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

----S. 2(e)(ii)---Immovable property when to be an asset under Wealth Tax Act, 1963---Essentials---Such property should be held for purpose of letting out.

B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer-II Circle, Karachi 1981 PTD 217 and Ibrahim Brothers Ltd. v. Wealth Tax Officer, Circle-III, Karachi PLD 1985 Kar. 407 rel.

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

----S. 2(e)(ii)---Leasing out Flour Mills installed in a building raised on plot of land---Liability to wealth tax ---Validity---Assessee had not leased out only the plant and machinery of Four Mills nor he was occupying the land and building, wherein Flour Mills was situated---Name Flour Mills had in fact been assigned to land and building, wherein plant and machinery of Flour Mills had been installed---Such assigning of name to a place by virtue of installation of specified nature of plant and machinery would not change actual fact that land and building was a one set of thing, while plant and machinery the other---Flour Mills was comprised of land, building, plant and machinery---Flour Mills having been leased out, thus, would include leasing out of land and building-- Terms "lease" and "letting out". are synonymous ---Assessee held immovable property comprised in land and building of Flour Mills for letting out, which was an asset within meaning of Wealth Tax Act, 1963 and liable to levy of wealth tax.

Lauri Joseph Newton v. Commissioner of Taxation of Common Wealth of Australia 1959 PTD 273 and Commissioner of Income-tax, Madras v. A.M.M. Muhammad Ibrahim Sahib 1963 PTD 687 ref.

B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer-II Circle, Karachi 1981 PTD 217 and Ibrahim Brothers Ltd. v. Wealth Tax Officer, Circle-III, Karachi PLD 1985 Kar. 407 fol.

(c) Words and phrases-----

---"Lease" and "letting out" ----Synonymous.

Rehan Hassan Naqvi for Appellant.

Arif Moton for Respondents.

Date of hearing: 2nd May, 2003.

JUDGMENT

GULZAR AHMED, J.---In this appeal under section 27 of the Wealth Tax Act, 1963 the appellant has raised the following questions:---

(1)Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified to hold that the learned Assessing Officer should estimate the value of Land and Building only which has been let out for the purpose of charging Wealth Tax by excluding the plant and machinery from the net wealth when the entire Flour Mills was leased out since 1989-90 and no wealth tax was charged up to the Assessment year 1994-95.

(2)Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was legally justified in invoking the provisions of section 2(e)(ii) of the Wealth Tax Act, 1963 in the case of the appellant when the entire Flour Mill was leased out and the Income Tax assessments were being made under section 30 of the Income Tax Ordinance, 1979 treating the leasing income as income from Other Sources from the assessment year 1994-95.

Mr. Rehan Hassan Naqvi, learned counsel for the appellant has contended that the appellant owns a Flour Mills in Korangi Industrial Area Karachi which Mill has been leased out by it due to business exigencies and the only income derived by the appellant is by way of lease and the learned Income Tax Appellate Tribunal in its impugned order has wrongly held that the land and building of the Mill are liable to Wealth Tax. He has contended that the appellant has leased the business of Flour Mills and that the provision of section 2(e)(ii) of the Wealth Tax Act are not applicable as the appellant does not hold immovable property for the business of letting out. He has relied upon Lauri Joseph Newton v. Commissioner of Taxation of Common Wealth of Australia 1959 PTD 273, Commissioner of Income Tax, Madras v. A.M.M. Muhammad Ibrahim Sahib 1963 PTD 687 and B.P. Biscuit Factory Ltd. Karachi v. Wealth Tax Officer II Circle Karachi, 1981 PTD 217. Mr. Arif Moton, learned counsel appearing for the respondent has contended that the immovable property of the Mill has been rented out alongwith the Mill and the reason for letting out has no effect on the charge ability of wealth tax and that such tax is charged on use.

We have considered the arguments of the learned counsel and have gone through the record.

It is an admitted position, that the appellant owns plot of land in the Korangi Industrial Area on which it has erected a building and installed plant and machinery of Flour Mills. The appellant has leased out the Flour Mills to a third party and such income of the appellant as per the appellant's own assertion is being assessed under section 30 of the Income Tax Ordinance, 1979. The question for determination in the present context is whether the appellant holds immovable property for the purpose of letting out. The learned I.T.A.T. in its impugned order has given a finding that the appellant is the owner of assets of land and building which is being held for letting out and is liable for levy of Wealth Tax. The learned I.T.A.T. in its impugned order has further observed that plant and machinery being movable properties, the Assessing Officer was not justified in charging Wealth Tax on the entire value of the assets consisting of immovable and movable properties. In the case of B.P. Biscuit Factory Ltd. (Supra) cited by the learned counsel for the appellant a Division Bench, of this Court at page 219 has interpreted the prevision of sub-clause (ii) of clause (e) of section 2 of the Wealth Tax Act and at page 219 has observed as follows:--

"(4) The answer to the question raised in the petition with regard to the interpretation of amended section 2(e)(ii) lies in finding out as to whether the word "or" in-between, immovable property held for the purpose of the business of construction and sale `and' letting out property" in the amended section 2(e)(ii) defining "assets" has been used in conjunctive or ' disjunctive sense. Section 2(e)(ii) reads as follows:--

"Assets include"

"In the case of a firm and association of persons or a body of individuals- whether incorporated or not, and a Company,, immovable property held for the purpose of the business of construction and sale, or letting out of property."

(5)The meaning of the word "held" in Law Terms and Phrases judicially interpreted by Mokal is "lawfully held". In Webester's New 20th Century Dictionary (2nd Edition), it is stated that in legal parlance the word "held" means to possess" by "legal title"; In other words' word "held" is technically understood to mean "to possess" by legal title". Reference in that respect is invited also in the case of Budhan Singh and another v. Nabi Bakhsh and another. The further question for consideration would be as to whether the word "or between the "business of construction and sale" and "letting out" has been used in a conjunctive or disjunctive sense. Ordinarily "or" is used .in disjunctive sense. The governing rule, however, is to carry out the intention bf the Legislature. It may be found necessary to read the conjunctions "or" and `and ` One for the other depending on the consequences, intended by the Legislature.

(5)Applying the rule stated above we find no evidence of the intention on the part of the Legislature in the amended clause `or' used for "and". On the contrary the plain meaning of the clause for the purpose of "business of construction and sale or subletting" is "for the purpose of business of construction of sale" or "for the purpose of business" of subletting of the property. Therefore, very clearly the two clauses have been intended by the Legislature to be used in disjunctive sense. The reasonable interpretation put on the amended clause therefore would be that assets would include immovable property" held" or "possessed" for the purpose of the business of construction or sale or letting out of property. Whether the original purpose of the property within the meaning of the memorandum of company association may be, it may subsequently change to suit the purpose from time to time. It has been contended on behalf of the petitioners that the original purpose of the company's business was purely confectionary making and that the business due to circumstances having received a set back; they have licensed out - some of the godowns which were originally constructed for the purpose of the business of the confectionary and therefore, the property cannot be assessed under the Wealth Tax Act as a property. We have been referred in that respect to the Memorandum of Association of the Company Annexure 11 and clarification issued by the Central Board of Revenue Annexure IV. We have given a very careful consideration to these documents but we' are unable to find anything to support the contention of the petitioners to the effect that the word "or" between the words "construction and sale and "letting out the property" has been used in a conjunctive sense. Mr. Nasim Ahmed Farooqui, the learned counsel for the respondents has drawn our attention to the case of. Salehan and others v. The State PLD 1969 SC 267, in support of the view that word `or' ordinarily is used in a disjunctive sense and in any cage the intention of the legislature is to be gathered from the plain reading of statute and the surrounding circumstances. Judging in that light we have no doubt in our mind that the word 'or' has been used in the amended clause 2(e)(ii) in disjunctive sense and the immovable property held or possessed by petitioners for the purpose of business of letting out of property, is included in the assets of the Company within the meaning of section 2(e)(ii) and that it would be subject to assessment under the Wealth Tax Act, 1963. "

A subsequent case of Ibrahim Brothers Lid. v. Wealth Tax Officer, Circle-III,- Karachi PLD 1985 Kar. 407 another Division Bench of this Court while interpreting the provision of sub-clause (ii) of clause (e) of section 2 of the Wealth Tax Act at page 409 has observed as follows:---

"Before "Before construing the above-quoted clause of section 2 of the Act, it may be pointed out that in the Memorandum of Articles of Association of the petitioner company, one of the objects is to own immovable properties and to lease out/let out the same. It is also an admitted position that the petitioner has not been carrying on business in any portion of the building but has their office in Sheikha House, Campbell Street, Karachi. Keeping in view the above factual position if we revert back to the definition of the terms `assets' given in above clause (e) of section 2 the assets include in the case of a firm or an association of persons or a body of individuals, whether incorporated or not and a company, an immovable property dither for the purpose of business of construction and sale or for letting out. It was urged by Mr. Nasim Ahmed Khan that in order , to attract the above sub-clause (ii), of clause (e) of section 2, it is incumbent that a company should be engaged in the business of construction and sale and letting out. In other words, according to him the words, "held for the purpose of the business of construction and sale" and the term "letting out" appearing in the above clause are to be read conjunctively and not disjunctively. It has, therefore, been further urged by him that if a company is not engaged in construction and sale of buildings but merely holds a ,building, and lets out the same, it will not be covered by above clause (ii) of clause (e) of section 2 of the Act. We are unable to subscribe to the above contention. In our view, there is no ambiguity in above sub-clause (ii) of clause (e) of section 2. The above words and the terms are to be read disjunctively as the use of a `coma' and the word `or' between the above words and term is not without significance but are employed to manifest that the same are to be read disjunctively. We are inclined to hold that in order to attract above sub-clause (ii) a company should either be engaged in the business of construction and sale of property or it should let out a property held by it. In the present case, it is an admitted position that the petitioner company holds a building, which has been let out to a number of tenants and of which the monthly rent as observed hereinabove is Rs. 1,15,841. It may again be pointed out that the petitioner's place of business is in Sheikha House, Campbell Street, Karachi, and not in the building in question. In this regard reference may also be made to the case of B.P. Biscuit Factory Ltd. Karachi v. Wealth Tax Officer, Circle II, Karachi (I), in which a Division Bench of this Court while construing the above clause (ii) of clause (e) of section 2 of the Act; held that the case of word "or" between the words "construction and sale' and "letting out the property" indicates that they are to be read disjunctively. "

Keeping in view the above two judgments of the Division Bench of this Court, it seems that the only requirement of law for an immovable property to be an asset under the Wealth Tax Act is that it should be held for the purpose of letting out. The appellant has leased out the Flour Mill which is installed in a building on a plot of land. It is not the case of the appellant that it has merely leased out the plant and machinery of Flour Mills. Nor is it the case of appellant that is occupying the land and building wherein Flour Mills is situated. In fact the name `Flour Mills' has been assigned to the land and building wherein plant and machinery of Flour Mill have been installed. There may have been plant and machinery say of Textile Mills or of cooking Oil Mills than the land building with plant and machinery would have the name of Textile Mills or of an Oil Mill. Such assigning of name to the place by virtue or installation of specified nature of plant and machinery, will not change the actual fact that land and building is a one set of thing while plant and machinery the other. Therefore, in the present case the Flour Mills is comprised of land, building, plant and machinery and such Flour Mills having been leased out, it surely includes leasing out of the land and building. The appellant therefore, holds immovable property comprised in the land and building of Flour Mill. The terms "lease" and "letting out" being synonymous, therefore, there is no escape from holding that the appellant holds immovable property for letting out and that it is an asset within the meaning of Wealth Tax Act, 1963 and liable to levy of Wealth Tax.

In view of the above discussion, the two question raised in this appeal are answered in affirmative and this Wealth Tax Appeal is disposed of accordingly.

S.A.K./A-500/KQuestions answered in affirmative.