W.T.As. Nos.1069/LB, 1070/LB and 1071/LB of 2002, decided on 28th August, 2002. VS W.T.As. Nos.1069/LB, 1070/LB and 1071/LB of 2002, decided on 28th August, 2002., 2003 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 669 (2002)

(a) Wealth tax‑‑‑

‑‑‑‑Assessment‑‑‑Legal issue, which goes to the root of the assessment, can be raised even at any stage of apex Court of Pakistan.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 5(1) (xii)‑‑‑Finance Act (XII of 1994), Preamble‑‑‑Exemption in respect of certain assets‑Agricultural land‑‑‑Inclusion of in net wealth‑‑‑Assessment year 1993‑94‑‑‑Value of land Rs.2,90,000‑‑ Assessee contended that since value of land was below the prescribed limit of Rs.10,00,000 same shall not be included in total net wealth of the assessee‑‑‑Validity‑‑‑Plea of the assessee was not sustainable in law‑‑‑Prior to substitution in cl. (xii) of S.5(1) of Wealth Tax Act. 1963 by virtue of Finance Act, 1994, ‑clue of agricultural land subject to a maximum limit of one lac of Rupees was not includable in total net wealth of the assessee‑‑‑Meaning thereby that if value of agricultural land exceeded Rs.1,00,000 then the value so assessed shall be included in total net wealth of the assessee but after it.,, substitution this amount had been raise to one million rupee (Rs.10,00,000), this substituted figure was applicable with effect from assessment year 1994‑95 onward‑‑‑Since the assessment year which was under appeal was 1993‑94 which pertained to the assessment year prior to substitution in S.5(1)(xii) of the Wealth Tax Act, 1963, the Assessing Officer ha acted within his jurisdiction in including value of agricultural land held by the assessee in his total net wealth as the value adopted was higher than the prescribed limit of Rs. 1,00,000---Orders of the two Authorities below were endorsed by the Appellate Tribunal on this score.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 5(1) (xvi)‑‑‑Wealth Tax Rules, 1963, R.8(3) ‑‑Lahore Development Authority Buildings Regulation Act, 1984, R.51‑‑ Exemption in respect of certain assets‑‑‑House‑‑‑Clinic ‑‑Portion of residential house was being utilized for clinic by the assessee‑‑ Exemption was allowed to house to the extent which was being used for self‑residence and value of the portion used as clinic was added in the net wealth ‑‑‑Assessee contended that merely using part of the house for professional purposes would not change status of the house and according to R.51 of Lahore Development Authority Buildings Regulation, 1984, part of the house could be used as office of clinic‑‑‑Validity‑‑‑No ambiguity existed to understand Buildings Regulation Act of Lahore Development Authority for the purpose of using a portion of the house for professional ends because Lahore Development Authority Buildings Regulation was a separate law and Authority was governed by its own rules and regulations‑‑‑Wealth Tax Act was an independent enactment which had nothing to do with any other law‑‑‑Lahore Development Authority law did not have overriding effect over the Wealth Tax Act, 1963‑‑‑Wealth Tax Act. 1963 did not debar the assessee from using part of his property, otherwise than for a residential purpose so there was no legal bar on the assessee in whatever manner he desired to use his residence‑‑ Appellate Tribunal held that no other law came into play for valuation of immovable assets for the purposes of charging wealth tax thereon until and unless it had been said so‑‑‑According to S.5(1)(xvi) of the Wealth Tax Act, 1963, around which whole controversy of the issue in hand revolved provided that wealth tax shall not be payable by an assessee in respect of one residential house owned and occupied by the assessee for purposes of his own residence where he opted to exclude his house from the assets‑‑‑Paramount significance in the said clause, had been attached to the words "owned and occupied by the assessee for purpose of his own residence" ‑‑‑Option for claiming exemption of the house thus could only be exercised if, the house was owned and occupied by the assessee for purposes of his own residence‑‑‑Clause (xvi) of S.(5)(1) of the Wealth Tax Act, 1963 had inbuilt characteristic of its being apportionment of the house into two heads i.e. one utilization for self‑residence and the other for non -utilization for residential purposes and in no way such portion of the residential house which was being used for clinic could be said to have been occupied by the assessee for the purposes of his own residence‑‑‑Appellate Tribunal held that every time, that a portion of house was used otherwise than for residential purposes, no matter whether any division of the house had taken place or not, the assessee shall not be entitled to the benefits of exemption to the extent the house was in utilization for professional purposes---Objection of the assessee was rejected by the Appellate Tribunal accordingly.

(d) Wealth Tax Act (XV of 1963)---

-----Second Sched., Cl.12(2)---exemption Clinic---Refusal to grant exemption to clinic Validity Clinic having been excluded out of the definition of shop exemption to clinic had rightly been refused by the Assessing Officer.

(2000) 81 Tax 80 rel.

Latif Ahmed Qureshi for Appellant.

Javed-ur-Rehman, D.R. for Respondent.

Date of hearing: 21^st August, 2002.

ORDER

RASHEED AHMAD SHEIKH (JUDICIAL MEMBER).---1. By this single order we proceed to adjudge these three appeals filed at the instance of the assessee-appellant against two separate orders passed by CIT(A) Zone-I, Lahore each date 6-5-2002 in respect of assessment years 1993-94, 1995-96 and 1996-97.

Assessment year 1993-94

2. For this assessment year sole objection of the assessee pertains t inclusion of value of agricultural land in the total net wealth of the asssessee which has been objected to have been included without lawful authority as value of the agricultural land so assessed was less than the described limit of Rs. 10,00,000. The assessee, in the present case holds 413 Kanals land which enjoys agricultural status and its value for wealth tax purpose was shown at Rs. 21,00,000. The Assessing Officer after following the treatment accorded in the immediately preceding assessment year 1992-93, also adopted the same value of the land for the year under appeal which was at Rs. 2,90,000. This treatment on first appeal, was maintained which compelled the assessee to assail the order passed by the CIT(A) in further appeal before the Tribunal.

3. Before us the learned counsel for the assessee contended that the Assessing Officer has acted in flagrant violation of law in including value of agricultural land in total wealth of the assessee since that was below the prescribed limit as had been laid down in section 5(1)(xii) of the Wealth Tax Act, 1963. This plea was never put forward before any of the two authorities below. Anyhow this being a legal issue and goes to the root of the assessment, can be raised even at any stage of apex Court of Pakistan. Hence this objection of the assessee is admitted for hearing. Anyhow it was stressed by the learned A.R. of the assessee that since value of this piece of land has been adopted at Rs. 2,90,000 which being blow the prescribed limit of Rs. 10,00,000 shall not be included in total net wealth of the assessee. This plea of the learned counsel for the assessee is not sustainable in law. Prior to substitution in clause (xiii) of subsection (1) of section 5 of the Wealth Tax by virtue of Finance Act, 1994, value of agricultural land subject to a maximum limit of one Lakh rupees was not includable in total net wealth of the assessee. Meaning thereby if value of agricultural land exceeds Rs. 1,00,000 then the value so assessed shall be include in total net wealth of the assessee. But after its substitution this amount has been raised to one million rupees (Rs. 10,00,000). This substituted figure is applicable with effect from assessment year 1994-95 onward. Since the assessment ear which is under appeal is 1993-94 which pertains to the assessment year prior to substitution in section 5(1)(xii) of the Wealth Tax Act, 1963, therefore the Assessing Officer had acted within his jurisdiction in including value of agricultural land held by the assesse in his total net wealth being the value adopted was higher than the prescribe limit of Rs. 1,00,000. The orders of the two authorities below are hereby endorsed by us as well on this score.

Assessment Years 1995-96 and 1996-97:

4. The assessee for these assessment years has objected to the impugned order on tow counts. Firstly, that valuation of residential house in segregation i.e. by adopting portion of it as residential house while the other as clinic, to be totally uncalled for and secondly that refusal to allow exemption to the clinic for the assessment years 1994-95 and 1995-96 was unwarranted in view of the clause 12(2) of the Second Schedule to the Wealth Tax Act. Facts in short leading for disposal of these objections are that the assessee owns a Property measuring 5 Kanals 3 Marlas, bearing No. 31 David Toad, Lahore on which a house has been constructed over an areas of 2 Kanals as per the P.T.-I Form. Out of which major portion is used by the assessee for self-residence while a part thereof, measuring 5 Marlas is being utilized for clinic. However, exemption from charge of wealth tax was claimed on the full house. Nevertheless the exemption was granted by the Assessing Officer to the house to the extent which was being used for self-residence. As regard clinic its total value was worked out by the Assessing Officer at Rs. 993,750 by adopting the rate fixed by the Deputy Collector in respect of the land and adding to it cost of construction by taking per sq. ft. rate of construction.

Before the First Appellate Authority plea of the assessee was that exemption from charge of wealth tax be granted to the full house being the entire house is owned and occupied by the assessee himself and the so it had fallen in grave error in apportioning the house into two parts for the purpose of charging wealth tax thereon because segregating the house into two units is against the philosophy of exemption granted to the self‑occupied house by the Legislature. The other plea of the assessee was that even otherwise clinic was exempt from levy of wealth tax under sub‑clause 2(12) of the Wealth Tax Act. Both these contentions of the assessee could not find favour with the Appeal Commissioner and he, however, remanded the point pertaining to valuation of the clinic with the direction to be revalued in accordance with rule 8(3) of the Wealth Tax Act, 1963 and strength in this regard was sought from three judgments of the Tribunal therein.

5. Before us Mr. Latif Ahmed Qureshi the learned counsel for the assessee reiterated the contentions as were put forward before the First Appellate Authority. His main thrust was that merely using part of the house for professional purposes would not change status of the house. Photocopy of the PT‑1 Form has also been placed on record to state that property tax has been paid on the full house. Hence apportionment of the house into two status i.e. one residential and the other professional, was uncalled for. The learned A.R. of the assessee also vigorously tried to draw strength from the LDA Buildings Regulations Act, 1984, to contend that according to rule 51 of the said Act, part of the house can be used as office or clinic etc. A clipping from daily newspaper The Nation dated 8‑2‑2001 has been placed on record to point out that permission to utilize 25 % of covered area of his private house for professional purposes has been granted by the Director‑General LDA in the case of another doctor. The learned counsel for the assessee also made efforts to explain his preposition with an example that if a room of a house is to be used for offering prayer that does not change status of the house. He thus urged that since Civil Laws recognizes use of a house otherwise than for residential purposes, the WTO had no authority to bifurcate the house property into two status or into two separate units for the purposes of charging wealth tax thereon. On the other hand the learned D.R. supported the orders of the two authorities below without the assessment record.

6. We have given anxious thought to the rival arguments and find the contentions put forth by the learned counsel for the assessee to be without any substance. There is no ambiguity to understand Buildings Regulation Act of LDA for the purpose of using a portion of the house for professional ends because LDA is a separate law which is governed by its own rules and regulations. While the Wealth Tax Act is an independent enactment which has nothing to do with any other law. Above all, the LDA's Act does not have overriding effect over the Wealth Tax Act. Even the Wealth Tax Act does not debar the assessee from using part of his property otherwise than for a residential purposes. So, there is no legal bar on the assessee in whatever manner he desires to use his residence. We, therefore, hold that no other law comes into play for valuation of immovable assets for the purpose of charging wealth tax thereon until and unless it has been said so.

7. According to clause (xvi) of subsection (1) of section 5 of the Wealth Tax Act, 1963, around which whole controversy of the issue in hand revolves, provides that wealth tax shall not be payable by an assessee in respect of one residential house owned and occupied by the assessee for purposes of his own residence where he opts to exclude his house from the asset. In this clause paramount significance has been attached to the words "owned and occupied by the assessee for purposes of his own residence". Thus, option for claiming exemption of the house can only be exercised if the house is owned and occupied by the assessee for purposes of his own residence. Actually this clause of section (5)(1) of the Wealth Tax Act, 1963 has inbuilt characteristic of its being apportionment of the house into two heads i.e. one utilization for self‑residence and the other for non‑utilization for residential purposes. In no way such portion of the residential house which is being used for clinic can be said to have been occupied by the assessee for the purposes of his own residence. We, therefore, hold that every time that a portion of house is used otherwise than for residential purposes, no matter whether any division of the house has been taken place or not, the assessee shall not be entitled to the benefits of exemption to the extent the house is in utilization for professional purposes. Accordingly this objection of the learned counsel for the assessee stands rejected.

8. Next contention of the assessee relates to refusal to grant exemption to the clinic in respect of assessment years 1995‑96 and 1996‑97. According to the learned counsel for the assessee the clinic also enjoys exemption from charge of wealth under clause 2(12) of the Second Schedule to the Income Tax Ordinance, 1979. This contention of the assessee stands overruled because in a Full Bench decision of the Tribunal cited as (2000) 81 Tax 80, clinic has been excluded out of the definition of shop. Thus, exemption to clinic has rightly been refused by the Assessing Officer.

9. No other ground of appeal has been pressed by the learned counsel for the assessee.

10. Consequently all these appeals filed at the behest of the assessee‑appellant fail and are dismissed being benefit of any merits.

C.M.A./531/Tax(Trib.) Appeals dismissed.