M. As. (R) Nos.124 to 126(IB) of 2002 and W.T.As. Nos. 1193 to 1195 VS M. As. (R) Nos.124 to 126(IB) of 2002 and W.T.As. Nos. 1193 to 1195, 2003 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 260 (2002)

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 35‑‑‑Wealth Tax Rules,, 1963, R.8(2)(c)(i) ‑‑‑ Rectification of mistake‑‑‑Valuation of share‑‑‑Appellate Tribunal directed the Assessing Officer to follow the judgment of High Court for valuation of shares but the judgment was overruled by the Supreme Court of Pakistan‑‑ Rectification application was filed by the department on the ground that the said judgment of the High Court relied upon by the Tribunal had been overruled by the Supreme Court of Pakistan and therefore, the order of Tribunal be rectified accordingly‑‑‑Validity‑‑‑Being unaware that the Supreme Court had delivered a judgment, whereby the High Court's order had been set aide, Appellate Tribunal passed an order which was contrary to the decision of the Supreme Court‑‑‑Scope of rectification under S.35 of the Wealth Tax Act, 1963 extended to mistakes of law‑‑‑Section 35 of the Wealth Tax Act, 1963 allowed mistakes to be corrected in the light of the law as it existed when the order sought to be rectified was passed‑‑‑Appellate Tribunal passed its order when the Supreme Court had already given its decision and no order, therefore, could be passed contrary to that decision‑‑‑Matter was neither past nor closed at the time of passing of the order by the Tribunal‑‑‑Rectification was a part of assessment process and unless limitation laid down in S.35 of the Wealth Tax Act, 1963 expired, the matter remained open and live‑‑‑Appellate Tribunal rectified its order accordingly‑‑‑[(1998) 78 Tax 217 overruled.

(1998) 78 Tax 217 overruled.

C.I.T. v. Shahnazwaz Ltd. and others 1993 SCMR 73 Irrelevant.

Federation of Pakistan and others v. Mrs. Samra Shakil and others 2001 PTD 3919; Himachal Pardesh Financial Corporation v. Commissioner of Income‑tax 233 ITR 450 = 2000 PTD 1072; Khalid Adamjee v. C.I.T. (West) Karachi 1983 PTD 246; Muhammad Yousaf v. Chief Settlement Commissioner PLD 1968 . SC 101 and Shad Muhammad and another v. C.D.A. Islamabad PLD 1991 SC 777 rel.

Naushad Ali Khan, D.R. for Appellant.

Zahid Hussain, A.C.M.A. for Respondent.

Date of hearing: 7th August, 2002.

ORDER

MAHMOOD AHMAD MALIK (ACCOUNTANT MEMBER).‑ ‑These three identical miscellaneous applications have been filed under section 35, of the Wealth Tax Act, 1963 by the department seeking rectification of Tribunal's order, dated 5‑10‑2001. The applications are reproduced hereunder:‑‑‑

"Respectfully submitted:

(1) That this Honourable Tribunal directed the Assessing Officer to follow the judgment of the honourable Lahore High Court in Writ Petition No.12975, dated 15‑4‑1998. Hence the order of the Commissioner of Wealth Tax (A) was maintained on the basis of said direction.

(2) That the said judgment of the honourable Lahore High Court relied upon by this Honourable Tribunal has been overruled by Honourable Supreme Court vide 2001 PTD 3919 (Supreme Court of Pakistan). The order of the Honourable Tribunal is, therefore, rectifiable.

It is, therefore, respectfully prayed that directions may be issued to follow the order of the honourable Supreme Court of Pakistan. "

2. The department appeals in W.T.A. Nos. 1193 to 1195(IB) of 2000 (assessment year 1999‑2000) were disposed of by this Bench vide order, dated 5‑10‑2001. The respondents ate Directors of Islamabad Woolen Mills (Pvt.) Ltd. They declared face value of the shares in Messrs Islamabad Woolen Mills Ltd., a private limited company in their Wealth Tax Returns and claimed exemption thereon. The Assessing Officer observed that the company namely Messrs Islamabad Woolen Mills Ltd. had been declaring losses, apparently meaning thereby that the break up value was less than the face value. Accordingly he valued the shares at face value being higher than the break up value.

3. The learned CIT(A) relied upon the judgment of the Lahore High Court given in Writ Petition No. 12975 of 1997, dated 15‑4‑1998, also reported as (1998) 78 Tax 217 (Lahore High Court) and directed that the valuation be made in the light of the judgment of the Lahore High Court. In this judgment the Honourable High Court had held that rule 8(2)(c)(i) of the Wealth Tax Rules, 1963 while lays down the method of valuation of shares of limited companies was ultra vires and was of no legal effect and it was directed that tax be levied on the market value of the shares.

4. The department filed second appeal before this Tribunal. It was held in our order, dated 5‑10‑2001 that no exception could be taken to the order of the learned CWT(A) and it was accordingly directed that the judgment of the Lahore High Court be followed.

5. The present applications have been filed by the department on the ground that the said judgment of the Honourable Lahore High Court relied upon by this Tribunal has been overruled by the Honourable Supreme Court of Pakistan in the case reported as 2001 PTD 391 (Supreme Court of Pakistan) and therefore, the order, dated 5‑10‑2001 of this Tribunal be rectified accordingly.

6. The learned DR supported the applications of rectification whereas the learned AR of the respondents submitted that the mistake pointed out was not, apparent from record because the said judgment of the Supreme Court of Pakistan was not produced before this Tribunal at the time of hearing of the appeal on 5‑10‑2001. The learned AR submitted that the decision of Supreme Court of Pakistan in CIT v. Shahnawaz Ltd. and others reported as 1993 SCMR 73 supports his assertion.

7. We have contemplated over the contents of the applications and the arguments given at the bar. The Honourable Supreme Court in the case cited the application under consideration has set aside the judgment, dated 15‑4‑1998 of the Honourable Lahore High Court given in Writ Petition No.12975.

8. Rule 8(2)(c)(i) of Wealth Tax Rules, 1963 deals valuation of shares of joint stock companies quoted on a Stock Exchange and those not quoted on a Stock Exchange. In case of the former it is provided that valuation is to be made on the basis of lower of the face value or the break‑up value of shares while in the case of companies not quoted on a recognized Stock Exchange it has been laid down that the value adopted will be higher of the face value and the break‑up value. The Honourable Lahore High Court held this provision to be discriminatory as it provides for different methods of valuation for the two types of companies. The Honourable High Court also held the clause to be confiscatory as no one can be directed to pay the tax on value of assets which are higher than the market value. Therefore, it is held to be ultra vires and of no legal effect.

9. The Honourable Supreme Court dealt with the issues and held as under: ‑‑

"The equal protection of law in the field of taxation does not mean that the Tax burden should be equally imposed on every person, property or thing but it means that the persons or objects similarly situated and in similar circumstances should be taxed by the same standard. A taxing statute Rules or any provision thereof cannot‑ be struck down merely on the ground that different tax is imposed on differently placed companies, as differentiation between a group of companies on the basis of rational and reasonable classification is permissible. The difference in determination of value of shares of companies quoted on a stock exchange and that of those companies not quoted on stock exchange being differently grouped, the circumstances in determining the value of shares by different modes cannot be said to be discriminatory. The contention that the rules in question is confiscatory in its nature is misconceived, for, as it has been observed above that the same is neither discriminatory nor overrides any provision of the Act but is based on reasonable classification as the two sets of companies are distinct and different from each other. As the determination of value of shares of unquoted companies unlike that of the quoted companies is controlled by private limited companies, therefore, their break‑up/market value being not freely determinable in the open market, no exception to the formula laid down in the rule in question can be taken. The contention of the learned counsel is thus accordingly repelled. For the forgoing reasons, we allow these appeals, set aside the impugned judgment and hold the rule in question to be intra vires. There shall be no order as to costs. "

10. The Supreme Court has decided the matter on a question of law. Article 189 of the Constitution of the Islamic Republic of Pakistan provides as under:‑‑‑

"Decision of Supreme Court binding on other Courts. Any decision of the Supreme Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all other Courts in Pakistan."

11. The decision of the Supreme Court of Pakistan is the law of they land and it has to be followed by all the Tribunals and the Courts. The judgment of the Honourable Supreme Court was delivered on 28‑3‑2001. But it was not placed before us when we passed the order on 5‑10‑2001. The Supreme Court decision has a binding effect. Through inadvertence ire Tribunal decided the matter overlooking the judgment of the honourable Supreme Court on the question of law.

12. An identical issue came up before the Himachal Paradesh High Court (India) in the case reported as Himachal Paradesh Financial Corporation v. Commissioner of Income Tax 233 ITR 450 = 2000 PTD 1072. It was held that if the Income‑tax Appellate Tribunal had decided a matter overlooking the judgment of the Supreme Court on a question of law, it is certainly a mistake apparent from record that can be rectified under law. A similar view was earlier expressed by the Honourable Karachi High Court in the case of Khalid Adamjee v. CIT (West) Karachi reported as 1983 PTD 246 (High Court. Karachi).

13. The case‑law cited by the learned AR is not relevant because it deals with an amendment in section 18A(6) of the now repealed Income tax Act, 1922 which was held to be retrospective in operation to tip tent of only such cases which were pending at the time the amendment was enacted and was not to be applied on past and closed transactions. In the present case the Honourable Supreme Court had already given its judgment on point of law when we passed the order. This judgment became the law of the land and it had binding effect on a cases ensuing up for assessment, adjudication etc. after this judgme nt was delivered.

14. The law laid down by Chief Justice Cornelieus in the case of Muhammad Yousuf v. Chief Settlement Commissioner PLD 1968 SC 101 and then followed in the case of Sakhi Muhammad and another .D.A. Islamabad PLD 1991 Supreme Court 777 is as under:‑‑‑

"This judgment was delivered on the 2nd November, 1964 and its consequence was that as from that date all Courts subordinate to the Supreme Court and all executive and quasi‑judicial authorities were obliged by virtue of the Constitution to apply the rule as laid down by the Supreme Court in cases coming before them for decision."

15. Being‑unaware that the Honourable Supreme Court had delivered judgment on 28‑3‑2001 whereby the High Court's order had been set aside we passed an order on 5‑10‑2001 which was contrary to the decision of the apex Court. The scope of rectification under section 35 of the. Wealth Tax Act extends to mistakes .of law. The section allows mistakes to be corrected in the light of the law as it existed when the order sought to be rectified was passed.

16. Before proceedings further we may take up an argument of the learned AR that the department had filed no appeal before the High Court against the order of this Tribunal and therefore, this was now a past and closed matter and therefore, the rectification cannot be made as suggested.

17. To us this argument is misconceived. Firstly because when this Bench passed its order on 5‑10‑2001 the Supreme Court had already given its decision and no order, therefore, could be passed contrary to this decision. So, the matter was neither past nor closed at the time of passing of the order by this Tribunal. Secondly, rectification is a part of assessment process and unless limitation laid down in section 35 of the Wealth Tax Act expired the mater remained open and live.

18. Accordingly we rectify our order, dated 5‑10‑2001. Para. 4 of the said order will now stand rectified as under:‑‑‑

"After hearing the arguments and perusing the orders passed by the forums below, it appears that the learned CWT(A) has directed the Assessing Officer to follow the judgment of the Honourable Lahore High Court delivered in a Writ Petition No.12975, dated 15‑4‑1998 and this Tribunal in a reported case 2000 PTD (Trib.) 1169 has followed the said judgment of the Honourable Lahore High Court. The Honourable Supreme Court of Pakistan in its decision, dated .28‑3‑2001 in the case reported as Federation of Pakistan and others v. Mrs. Samra Shakil and others cited as 2001 PTD 3919 had already set aside the Lahore High Court's decision above referred and held rule 8(2)(c)(i) of the Wealth Tax Rules to be intra vires. Accordingly the shares of the private limited company declared by the respondents were to be valued under rule 8(2)(c)(i). The company in which the respondents held shares' had been declaring losses and, therefore, the break‑up value was less than the face value. Therefore, the Assessing Officer was justified to value the shares on the basis of face value which was higher than the break‑up value. The orders of the Assessing Officer in the case under appeal did not therefore, suffer from any infirmity. The orders of the learned CIT (A) are accordingly vacated and those of the Assessing Officer in the three cases under appeal are restored."

19. The miscellaneous application accordingly succeeds as indicated above.

C.M.A./499/Tax(Trib.) Application accepted.