(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2 (5)(ii)‑‑‑Expression "body of individuals"‑‑‑Explanation‑‑‑Body of individuals did not include a Provincial Government a body created through a Statute by the Provincial Government or other such Government and semi‑Government department.

PLD 1965 SC 201; Daccan Wine v. CIT (1977) 106 ITR 111; (1979) 120 ITAR 564; (1983) 48 Tax 100 (H.C. Ind); (1997) 224 ITR 635 and (1979) 120 ITR 564 Page 569 (P & H) rel.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 23(2)‑‑‑Limitation against order when not maintainable in the eye of law‑‑‑Order of Assessing Officer being not maintainable on the face of it, there was no question of any limitation against such order.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 24(3)‑‑‑Appeal to Appellate Tribunal‑‑‑Limitation‑‑‑Condonation of delay‑‑‑Issue in case must, as far as possible, be decided on merits ignoring the technical flaws and delay in filing various petitions should be condoned dispassionately.  

(d) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 23(2) & 2(5)(ii)‑‑‑Cantonment Act (II of 1924)‑‑‑Appeal to the Appellate Additional Commissioner from orders of Deputy Commissioner ‑‑‑Condonation of delay‑‑‑Assets‑‑‑Body of individuals‑‑ Local authority‑‑‑‑Cantonment Board was assessed under the Wealth Tax Act, being body of individuals for the reason that they constructed plaza for the purpose of sale and letting out‑‑‑First Appellate Authority, by condoning delay in filing of appeal, cancelled such assessment on the ground that Cantonment Board was not body of individuals‑‑‑Department contended that First Appellate Authority was not justified in condoning delay for filing of appeal and also that assessee was a body of individuals hence‑taxable under the provisions of Wealth Tax Act, 1963‑‑‑Validity‑‑ Condonation of delay had not caused any prejudice to the department as collection of revenue from the limbs of Government ignoring potent corners from where a sea of revenue could be generated was obviously unfortunate‑‑‑If an assessee was not liable to a charge under a specific Act, any order passed against him was void and challengeable as and when the assessee became conscious and came up with his grievance‑‑ Appeals having no merits were dismissed.

Muhammad Asif, D.R. for Appellant.

Muhammad Azhar Siddique for Respondent.

Date of hearing: 13th January, 2004.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).‑‑‑These appeals have been filed by the department. These are against the orders of the CIT(A), dated 12‑10‑1995 for the assessment years 1993‑94 and 1994‑95 and 11‑12‑1999 for the assessment years 1995‑96 and 1996‑97 respectively.

The main grievance of the department is that the First Appellate Authority was not justified in condonation of delay for filing of appeal and also that the assessee under discussion is a body of individuals hence taxable under the provisions of wealth tax.

The learned DR while supporting the claim of the department said that neither the circumstances under which the appeal has been allowed has been mentioned nor the reasons for condonation have been mentioned in the order. He said that admittedly this is for the time and is the only case wherein a Cantonment Board/local authority has been assessed to wealth tax anywhere in the country. However, the department's stance that it is a body of individuals requires detailed in depth study. He said that in the earlier hearing before various Benches as well as partly‑before this Bench the LA have exhaustively argued that for condonation of delay each day should be explained with convincing reasons as this is not a matter of substantive right. If some body sleeps over his right he should not be allowed to start a new series of litigation by way of generous condonation of the laches in filing some appeal. Obviously if some one, by consent, surrenders his right, it should not be awarded to him by simply saying that the assessment was void hence no limitation would run against the same. Furthermore, whether the Cantonment Board is a body of individuals or not should be left to the Department so that there is a comprehensive decision on the issue and the charge is properly created against such and similar other organizations. In his opinion a local authority be that a statutory body, is covered by `body of individuals.' Furthermore, in his opinion the definition of assets as was applicable on the day fully covers Cantonment Board for the reason that they have constructed Plaza for the purposes of sale and letting out.

The case of the assessee on the other hand basically is that the Cantonment Board, Multan is a local authority created by a Federal Law namely the Cantonment Act, 1924 (Act No. II of 1924). The purpose of creation of this Cantonment Board was the administration of local fund called the Cantonment Fund, which was held to be as a public property and if for some reasons City authority ceases to exhaust, the fund is to be reverted back to Federal Government. The authority was empowered to make its own bye‑laws and levy taxes etc. Constitution of the authority comprised of the following persons:‑‑

(1) Army Area Commander (Chairman)

(2) 9 Army Officers (or other person) nominated by the Army Area Commander.

(3) 12 persons elected from the people of the local area.

(4) A Magistrate, an Engineer and a Health Officer.

The members have no right or share in the income or property of the said Board. Furthermore Federal Government appoints a senior Civil Servant to act as an Executive Officer of the authority.

A local authority therefore, is a statutory body regulated by the Cantonment Act, 1924 and for all practical purposes is a limb of the Government. The Assessing Officer brought it to the tax net under the garb of the definition of the body of individuals which is neither applicable on a statutory body nor can be so stretched to include Cantonment Board of such other limbs of the Government in its purview. The fact that in two years the CIT has condoned the limitation is connected with the status of the assessee as such. If it is established that the assessee is not a `body of individuals' no limitation runs against such an order being illegal on the face of it. The law on the subject is very clear and the Courts have elaborately discussed it in so many parallel cases. The assessee has taken a good deal of pain by explaining as to what is a local authority what forms a body of individuals, however, we will restrict the discussion to the issue which is relevant.

The local authority has been held to be as a body of persons invested by law with control and administration of any matter within a local area. Such an authority is invested with certain powers through delegation, which generally otherwise are exercised by the provincial Government. In this regard all the definitions are guided by a judgment of Full Bench of Supreme Court of Pakistan wherein the Honourable Chief Justice A.R. Cornelius speaking from the Bench in the case of Deputy Managing Director, National Bank of Pakistan v. Ataul Haq PLD 1965 SC 201 stated as follows:‑‑

"The expression `Local Authority' is understood to mean an authority which is entrusted with the administration of a Local Fund. Local Authorities are bodies exercising within limited territories included in a province, powers which belong to the Province, but which by statute are delegated to the Local Authority. A Local Authority is ordinarily charged with functions of self‑Government, and has power of making bye laws, imposing taxes and of maintaining and administrating a local fund".

The term body of individual has not been defined in the Wealth Tax Act 1963, however, the help can be sought from the following judgments:‑‑

In the case of Deccan Wine v. CIT (1977) 106 ITR III, the High Court of Andhra Pradesh observed that a body of individuals means a combination of individuals having common interest in business with the object of earning income carried on by one or more of them for the benefit of all of them. In that case a widow and her two minor sons had inherited three businesses: the widow carried on the business as before. The learned High Court held that the income of this combination of individuals was rightly assessed in the status of body of individuals. The question of treating it as an "Association of Persons" did not arise because the element of volition on the part of the members of the group was lacking.

Similar interpretation of the term `body of individuals' was given by the High Court of Punjab and Haryana in the case of Meera and Co. v. CIT reported as (1979) 120 ITAR 564 and by the Madras High Court in the case of N.P. Sarswathi v. CIT reported as (1983) 48 Tax 100 (H.C. Ind). Both the above cases came before the Supreme Court of India in appeal. The learned Supreme Court, while dismissing the appeal against both the judgments, reported as (1997) 224 ITR 635 Meera and Company v. CIT held:

"The profit that arose out of the business was a result of the business activities carried on jointly by the mother on her own behalf and also on behalf of the minor children. It did not make any difference that the widow and the minor sons did not start the business. The business was inherited, it was carried on as before. The fact that the business had been continued by the widow on her own behalf as well as on behalf of the minor sons after buying the interest of the mother showed that there was an organized activity jointly carried on to produce income. It was a clear case of a joint business venture of a few individuals. The income of this business had rightly been assessed in the status of a `body of individuals'."

In fact above definition has been appreciated by the First Appellate Authority. He has rather dilated upon many other facts including that neither the assessment year has been mentioned in the order nor the income year has been determined in respect of the properties under discussion. Moreover, the assessments were framed without proper appreciation of the facts. The authority neither sold nor have intended sale of any property during any of the assessment years under discussion. Further no other Cantonment Board in Pakistan has been subjected to this charge. This obviously is very surprising. How a Cantonment Board constituted under a Federal Act and under what law a local authority can be held to be as a body of Individuals has not been mentioned anywhere in the assessment orders. A body of individuals means a unity of interest of individuals in some business for their personal gain or for general welfare. It is some thing different from association of persons which in fact also is a get together of a similar nature but it have an element of volition by the co‑sharers. The definition of the same therefore, is that it is a combination of individuals with joint interest in a business being carried out for their own gains or public welfare without an element of volition on the part of the members of the group.

This unlike a local authority which is created by statute is mostly run by the employees appointed for the purpose alongwith elected representatives by the residents. It may also involve in some business but the gains of said business are not distributed among them. The same remains ownership of the authority and is used for general welfare like upkeep and repair of streets, roads etc. etc. The profits and gains of a local authority cannot be claimed by any person as his share. It therefore, is a body formed by statutes not by individuals. The "body of individuals" therefore, does not include a provincial Government a body created through a statute by the provincial Government or other such Government and semi‑Government department. If such a definition is allowed to be applied this would mean inclusion of the City Corporation; Development Authorities like KDA, LDA and other such institutions created by legislation by said Government. In our opinion therefore, the First Appellate Authority has rightly set aside the issue for the reconsideration of the Assessing Officer. However, obviously the scope of the Assessing Officer is restricted to the extent of deciding as‑to under what law a local authority can be considered as a body of individuals.

Our finding is further supported by the following definition:‑‑

The expression `body of individuals', should receive a wide interpretation, perhaps not wide enough to include combination of individuals who merely receive income jointly without anything further as in the case of co‑heirs inheriting shares or securities, but certainly wide enough to include a combination of individuals who have a unity of interest but who are not actuated by a common design and one or more of whose members produce or help to produce income for the benefit of all. The expression "body of individuals" must have a distinct meaning of its own irrespective of the fact that it may have some characteristics common with an "association of persons" but it could not be the same thing as, or a mere species of, an "association of persons". An "association of persons" does not mean any and every combination of persons. It is only when they associate themselves in an income producing activity that they become an "association of persons". (1979) 120 ITR 564 Page 569 (P&H).

Issue with regard to limitation therefore, is strictly attached to the same. Since we have confirmed that the order of the Assessing Officer is not maintainable on the face of it, in our opinion there was no question of any limitation against the said order. In this regard the judgments mentioned by the First Appellate Authority in the body of his order are very relevant and we do not need its reproduction. In fact in the recent past the higher Courts have further enlarged the scope for the petitioners. The Courts in recent years have opined that issue in a case must, as for as possible, be decided on merits ignoring the technical flaws and delay in filing various petitions should be condoned dispassionately. We, therefore, are convinced that the condonation of delay in this case has not caused any prejudice to the department as collection of revenue from the limbs of Government ignoring patent corners from where a sea of revenue can be generated is obviously unfortunate. If an assessee is not liable to a charge under a specific Act, any order passed against him is void and challengeable as and when the assessee becomes conscious and comes up with his grievance.

The result of the discussion ~is obvious. There is no merit in these four appeals filed by the department. The same are dismissed.

C.M.A./52/Tax (Trib.) Appeals dismissed.