per order of Commissioner Wealth Tax (A) was to be calculated on 80% of the tax demand payable as a result of completion of assessments under S.16 of the Wealth Tax Act, 1963 from the date it was payable in the respective years under S. 14A (i.e. the date prescribed for submission of returns for the respective assessment years) to the date of completion of relevant assessments under S.16 of the Wealth Tax Act, 1963.

W.T.A. No.165/KB of 1999‑2000 ref.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(16)‑‑‑Net wealth‑‑‑Debt owed‑‑‑Cumulative wealth tax liability‑‑ Assessment years 1994‑95 to 1998‑99‑‑‑Cumulative wealth tax liability remained in arrears was allowed as "debt owed" while computing the net wealth for the subsequent years.

Commissioner of Wealth Tax v. Mst. Fozia Mughis 1988 PTD 629 and Commissioner of Wealth Tax v. Hoor Bai Ibrahim 1982 PTD 671 rel.

A. H. Faridi for Appellant.

Muhammad Umar Farooq, D.R. for Respondent

Date of hearing: 28th November, 2001

ORDER

MUHAMMAD AKHTAR NAZAR MIAN (ACCOUNTANT MEMBER).‑‑‑The appellant‑company has come in appeal against the order of the CWT(A), dated 26‑11‑2000. Common ground in all the years is calculation of additional tax under section 31B(1)(b) of the Wealth Tax Act, 1963 (hereinafter called the Act), which has been charged from the respective dates when the returns were due under section 14 in each year. Another common ground for the assessment years 1994‑95 to' 1998‑99 is the failure of the CWT(A) in allowing cumulative wealth tax liability payable on the basis of wealth tax assessments.

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

3. The facts so far as relevant for the disposal of these appeals are that the appellant was in receipt of rental income of Rs.316,423, Rs.693,754, Rs.578,479, Rs.568,380, Rs.585,569 and Rs.597,634 in the respective assessment years 1993‑94 through 1998-99, and therefore, it was required to file wealth tax returns under the Act. Since no return had been filed by the appellant, the appellant was called upon to ‑submit returns of wealth. This was done by the company by declaring net value of assets at 10 times the rental income and claiming proportionate liabilities against the property as appearing in the respective balance sheets. In this way negative net wealth was declared in all the years. The Assessing Officer successfully disallowed the claim of liabilities in all the years and this treatment was confirmed by this Tribunal vide WTA No.123/KB of 1999‑2000 for WTA No. l 28/KB of 1999‑2000 (assessment years 1993‑94 to 1998‑99), dated 21‑3‑2000. In this view of the matter it has been confirmed that the company had net wealth of an amount making it liable to tax, and therefore, it was required to file the returns in the respective years on dates as prescribed under section 14(lA) of the Act.

4. Since the tax demand .was duly raised, additional tax under section 31‑B was charged. In the original, orders the DCIT had charged tax under section 31B(1)(a) but the CIT(A) vide order now impugned before us directed to calculate tax under section 31B(1)(bl‑of the Act. It has been contended before us that since the returns for all the assessment years were filed on 18‑2‑1999 the additional tax should have been charged from 18‑2‑1999 to the date of assessment i.e. 4‑3‑1999. Alternatively it is argued that the additional tax under clause (ii) to subsection (1) of section 31B could not be charged for a period exceeding that .as prescribed in the proviso to subsection (1) of section 31 B.

5. We have given due consideration to the submissions of the learned A.R. At this point of time after the decision of ITAT in the main appeals as quoted in para.3 (supra), this is a settled fact that the appellant was required under the law to submit wealth tax returns on dates prescribed under section 14(IA) of the Act because in all the years under appeal the appellant had net wealth chargeable to tax. This means that in the circumstances of the case the appellant had failed to pay any tax under section 14A and, therefore, it was liable to pay additional tax under section 31B(1)(b) read with clause (ii) thereof from the date the tax became first payable under section 14A to the date of completion of assessment under section 16. This has been so prescribed in clause (ii) of sub‑section (1) of section 31B. In view of this legal position it is held that the CWT(A) has rightly directed to calculate tax from the dates it was due under section 14A for the respective assessment years 1993‑94 to 1998‑99.

6. Next objection of the learned A.R. is that the proviso to subsection (1) of section 31B as inserted by Finance Act, 1998 has been held to have retrospective effect in respect of pending assessments by this Tribunal in an unreported case WTA No.165/KB of 1999‑2000 (assessment year 1997‑98), dated 5‑4‑2000 and in this view of the matter the additional tax under section 3113(l) should have been charged for lesser period as prescribed in the proviso. For the sake of convenience the said proviso is reproduced below:‑‑

"Provided that where in cases referred to in clause (ii), the assessment is not made before the end of the assessment year next following the year in which the return was filed, no additional tax shall be payable after the end of the said assessment year."

7. Returns for all the assessment years under appeal, in the instant case, were filed on 18‑2‑1999 and the assessments were completed on 4‑3‑1999, that is almost in one month. This period of pendency of assessment is not covered in the proviso, and therefore, we hold that since the conditions prescribed in the proviso are not applicable to the circumstances ‑of this case, there is no question of applicability of the said proviso.‑

8. Consequent upon the decision as made above, the net effect is that the additional tax shall be calculated in accordance with the decision of the learned CWT(A) impugned before us i.e.. on 80% of the tax demand payable as a result of completion of relevant assessment under section 16 from the date it was payable in the respective years under section 14A (i.e. the dates prescribed for submission of returns for the respective assessment years as prescribed under section 14(lA) of the Act) to the date of completion of relevant assessment under section 16.

9. While submitting wealth tax returns the appellant had not claimed the tax payable on net wealth as "debt owed" on the respective valuation dates in all the assessment years under appeal. This point was raised by the appellant in appeal before the CWT(A) and on the basis of the decision of Lahore High Court reported as (1988 PTD 629 Lahore High Court) in the case of Commissioner Wealth Tax v. Mst. Fozia Mughis, the learned CWT(A) accepted the claim of the appellant that the tax due on the basis of net wealth as on the valuation dates is "debt owed" and is allowable against the net wealth. He has, therefore, directed that the wealth tax assessed for each year may be allowed as "debt owed" in that year. The learned A.R. had contested before‑the learned CWT(A) that for the assessment year 1994‑95 onwards the cumulative effect of unpaid wealth tax becomes "debt owed" for the respective years. This contention of the learned A.R. was not accepted by the learned CWT(A). . ,

10. It is contended by the learned A.R. that the learned ITAT ‑has been allowing as "debt owed" the wealth tax which had remained in arrears while computing the net assets for the subsequent years and this principle has been upheld by the Lahore High Court and subsequently approved by the Supreme Court of Pakistan in a case reported as 1982 PTD 671 Commissioner of Wealth Tax v. Hoor Bai Ibrahim. Relevant part of para.4 of the judgment of the Hon'ble Supreme Court of Pakistan in the case of Hoor Bai Ibrahim. is reproduced below:‑‑‑

"4. The High Court in the impugned judgment while relying on the aforestated two cases had observed as follows.

'In both the above cases it has been held that the amount earmarked in the return as the income‑lax liability is a `debt owed' which is adjustable out of the gross wealth within the scope of section 2(m) of the Wealth Tax Act. If the amount shown as' the liability of income‑tax could be allowed as a `debt owed' for adjustment from the gross wealth under section 2(m) of the Act for the purposes of computations of net wealth of assessee we do not see any reason to disallow the amount shown as a liability of wealth tax under the Wealth Tax Act, as `debt owed' within the meaning of that section 2(m)' . "

In Mst. Fauzia Mughis's case the following observations was made:‑‑‑

"In some cases the. Tribunal has also allowed' deduction of the wealth tax which had remained in arrears while computing net assets for the subsequent years. On the principles and for the reasons, recorded earlier, such deduction, if it has remained in arrears will, according to us, constitute a debt‑ owed by the assessee and its deductions was rightly allowed by the Tribunal. No doubt, in the year ,under charge its deduction will not be permissible but when once that liability has accrued and debt for that year has become a debt owed by the assessee then while computing the net assets .of subsequent years, the deduction of this debt will have to be made both on principle of `debt owed' or on the principle that by that debt the opening balance of the assets of the subsequent year automatically gets reduced."

11. Following the decision of the Hon'ble Supreme Court of Pakistan as quoted above, it is directed that cumulative wealth tax liability may be allowed for the assessment years 1994‑95 to 1,998‑99.:

12. Consequently the appeal for the assessment year 1993‑94 fails and is dismissed and the appeals for the assessment years 1994‑95 through 1998‑99 succeeded to the extent and in the manner indicated above.

C.M.A.M.A.K./194/Tax (Trib.) Order accordingly