SHAHI CARPET (PRIVATE) LIMITED VS COMMISSIONER OF WEALTH TAX/INCOME-TAX, COMPANIES-II, KARACHI, 2003 PTD-KARACHI-HIGH-COURT-SINDH 1377 (2003)

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

----S.2(16)(ii)---Net wealth---Tax is to be calculated after taking into consideration the `debts owed' by the assessee on the valuation date and incurred in relation to the assets (property) subjected to wealth tax.

(b) Question of law---

---- Where any party challenges the conclusion drawn from a set of facts and circumstances, it is a question of law.

(c) Appeal---

---- Question of law---Question of fact---Point of law can be raised at any stage including the appeal---Question of fact, however, is not permissible to be raised, for the first time in appeal.

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

----S. 2(16)---Findings reached by the Wealth Tax Officer, affirmed by Commissioner (Appeals) and the Appellate Tribunal that the adjustment of "loan claimed' against the property was already repaid before the assessment year and other liabilities appearing in the balance sheet had no nexus with the property subjected to wealth tax, were the findings of fact and on that findings no other conclusion was possible under the law except that "liabilities claimed" were not allowable under S. 2(16), Wealth Tax Act, 1962.

Messrs Abbot Laboratories Ltd. v. Commissioner of Income Tax, Central Zone, Karachi 1989 PTD 602; Oil India Co. Ltd. v. Commissioner of Income-tax, Central Calcutta (1982) 137 ITR 156; Commissioner of Income-tax v. International (Pvt.) (1982) 137 ITR 184; General Tyre and Rubber Co. v. Commissioner of Income-tax (Civil Reference No.25 of 1'979; I.T.C. No.93 of 1992; Commissioner of Income-tax v. Kotrika Venkataswamy and Sons (1971) 79. SC 449; Commissioner of Sales Tax (Central), Karachi v. Karachi Oils Seed Industries 1987 PTD 64Commissioner of Sales Tax, Lahore v. Suleman &. Company 1980 PTD 188; Orient Road Ways v. Commissioner of Income-tax 2000 PTD 999 = 233 ITR 351; Commissioner of Income-tax v. Banswara Textile Mills Ltd. 2000 PTD 2087 = 235 ITR 743; Commissioner of income-tax v. Gulf Engineering Company 2000 PTD 2227 and Commissioner of Income-tax, Lahore v. Government Jallo Rosin and Turpentine Factory, Lahore PLD 1976 Lah. 1135 = 1976 PTD 206 ref:

Province of Punjab v. Federation of Pakistan PLD 1956 FC 72 distinguished.

Muhammad Javaid Khurrum for Appellants.

Aqeel Ahmed Abasi for Respondents.

Date of hearing: 21st February, 2003.

JUDGMENT

SHABBIR AHMED, J.---Since the common question has been raised in above appeals based on similar facts pertaining to the assessment years 1993-94, 1994-95, 1995-96, 1996-97, 1997-98 and, 1998-99 it is therefore, considered proper to deal with together and to dispose them of by this judgment,.

The above appeals have been filed by the appellants impugning the order, dated 21-3-2000 passed by Income Tax Appellate Tribunal, pertaining to the assessments referred to above, whereby the Tribunal maintained the order of Commissioner of Income Tax (Appeals), dated 30-4-1999, affirming the order of Deputy Commissioner, Income Tax rejecting the plea of the appellant for deduction of amount claimed as loan/liability' on the grounds that loan taken from Messrs Salateen Trading Co. Ltd. had been paid prior to the assessment year 1993-94 which is first year of the assessment under appeals and it was no more debt owned in respect of the property subjected to Wealth Tax and other liabilities appearing in the balance sheet do not bear any nexus to the property, as such, the liability claimed is not allowable.

The following point of law in terms of section 27 of the Wealth Tax Act, 1963 has been raised by the appellants:---

(1) Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was right to hold that (a) the loan obtained in respect of the property being subjected to wealth tax had already been paid prior to the assessment year and that (b) there was no nexus between the other liabilities appearing in the balance sheet of the company and the `rented property' which has been subjected to wealth-tax in the respective years.

Learned counsel for the parties were put on notice that aforesaid question would be heard and would be disposed of finally at Katcha Peshi stage and the learned counsel have argued the appeals for final disposal.

We have heard Mr. Muhammad Javad Khurram, learned counsel for the appellants and Mr. Aqeel Ahmed Abbasi, learned counsel for the' respondents.

Before examining the respective contentions, it would be advantageous to reproduce the provisions of section 2(16) of the Wealth. Tax Act, which defines `net wealth' as follows:--

"(16) `net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than ----

(i) -------------------------------------------------------------------------

(ii) debts which are secure on, or which have been incurred in relation to any asset in respect of which wealth tax is no; payable under this Act.

The perusal of the aforesaid provisions would show that taxis to be calculated after taking into consideration the debts owed' by the assessee on the valuation date and incurred in relation to the assets (Property) subject to Wealth Tax.

Learned counsel for the appellant's contention was that though the factual aspect cannot be the subject of appeal but contended that where any party challenges the conclusion drawn from a set of facts and circumstances, it is a question of law and to support his contention has referred Messrs Abbot Laboratories Ltd. v. Commissioner of Income Tax, Central Zone, Karachi (1989 PTD 602). In above case, there was no dispute about the amount borrowed. The only question involved was whether the liability to pay an extra amount due to devaluation was a business expenditure and the question referred was whether on the facts and in the circumstances of the case the Tribunal was right in holding that the excess payment while representing the loan was due to devaluation of Pakistani Rupee is not an admissible deduction under the Income-tax Act? The question was replied in negative. The Division Bench of this Court, adopted, the view taken in (1) Oil India Co Ltd. v. Commissioner of Income-tax, Central Calcutta (1982) 137 ITR 156, (2) Commissioner of Income-tax v. International (Pvt.) (1982) 137 IT 184 and (3) General Tyre and Rubber Co. v. Commissioner of Income-tax (Civil Reference No.25 of 1979). The view taken in above cases was that additional liability due to devaluation would be a loss in connection with the loan arising out of business.

There is no cavil to the proposition enunciated in above case that where any party challenge the conclusion drawn from a set of facts and circumstances, it is a question of law.

Mr. Mohammad Javaid Khurram also, referred the judgment of Division Bench of this Court, dated 1-3-2001 in I.T.C. No.93 of 1992, wherein the question raised was whether on facts and in the circumstances of the case the learned I.T.A.T. was justified in directing the W.T.O. to allow as liability the entire amount received from the customers as advances till the relevant valuation date. The W.T.O. had restricted it to the amount which was actually used in the construction of the buildings in view of section 2(m)(ii) of the Wealth Tax Act, 1965 (section 2(16)).

The relevant facts were that the assessee, a partnership firm sought deduction of `debts owned' on the valuation date from the gross wealth consisting of advances received by the assessee from intending purchasers by way of part payments of properties booked in the projects. The Wealth Tax Officer, allowed such debts only to the extent the amounts which the assessee had actually spent on construction of the buildings till the valuation date. The order was upheld in appeal by the Commissioner of Income Tax. (Appeals) but on further appeal to the Tribunal, the Tribunal held that the advances which had not been adjusted till the valuation date relevant to the assessment year should be allowed as debt owed' against the gross value of the buildings.

The learned members of the Bench was of the view that the question involved was not merely one' of fact but did amount to a question of law and it was observed that for the purpose of deduction the debt must exist on the valuation date in terms of section 2(m) of the Act and answered the question in affirmative.

Learned counsel for the appellants has vehemently contended that the conclusion drawn is not correct, as such it is question of law.

Conversely, Mr. Aqeel Ahmed Abbasi learned counsel for the respondents has vehemently contended that question, formulated is question of fact, cannot be raised in appeals under section 27 of the Act and to support his contention, he referred the case of Commissioner of Income-tax v. Kotrika Venkataswamy and Sons (1971 (Volume 79) SC 449), wherein the plea taken on behalf of the appellant was not accepted as the form of the question, was whether the Tribunal was justified in coming to the conclusion on the facts and circumstances of the cast that no concealment was proved by the department.

The Supreme Court of India ruled that:--

`That question cannot in our judgment include an enquiry whether the Tribunal had jurisdiction to reach a conclusion different from the conclusion it had reached in the proceeding for assessment Mr. Aqeel Ahmed Abbasi in further support of his contentions, has referred the following cases:--

(1) Commissioner of Sales Tax (Central) Karachi v. Karachi Oils Seed Industries [(1987 PTD 64)]. (2) Commissioner of Sales Tax, Lahore v. Suleman & Company 1980 PTD 188 (3) Orient Road Ways v. Commissioner of Income Tax [(2000 PTD 999 (233 ITR 351)], (4) Commissioner of Income Tax v. Banswara Textile Mill, Ltd. [(2000 PTD 2087) (235 ITR 743)] and (5) Commissioner of Income Tax v. Gulf Engineering Company (2000 PTD 2227).

The ratio to decide in above cases was that only a question of law and not a question of fact could be agitated in appeals/references.

Mr. Muhammad Javaid Khurrum also contended that the Tribunal failed to consider the `loan' taken from the directors of the assessee to repay the loan of Messrs Salateen Trading Company (Pvt.) Limited, which was outstanding on date of assessment. His contention was that though no such plea was raised before the Tribunal but such plea could be raised by the appellant in appeal and he referred the case of Commissioner of Income-tax, Lahore v. Government Jallo Rosin and Turpentine Factory, Lahore' PLD 1976 Lah. 1135 = 1976 PTD 206 to contend that a point which was not raised at any stage could be raised at the appellate stage.

In the cited case, the objection pertaining to jurisdiction based on Article 185(1) of the Constitution of 1973, was raised, which lays down that the Supreme Court shall, to the exclusion of every other Court, have original jurisdiction in any dispute, between any two or more Governments. The dispute was between the Punjab Provincial Government and Federal Government pertaining to the payment of Income Tax. The Federal Court had already decided said question in Province of Punjab v. Federation of Pakistan (PLD 1956 FC 72), the plea was accepted and the reference was treated as infructuous for above reasons the proceedings taken by the Tribunal was bad. The assessment completed by the Income Tax Officer was ab initio void and without jurisdiction.

The case is distinguishable with present case. There is no evil with the proposition that point of law can be raised at any stage including the appeal. The appellant, in the instant case, has tried to raise the question of facts, for the first time, which is not permissible in Law.

In the present appeals, the findings reached by the Wealth Tax Officer, affirmed by Commissioner Income Tax (Appeals) and the Tribunal that the adjustment of loan claimed' against the property' was already repaid before the assessment year and other liabilities appearing in the balance sheet have no nexus with the property subjected to Wealth Tax, are the findings of fact and on that findings no other conclusion is possible under the law except that `liabilities claimed' are not allowable under the provisions of section 2(16).

As a consequence thereof, the appeals have no merits and the same are dismissed in limine. However, with no order as to costs.

M.B.A./S-281/K Appeals dismissed.