W.T.A. No.194/KB of 2000-01, decided on, 18th September, 2001. VS W.T.A. No.194/KB of 2000-01, decided on, 18th September, 2001.
2003 P T D (Trib.) 1059
[Income‑tax Appellate Tribunal Pakistan]
Before Jawaid Masood Tahir Bhatti, Judicial Member and Agha Kafeel Barik, Accountant Member
W.T.A. No.194/KB of 2000‑01, decided on 18/09/2001.
Wealth Tax Act (XV of 1963)‑‑‑
‑‑‑‑Second Sched., Cl. (12)(1) & (17)(b)‑‑‑Exemption‑‑‑House‑‑ Amalgamation of two plots‑‑‑Two plots, adjacent to each other, used for residential purpose situated in two different roads‑‑‑One plot was constructed portion, while the other was used for lawn‑‑‑Exemption allowed by the Assessing Officer was disallowed by the Inspecting Additional Commissioner for the reason that residential house was situated on two various roads‑‑‑Validity‑‑‑Exemption under Cl. (12)(1) of the Second Sched. of the Wealth Tax Act, 1963, on one residential house owned and kept by the assessee for purposes of his own residence could not be restricted to any specific measurements, location, size or for any other reason not warranted under the law‑‑‑No limit of the area had been mentioned in law and one residential house of whatsoever nature had been allowed to be exempted for the computation of the net wealth of the assessee, which could not be denied‑‑‑Only condition under the law was that the property was being used for residential purpose‑‑‑Constructed portion and the lawn being used were the part of residential house and could not be bifurcated for the purpose of wealth tax, as the residential house had not been defined under the Wealth Tax Act, 1963‑‑‑Legal amalgamation of the two plots was not necessary for the purpose of Wealth Tax Act. 1963, as no such condition had been provided under the law‑‑‑Order of the Inspecting Additional Commissioner was vacated by the Appellate Tribunal and that of the Assessing Officer was restored.
PTD 1997 (Trib.) 2106; Calcutta Stock Exchange Association Ltd.'s case (1935) 3 ITR 105; CIT v. Fulabhai Khodabhai Patel (1957) 31 ITR 771; Thakural Poddar v. I.T.O. (1957) 32 ITR 656; Chamber's Dictionary and (1964) 10 Tax 67 rel.
2000 PTD (Trib.) 2133 distinguished.
Jawaid Zakaria and Jan‑e‑Alam, I.T.P. for Appellant.
Zaki Ahmed D.R. for Respondent.
Date of hearing: 18th September, 2001.
ORDER
JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).‑ The appellant through this appeal has objected to the order of the learned IAC, dated 30‑10‑2000, invoking provision of section 17(b) of the Wealth Tax Act and disallowing the exemption of self‑occupied house.
2. Messrs Jan‑e‑Alam, ITP, and Jawaid Zakaria, Advocates, have appeared before us and has submitted that the Assessing Officer vide his order under section 16(3) of the Wealth Tax Act allowed exemption for the property bearing Plot Nos.41 and 42 Khayaban‑e‑Ghazi, Phase‑V, D.H.A., Karachi value of which was shown as Rs. 12,74,751 by the assessee but the learned IAC issued a show‑cause notice under section 17(b) of the Wealth Tax Act on 28‑8‑2000 showing his intention to re‑open the case, as according to him, the exemption as allowed by the Assessing Officer was not proper, the assessee replied the show -cause notice and explained the whole position but the learned CIT(A) has revised the assessment already made and has assessed the value of plot of 2000 sq. yds. at Rs.34,78,000. According to the learned counsel the learned IAC was not justified to assess the value as he has himself accepted that Plot Nos. 41 and 42 are owned by the assessee, both a adjacent plot and both have been utilized for purpose of resident house. According to him, it has also been accepted in the impugn order that the constructed part of the house is situated on one plot a other plot is being used as part of same house as lawn of the said house. According to the learned A.R. under clause (12) (1) of the Second Schedule of the Wealth Tax Act, one residential house owned and one by the assessee for purposes of his own residence will be exempted a will not be included in the net wealth of the assessee. According to him in this section, no limit of the Area has been mentioned and one residential house of whatsoever nature has been allowed to be exempt for the computation of the net wealth of the assessee. Learned counsel has contended that only condition for exemption is that the property being used for residential purposes and the constructed part of the residential house and the lawn being used are the part of the resident house and cannot be bifurcated for the purpose of Wealth Tax According to the learned counsel, the word property or residential house has not been defined under the Wealth Tax Act, 1963 and under section 2(2) of the Wealth Tax Act, the words and expression used but not defined in the Wealth Tax Act shall have the meaning assigned them under the Income Tax Ordinance, 1979 and under section 19(2)(a) of the Income Tax Act, house property has been defined as a proper consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, but does not include any such property or a portion thereof which is occupied by the assessee for purpose of a business or profession carried on by him, the profits whereof a chargeable to tax under the Income Tax Ordinance, 1979. According the learned counsel, in the, present case, the Assessing Officer has neither established that the property has been used for any other purpose except for the purpose of residence. Regarding legal amalgamation of the two plots, learned counsel has submitted that it is not necessary for the purpose of the Wealth Tax as in the Wealth Tax Act or even in the Income Tax Act, no such condition has been provided under the law. Therefore, the Assessing Officer was not justified in disallowing the exemption and to cancel the order of the Assessing Officer. Learn counsel in support of his contention, has placed reliance on the decision of this Tribunal reported as 1997 PTD (Trib.) 2106.
3. On the other hand, Mr. Zaki Ahmed, learned representative for the Department is supporting the impugned order of the learned CIT(A). According to him, on examination of record, it was observed by the learned IAC that the assessee has claimed basic exemption of self occupied house situated at two various plots out of which Plot No.41 is situated in Khayaban‑e‑Ghazi, while the Plot No.42 is situated in Khayaban‑e‑Hafiz of the Phase‑V, D.H.A. each of the plot is 2000 sq. yds. Area. According to the learned D.R. both the plots are adIACent to each other, one is facing Khayaban‑e‑Hafiz while other is facing Khayaban‑e‑Ghazi, but these are two separate plots or units for the use of separate independent unit for residential purposes and each one of them has separate identity and individuality. According to the learned D.R. since the two plots have not been amalgamated and stands as a separate unit; exemption allowed by the Assessing Officer was not justified and the learned IAC has, therefore, rightly treated them two different plots for self‑occupied house purposes and has declared the assessment order erroneous and prejudicial to the interest of Revenue, as the Assessing Officer has allowed the exemption without any justification. Regarding the case referred by the learned counsel for the assessee, learned D. R. has submitted that the present case is distinguishable from tat case as in that case the assessee built a house in 1983‑84 which was used for self residence, but as the accommodation was insufficient for the assessee's family, the adIACent house was purchased and the partition wall between both the houses was removed and those two separate units were covered into a single unit and the house was transferred to one boundary wall and one entrance gate and in this way both the houses were amalgamated into one residential house. But, in the present case, according to the learned D.R. the situation is totally different, the assessee has constructed only one plot and other plot is opened and being used as lawn. The construction on the plot is in accordance with the D.H.A. Construction Rules and Regulations and both the plots have separate individuality and identity having thereon separate allotment orders, possession letter, site plan, plot numbers, separate Khayaban and street etc. and therefore, these two plots cannot be called as one unit house constructed on two amalgamated plots. Learned D.R. has contended that the bifurcation and amalgamation of plots in D.H.A. is a routine matter and that is done by complying with certain conditions of the authority and since this exercise has not been done, the intention of the assessee is crystal clear that he wanted to keep that plot a separate unit for future utilization and the learned I.A.C. has, therefore, rightly modified the order and has enhanced the taxable worth of the assessee by invoking section 17(b) of the Wealth Tax Act, 1963. Learned D.R. in support of his contention has placed reliance on the decision reported as 2000 PTD (Trib.) 2133.
4. We have heard learned representative of the two parties and have also perused the impugned order of the learned I.A.C, the order under section 16(3) of the Wealth Tax Act passed by the D.C.W.T., the case law referred by both the parties and the relevant provision of law.
After considering the submissions made by the learned representative of both the parties, we have found that the main controversy to be resolved through this appeal is regarding exemption of self‑occupied house. Admittedly the appellant is residing in the property bearing Plot Nos. 41 and 42 which are adIACent to each other on the one plot there is a constructed portion while‑the other plot is used for lawn of the house. Plot No.41 is situated in Khayaban‑e‑Ghazi while the Plot No.42 is situated in Khayaban‑e‑Hafiz of the Phase‑V, D.H.A. Karachi, Mr. Jawaid Zakaria, learned representative of the appellant has contended that it makes no difference if both the plots used for the residential purposes are situated in two various Khayabans. As the exemption under pause (12)(1) of the Second Schedule of the Wealth Tax Act is for one residential house owned and kept by the assessee for purpose of his own residence and the exemption allowed under the law cannot be denied for the reason that the residential house is situated in two various Khayabans or for the reason that the residential house has been constructed on the plot measuring 2000 sq. yds. and the other plot measuring 2000 sq. yds. is being used for the purposes of lawn. He has vehemently contended that only point for consideration for the exemption should be the self- occupied house. We have considered the following definition of the word residence as defined in the Income Tax Dictionary:‑‑‑
"In my opinion, the word `residence' in its simple and ordinary meaning signifies the place where a human being eats, drinks and sleeps or where his family and servants eat, drink and sleep, and where there is some permanence or continuance of such eating drinking and sleeping. In‑Re: The Calcutta Stock Exchange Association Ltd. (1935) 3 ITR 105.
When you are considering a question like residence, you are considering just a bundle of actual facts, and it seems to me that in a case like this you could quite well say that here this man had this house at his disposal, with everything to it for his convenience, kept going all the year round, although he only wanted it for a short time. Leewenstein v. Dosalies (1926) 10 TC 424 quoted in CIT v. Fulabhai Khodabhai Patel (1957) 31 ITR 771.
The word `resident' must be understood in the sense given in section 4A of the Act. It is true that section 4A explains the meaning of the term `resident in the taxable territories'. But then the Act nowhere gives‑the definition of the word residing', or resident' in the abstract. For the purpose of the Act, the significance of the words `residing' or `residence' of `resident' is only by reference to taxable territories. That being so, the word `resident' occurring in clause (a) of the second proviso must be construed according to the import and meaning given to it by section 4A. Thakural Poddar v. ITO (1957) 32 ITR 656."
In the Chambers Dictionary the word reside has been defined as under:‑‑
dwell permanently; to be in residence; to abide; to be vested; to inhere a residence the act or duration of dwelling in a place; the act of living in the place required by regulations or performance of function; a stay in a place a dwelling place; a dwelling; house, esp one of some pretensions; that in which anything permanently inheres or has its seat in residency a residence; the official abode of a resident or governor of a protected state; an administrative district under a resident a resident's post at a hospital, or the period during which it is held.‑
We have also perused the order of this Tribunal reported as (1997) PTD (Trib.) 2106 referred by the learned counsel for the appellant. The relevant portion of the judgment is reproduced hereunder:‑‑‑
"5 It is contended that the assessee built a House at 86‑C, New Muslim Town, Lahore by investment at Rs.3,50,000 in the period relevant to 1983‑84 assessment. It is further contended that the house was used for self‑residence and as the accommodation was insufficient for the assessee's family. Therefore, House No.85‑C adIACent to House No.86‑C was purchased on 7‑4‑1984 for a declared value of Rs.5 lacs. It is emphasised by the learned A.R. that the partition wall between both the house was removed and those were converted into a single unit. The house has one boundary wall and one entrance gate. The learned A.R. forcefully submits that claim for exemption of both the houses as a self‑occupied unit was not admitted. The learned A.R. further submits that two separate units exist for which form PT‑1's had been issued by the Excise and Taxation Department but actually it is a one house being used for self‑residence. The learned A.R. claims exemption as envisaged under section 5(1)(xvi) of the Wealth Tax Act. The learned A.R. contends that there is no justification for making an addition of Rs.38 lacs. The learned D.R. strongly supported both the orders passed by the learned A.A.C, Range‑IV, Lahore.
6. We have heard both the learned A.R. and D.R. and perused all the orders passed by the learned lower authorities. It is an established fact that residential house of whatever size, if self‑occupied is exempted from Wealth Tax Act under section 5(1)(xvi). There is no restriction as to the size of the property how large it may be. The assessee's plea that both the units constitute one residential house and are being occupied for self‑residence carries weight, as already conceded by the department from 1989‑90 to onward. The claim for exemption of self‑occupied house being legal and justified is hereby allowed ...."
We have also gone through the decision of this Tribunal reported in (1964) 10 Tax 67, wherein, the meaning of residence has been defined in the following words:‑‑‑
"The concept of residence involves the idea of an abode, an element of permanency and continuity of living."
We have also gone through the decision of the Full Bench of this Tribunal referred by Mr. Zaki Ahmed, learned representative of the Department, reported as 2000 PTD (Trib.) 2133 which is a very lengthy judgment but in that decision the controversy regarding the word Shop has been resolved. Concluding Para‑58 of the judgment is reproduced hereunder:‑‑‑
"58. We, therefore, without any hesitation hold that the word `shop' means a place where goods or merchandise are kept for sale to consumers usually in small quantities on retail and/or whole sale basis. The example of the same are, a trader's, shop selling any kind of utility items, a printing shop a place where goods are prepared and sold for human consumption i.e. bakery and sweet-meet shop, a specialized department in a large store, a Gourmet shop, chemists shop. There is, however, exception to this rule. The word used in clause (12)(2) in one shop', hence if any of the above activity is done by the assessee in two or more shops, he shall be entitled to the exemption of one only. This obviously concludes that, a motor mechanic workshop, a factory, a departmental store, a Doctor's clinic, a hospital, a marriage Hall, a Cinema Hall, a school or such other Educational Institutions are not a 'Shop' within the meaning of clause (12)(2) of the Second Schedule of the Wealth Tax Ordinance".
We find no force in the arguments of the learned D.R. that the ratio of the decision supra can be applied on the residence also. We are of the considered view that the exemption under clause (12)(1) of the Second Schedule of the Wealth Tax Act, on one residential house owned and kept by the assessee for purposes of his, own residence cannot be restricted to any specific measurements, location, size or any other reason not warranted under the law. No limit of the area has been mentioned in the law and one residential house of whatsoever nature has been allowed to be exempted for the computation of the net wealth of the assessee, which cannot be denied. The only condition under the law is that the property is being used for residential purposes. After considering the definitions referred supra, we are of the considered view that the constructed portion and the lawn being used are the part of residential house and cannot be bifurcated for the purpose of Wealth Tax, as the residential house has not been defined under the Wealth Tax Act, 1963. Likewise, we are of the view that the legal amalgamation of the two plots is not necessary, for the purpose of Wealth Tax Act, as no such condition has been provided under the law. We, therefore, considering the above circumstances of the case, vacate the impugned order of the learned IAC and the order passed by the Assessing Officer under section 16(3) of the Wealth Tax Act, 1963 is restored.
5. The appeal is allowed.
C.M.A./614/Tax (Trib.) Appeal allowed.