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

----S. 2(5)---Assets---Status---Association of Persons---Assessment year 1996-97---No assessment in the status of Association of Persons could legally be made because of the amendment brought in section 2(5) of the Wealth Tax Act, 1963 by virtue of Finance Act; 1996---Assessment framed in the status of Association of Persons for the assessment year 1996-97 was cancelled by the Appellate Tribunal.

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

----S. 2(5)(ii)---Assets---Property inherited by the co-owners was let out--Taxation ---Assessee contended that inherited property was let out only after the death of principal owner because the family was forced to let it out since they had no, other source of income and property was not held for purpose of letting out and intention of the assessee was manifested from the fact that property was not acquired or constructed for purposes of letting out and the share in the property of co-owners were definite and each co-owner was liable to be taxed in respect of his share---Validity---Status of the assessee and of the property as on the valuation date were material for the purpose of wealth tax assessment for a particular year and it was always not necessary that for what purpose the property was acquired---Property purchased for the purpose of construction, sale or letting out may not be held for the same purpose during the subsequent years vis-a-vis a property not acquired for the purpose of construction, sale or letting out may be held for these purposes during a subsequent year---Undisputed facts had proved that the co-owners ventured to earn income by jointly letting out property during the years under consideration---Intention of all the co-owners to hold the property for purpose of letting out on the relevant valuation dates in terms of provisions of S.2(5)(ii) of the Wealth Tax Act, 1963 was established---Appeals were rejected by- the Appellate Tribunal.

(1984) PTD (Trib.) 157 and (1967) PTD (Trib.) 160 irrelevant.

Shabbir Ahmed, FCA/AR for Appellant.

Mrs. Sameera Yasin, D.R. for Respondent.

Date of hearing: 26th February, 2003.

ORDER

KHALID WAHEED AHMED, (JUDICIAL MEMBER),---Through the titled appeals, the appellant, an AOP, impugns the consolidated order, dated 28-10-2002 passed by the Learned CIT & WT (Appeals), Zone-I, Lahore pertaining to the assessment years 1994-95 to 1999-2000 on the following common grounds for all the years under consideration:

(i)That the order of the CIT(A) confirming the assessment made by the Wealth Tax Officer is liable to be vacated as being manifestly perverse in law and fact.

(ii)That the authorities below are wholly wrong in holding the property subjected to wealth tax "as belonging to more than one person and held for the purpose of letting out" and as such liable to wealth tax as an AOP.

(iii)That the facts on record no AOP referred to in section 2(16) was in existence in relation to the property in question and further that the said property was outside the mischief of section 2(5)(ii) of the Wealth Tax Act, 1963 and thus not liable to wealth tax:

2. Relevant facts of the case under consideration are that for charge of wealth tax in respect of Property No.54-Bridge Colony, Lahore notices for filing of Wealth Tax Returns were issued on Mst. Tanveer Muzaffar and others. Wealth Tax Returns were filed to declare Nil Wealth with the arguments that property in question was not liable to be assessed in the status of AOP. The Assessing Officer did not accept the contention of the appellant for the reason that the property after the death of Brig. Muzaffar belonged to his legal heirs who were his son and daughters. Rent agreement was also executed in the name of Mst. Tanveer Muzaffar and others as lessor. In the impugned order, Learned CIT(A) dismissed the appeals of the appellant with the observations that as per facts of the case the property in question belongs to more than one person and has been held for the purpose to letting out According to the Learned CIT (A), the Assessing Officer was quite justified in making wealth tax assessments in the status of AOP. Learned CIT(A) upheld the action of the Assessing Officer since according to him the appellant could not controvert the findings of the Assessing Officer.

3. At the very outset of the hearing of the appeals under consideration, Learned A.R. for the appellant raised the objection regarding the validity of assessment framed for the year 1996-97 in the status of AOP. It was the contention of the appellant that for the assessment year 1996-97, no assessment in the status of AOP could/ legally, be made because of the amendment brought in subsection (5) of section 2 Wealth Tax Act, 1963 by virtue of Finance Act, 1996. According to the Learned A.R. for the appellant, the assessment framed in the status of AOP for the assessment year 1996-97 was thus not sustainable. Learned A.R. of the assessee contended that legal objection going to the roots of the case could be raised by him even at the appeal stage.

4. Learned D.R. was unable to controvert the above contention of the Learned A.R. of the appellant. We agree with the viewpoint expressed by Learned A.R. that no assessment could legally be made in the status of AOP for the assessment year 1996-97. Under the circumstances of the case, the assessment framed in the status of AOP for the assessment year 1996-97 is not maintainable, hence is hereby cancelled.

5. The issue raised by the appellant-assessee through the common grounds of appeals for the assessment years 1994-95, 1995-96, 1998-99 and 1999-2000 is that the assessment framed in the status of AOP was not justified. Learned A. R. for the appellant stated that the property was transferred in the name of co-owners by inheritance and was not purchased for the purpose of business of sales or letting out. According to the Learned A.R. for the appellant, the mischief of section 2(5)(ii) of Wealth Tax Act, 1963 was not attracted in the case of the individuals who happened to be co-owners by operation of law i.e. by inheritance or death of her husband in 1986. Learned A.R. for the appellant stated that the co-owners had no intention of doing the business of letting out property. It was the contention of the learned A.R that since property was not acquired for the purpose of any such business no possession of any person came into existence. According to the Learned A.R. the inherited property was let out only after the death of the principal owner because the family was forced to let it out since they had no other source of income. It was contended on behalf of the appellant that the property was not held for the purpose of letting out and the intention of the assessee was manifested from the fact that the property was not acquired or constructed for the purpose of letting out. It was also contended on behalf of the assessee that the shares in the property of the co-owners were definite and each co-owner was liable to be taxes in respect of his share which was his property.

6. It was also contended on behalf of the appellant-assessee that the assessment of wealth tax framed in the status of the AOP was also unjustified because to make an assessment in the status of AOP, it is essential that there should a combination of persons with the intention of a joint venture which was not present in the instant case. It was submitted that in the present case, the property came to the joint ownership of the co-owners through inheritance and not by their own will. In this context, the judgment of the Tribunal reported as (1984) PTD (Trib.) 157 and (1967) PTD (Trib.) 160 was also referred. The case-law cites on behalf of the assessee is not relevant because it, pertains to the assessment of income from property in which there are specific provisions under the Head Income from Property provided for the purpose of income-tax assessment.

7. Learned D.R. in his arguments, however, supported the viewpoint expressed by the two authorities below .in their orders. According to the Learned D.R., the assessment was rightly framed in the status of AOP because the property was held for the purpose of letting out in terms of section 2(5)(ii) of the Wealth Tax Act, 1963 by the AOP. It was evident from the fact that all the co-owners have jointly let out the same during the years under consideration.

8. Arguments of learned representatives of both the parties have been heard and the facts available from the orders of the authorities below have also been considered. Learned A.R. of the assessee has not been able in convincing us by putting forth any plausible argument or by citing the relevant case-law to establish that the Assessing Officer was not justified in framing the wealth tax assessment for the assessment years 1994-95, 1995-96, 1998-99 and 1999-2000 in the status of AOP. The status of the assessee and of the property as on the valuation date are material for the purpose of wealth tax assessment for a particular year and it is always not necessary that for what purpose the property was acquired. A property purchased for the purpose of construction, sale or letting out may not be held for the same purpose during the) subsequent year vis-a-vis property not acquired for the purpose of construction, sale or letting out may be held for these purposes during a subsequent year. It is proved from the undisputed facts of the instant case that the co-owners ventured to earn income by jointly letting out property during the years under consideration. Thus, in our opinion, the intention of all the co-owners to hold the property for the purpose of letting out on the relevant valuation dates in terms of provisions of section 2(5)(ii) of the Wealth Tax Act, 1963 was established.

9. As a result of the above discussion, the appeal of the assessee for the assessment year 1996-97 succeeds on the legal ground as mentioned above while the appeals for the assessment years 1994-95, 1995-96, 1998-89 and 1999-2000 fail accordingly.

C.M.A./953/Tax (Trib.)Order accordingly.