(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17A(i)(b)‑‑‑Time limit for completion of assessment and re assessment‑‑‑Section 17A(i) (b) of the Wealth Tax Act, 1963 specifically provides that the time limit for completion of assessment is two years where a return has been filed‑‑‑General limitation of four years is not applicable in a case where a return has been filed and is only applicable if the return has not been filed.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 5(1)(i) & Second Sched., Cl. 22‑‑‑Exemption in respect of certain assets‑‑‑Property held for public purpose‑‑‑Stock Exchange‑‑ Construction of building by Stock Exchange to accommodate Banks in order to run the clearing house and members of Stock Exchange‑‑‑Claim of exemption‑‑‑Validity‑‑‑Appellate Tribunal allowed exemption under S.5(1)(i)/Cl. 22 of the Second Sched. to the Wealth Tax Act, 1963 to such building.

I.T.A. No. 251/LB/252/LB of .1996‑97 and CIT v. Hyderabad Stock Exchange Ltd., A.P. (1967) ITO 195 rel.

CIT, Madras v. Andhra Chambers of Commerce (1965) 55 ITO 772; 85 Tax 27; (2001) 84 Tax 181 and 113 ITR 22 ref.

Imran Afzal, FCA for Appellant.

Bashir Ahmad Shad, D.R. for Respondent.

Date of hearing: 8th May, 2003.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).‑‑‑These are cross‑appeals for the assessment years 1992‑93, 1994‑95, 1996‑97 to 2000‑2001 against consolidated order passed by the learned CIT(A), Zone II, Lahore. The assessee in the assessment years 1992‑93, 1994‑95 and 1996‑97 to 1998‑99 has assailed that the original assessments framed by the DCIT Were barred by time in terms of section 17(1)(b) of the Wealth Tax Act, 1963 whereas in all the years under consideration the assessee has agitated that both the authorities below erred in law in rejecting the exemption of building claimed under section 5(1)(c)/clause 22 of the Second Schedule to the Wealth Tax Act, 1963. The Department, on the other hand, in the assessment years 1992‑93, 1994‑95 and 1995‑96 has agitated that the learned CIT(A) was not justified to delete the estimation as the approval of the learned IAC was obtained in the assessment years 1992‑93, 1994‑95 and the Department has further agitated that the learned CIT(A) was not justified to give directions to finalize the assessment on the basis of actual rent received from banks as well as members of the Lahore Stock Exchange as the assessee failed to prove his contention, at the time of assessment proceedings, despite repeated requests. In the ‑assessment year 1996‑97 the Department has agitated the direction of the learned First Appellate Authority to finalize assessment on the basis of actual rent received from banks and members of the Lahore Stock Exchange since approved site plan and exact measurement of area was not provided. In the assessment years 1997‑98 to 2000‑2001 the Department has agitated that the learned CIT(A) was not justified to give directions to finalize the assessment on the basis of actual rent received from members of Lahore Stock Exchange as the assessee failed to prove his contention at the time of assessment proceedings despite repeated requests.

2. The brief facts of the case are that the appellant is a resident company limited by guarantee formed for the prime object to conduct, regulate and control the trade of business of buying, selling and dealing in shares, scrips, participation term certificate, Modaraba certificates and other public/private sector capital market instruments by establishing and maintaining or to arrange with or through a bank a clearing house for the business of the exchange and to frame regulations under which such clearing house will function. Lahore Stock Exchange (G) Limited (LSE) constructed a building specifically to accommodate banks in order to run the clearing house and members of LSE, to facilitate the business of the exchange. The building, other than the area in occupation of the exchange is rented to banks for running clearing house and leased for 99 years to the members of the exchange for transacting business. The Assessing Officer finalized the assessment after rejecting the declared version. The GARY was adopted at the rate of Rs.23 per sq. ft. for the assessment year 1992‑93 and 1994‑95 and at Rs.25 per sq.ft. for the assessment year 1995‑96 against the declared average rate of Rs.21.6% per sq. ft. on the area measuring 8853 sq. ft. let out to banks. The remaining covered area of the building i.e. 57157 sq. ft. was considered to be let out to members and was estimated at the rate of Rs.15 per sq. ft. without any allowance of the area in the occupation of the appellant, against the actual rent received from them @ of Re. 1 per sq. ft. for 25800 sq. ft. (being the area let out to members). The assessments were finalized after obtaining approval from the learned IAC. These assessments were set aside in first appeal. However, Assessing Officer repeated assessments originally made.

3. For the assessment year 1996‑97 the Assessing Officer framed the assessment on the basis of assessment year 1995‑96. For the assessment years 1997‑98 to 2000‑2001 the Assessing Officer finalized the assessments accepting the declared GARY for the area let out to banks based on rent agreements and actual area of 25600 sq. ft. leased out to the members. Previously the area being valued was 57157 sq. ft. GARY was determined applying the rate of Rs.15 per sq. ft. for the assessment years 1997‑98 and 1998‑99 and Rs.18 per sq. ft. for the assessment years 1999‑2000 and 2000‑2001.

4. The assessee being aggrieved preferred appeals before the learned First Appellate Authority who after considering the arguments, rejected the claim of the assessee regarding exemption under section 5(1)(i)/clause 22 of the Second Schedule to the Wealth Tax Act, 1963 in all the years under consideration. The learned CIT(A) observed that the Assessing Officer was not justified to estimate the GARY of the appellant without putting reasonable piece of evidence to establish the declared rental, to be incorrect or even understated. The rent received being fully verifiable and supported by the agreements duly executed between the appellant and the tenants and the members and its acceptance in the income tax assessment merits calculation of the GARV on the basis of actual rent received by the assessee to be accepted. The Assessing Officer was directed to finalize the assessments on the basis of actual rent received, declared and assessed in the income tax proceedings.

5. Parties have been heard. The learned AR for the assessee submitted that the original returns were filed and assessed on the following dates:‑‑

The learned AR contended that section 17A(i)(b) provided that "no order of assessment shall be made under section 16 at any time after the expiration of period of four years from the end of assessment year in which the net wealth was first assessable or two years from the date of furnishing of a return or a revised return under section 15, whichever is later, where the assessment year is an assessment year commencing on or after first day of July, 1981". The learned AR vehemently contended that in the light of a specific provision in section 17A(i)(b) no order of assessment could be made where two years had elapsed after the filing of wealth tax returns. The assessment finalized after a lapse of two years being barred by time is deemed to have been finalized accepting declared version. The learned AR also informed that on the same issue, Writ Petition No.6315 of 1994 had been admitted by the Honourable Lahore High Court but had not been fixed for hearing. The learned AR also stated that the learned CIT(A) did not accept the claim of exemption stating that no order of any judicial authority on the issue was quoted. The learned AR in this regard stated that the ITAT, Karachi in the case of Karachi Stock Exchange in I.T.A. Nos. 251/LB of 1996‑97 etc., dated 26‑7‑2000 had held the exchange to be a charitable organization qualifying for exemption under clause 93 of the Second Schedule to the Income Tax Ordinance and as a consequence qualified for exemption under clause 22 of the Second Schedule to the Wealth Tax Act. The learned AR also relied on a case from Indian jurisdiction reported as (1965) 55 ITO 772 (SC Ind.) CIT Madras v. Andhra Chambers of Commerce wherein the Court held that if the building was properly held under a trust or other legal obligation, wholly for charitable purpose, the income from the building was exempt from tax under section 4(3)(1) of the Indian Income Tax Act, 1922. The learned AR further relied on a case reported as (1967) ITO 195 (H.C.A.P.) CIT v. Hyderabad Stock Exchange Ltd., A.P. wherein it was held that the object beneficial to a section of the public is an object of general public utility if the section of the community sought to be benefited, is sufficiently defined and identifiable by some common quality of a public or impersonal nature; this test was satisfied by the stock exchange and hence its income was exempt from tax under section 4(3)(i) of the Income Tax Act, 1922. The learned AR also submitted that the original assessments had been set aside for which the prior approval of the IAC was obtained but the subsequent order passed under section 16/23 by the Assessing Officer without complying with the mandatory provision, as required under rule 8(3) of the Wealth Tax Rules, 1963 i.e. obtaining prior approval of the IAC, being illegal, merit deletion for assessment years 1992‑93, 1994‑95, 1995‑96 and 1996‑97. Reliance in this regard was placed on the reported cases 85 Tax 27 (H.C. Lah.) 84 Tax 181 (2001) and 113 ITR 22.

6. After hearing the parties and going through the orders passed by the Authorities below we find that the contentions as raised by the assessee bear weight. Section 17A(i)(b) specifically provides that the time limit for completion of assessment is two years where a return has been filed. The general limitation of four years is not applicable in a case where a return has been filed and is only applicable if the return has not been filed.

7. Reporting the claim of exemption the assessee has relied on an unreported decision, dated 26‑7‑2000 passed in I.T.As. Nos. 251, 252/LB of 1996‑97, etc. of Karachi Stock Exchange and the reported decision of Andhra Pradesh High Court (Hyderabad Stock Exchange) where in it was held that an object beneficial to the section of public is an object of general public utility if the section of community sought to be benefited is sufficiently defined and identified by some common quality of public and impersonal nature; this test was satisfied by the Stock Exchange and hence its income was exempt from tax under section 4(3) of the Income Tax Act, 1922. We are of the considered view, that facts and circumstances of the case in hand, i.e. Lahore Stock Exchange (G) Limited are exactly the same as were in the cases decided by the Tribunal and Andhra Pradesh High Court. Therefore, following the ratio of the cases cited supra we feel no hesitation in allowing the exemption under section 5(1)(i)/clause 22 of the Second Schedule to the Wealth Tax Act, 1963 in all the years under consideration. Since we have decided the appeal filed by the assessee on legal ground, there is no need to adjudicate the issues raised by the Department.

8. As a result of the above discussion the appeals filed by the assessee are allowed whereas those filed by the Department are dismissed being devoid of merits.

C.M.A./971/Tax (Trib.) Appeal allowed.