COMMISSIONER OF INCOME-TAX, FAISALABAD VS Messrs RASHID TEXTILE
2005 P T D 1456
[Lahore High Court]
Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ
COMMISSIONER OF INCOME-TAX, FAISALABAD
versus
Messrs RASHID TEXTILE
C.T.R. No.189 of 1997, decided on 14/03/2005.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 136(1)---Reference to High Court---Additional question---Limitation---Reference to High Court as to the additional question, on time barred application, cannot be made---High Court declined to entertain such additional question.
N.A. Industries v. Commissioner of Income-tax 1992 PTD 50 fol.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 136(1)---Reference to High Court---Question of fact---Question as to whether the land in question was sold at a price as has been stated in the sale deed or at a higher price is a question of fact---Determination of the value of the landed property and substitution of one estimate against another, could not, by any stretch of imagination be described as a question of law.
Commissioner of Income Tax v. Sarfaraz Ali Sh. 2000 PTD 374 fol.
Muhammad Ilyas Khan for Appellant.
Zia H. Rizvi for Respondent.
ORDER
SYED HAMID ALI SHAH, J.---The assessee company purchased 31 Kanals 8 Marlas of land in Chak No.7/JB, Tehsil and District Faisalabad for Rs.2,00,000 (rupees two hundred thousand only) vide registered sale-deed, dated 13-5-1987. The vendors were the shareholders/directors of the vendee company. Another piece of land inthe same vicinity was purchased by some other assessee, during the same period, against the consideration ofRs.1,00,000 per kanal. The Income Tax Officer, on the basis of later sale, estimated the value of land, purchased by the assessee company, at Rs.1,00,000 per kanal, after confronting the assessee throughshow-cause notice, dated 17-3-1991, with approval, dated 29-4-1991 of Inspecting Additional Commissioner under section 13(2). Show-cause notice, dated 30-4-1991 was followed byanothernoticeundersection13(1)(d).TheIncomeTaxOfficermade an addition of Rs.29,40,000 (Rs.31,40,000-Rs.2,00,000) under section 13(1)(d) with the approval, dated 28-5-1991 of Inspecting Additional Commissioner.
2.The assessee assailed the said addition, in appeal and CIT through order, dated 7-10-1991, determined the value of land at Rs.2 lacs per acre and resultantly impugned additionunder section 13(1)(d) was reduced to Rs.585,000 only. Both, the Revenue as well as the assessee, challenged the order, dated 7-10-1991 of CIT before Income Tax Appellate Tribunal.
3.The Assessee claimed that transactionwas not sale stricto senso but was a change of title from shareholders to the company. The shareholders of Company implemented the agreement, dated 1-1-1981, executed between the shareholders and the firm. It was agreed that the land be sold to Company at any future date, for a sum of Rs.2,00,000. The firm was later on converted into company where rights and liabilities of firm stood transferred to the newly incorporated company. The land remained in the use of the business of the firm since, 1974. The Income Tax Appellate Tribunal has held in its decision, dated 7-10-1992 (impugned before us) that there is no evidence that seller has received more money for acquisition of area than for which the area purports to have been sold. The addition under section 13(1)(d) of theOrdinance was directed to be deleted. The appeal of assessee in this respect was accepted and the departmental appeal was rejected. The relevant portion of order of Income Tax Appellate Tribunal is reproduced:--
"Under these circumstances, it would not be correct to evaluate the value of the area as it was available for open sale. The balance of judgment must be built in favour of the finding that the sale was in fact only a formality, because for all practical purposes the area already vested in the company. Even if it is assumed that the area did nottechnically vest in the company before the executionof the formal sale-deed, in view of the relation of the sellers with the company, there was all justification for the owners to sell it to the company at lower price or for inadequate consideration."
4.The following question of law had been stated to have arisen out of the order of Tribunal rendered on 7-10-1992 in cross appeals I.T.As. Nos. 467 and 1120/LB of 1991-92:--
"Whether on the facts and circumstances of the case, Income Tax Appellate Tribunal has rightly deleted the entire addition of Rs.2,940,000 representingthe difference between the market value of land purchased by the respondent company which was determined at Rs.3,140,000 under subsection (2) of section 13 of the Income Tax Ordinance, 1979 and the consideration of Rs.2,00,000 shown in the sale deed."
5.The reference was sought through application, dated 29-5-1993 on following additional question of law as well:--
"Whether the provisions ofsubsection (2) of section 13 of the Income Tax Ordinance read with its subsection (1) would not normally apply to transactions between closely related persons like a company and its major share-holders as in the instant case?"
6.Learned counsel for the appellant has vehemently argued that the market value of the property is more than the vendee has paid for the acquisition of the property; the difference between the market value and the consideration paid by the assessee will be deemed to be income of the assessee and as such is liable to be added to the income of the assessee under section 13(1)(d) of the Ordinance. It was also contended that the Assessing Officer has rightly assessed the property at the market prevalent rate as the provisions of section 13 of the Ordinance authorize the Assessing Officer to take into consideration the prevalent market price of the property and evaluate the property at the market prevalent rate. Learned counsel for the appellantlastly argued that the Company has acquired property in an assessment year and its value isto be assessed by the Assessing Officer and the amount mentioned in the sale-deed cannot be deemed as the price of the said property.
7.Mr. Zia H. Rizvi, learned, Advocate Supreme Court, appeared at limine stage although no notice was issued to the respondent. He submitted that the appeal cannot proceed and is liable to be dismissed on two grounds: Firstly it is bared by time and; second the question involved is pure question of fact and not of law.
8.Heard learned counsel for the parties at length and examined the record.
9.We will first take up the additional question of law, as framed by the appellant. The appellate Tribunal has decidedthecrossappealson7-10-1992 and application for submission of reference on additional questionoflawtothisCourt,wasmovedtoappellate Tribunalon29-5-1993. The period of limitation for filing theapplication before the ITAT, for submission of reference before this Court, is 90-days, of receipt of order of ITAT, as contemplated in section 136(1) of the repealed Ordinance, 1979. Sindh High Court Karachi in case NA Industries versus Commissioner of Income Tax 1992 PTD 50, has held that the reference to High Court as to the additional questions, passed on time barred application, cannot be made. We are not inclined to entertain the additional question, for the same has been referred to this Court on time barred application.
10.The appellate Tribunal deleted the entire addition of Rs.2,940,000 on the ground that the sale was in fact only a formality for all practical purposes and the land vested in the Company and remained in its occupation, prior to sale. The sale of land at a low price or inadequate consideration was justified as it was between the shareholders and the Company. The question as to whether the land in question was sold at a price as has been stated in the sale-deed or the price is higher than the one stated in document, are the questionof fact. Thedetermination of the value of the landed property and substitution of one estimate againstanother, could not by any stretch, be described as a question of law. While holding so we find support from the decision delivered by a Division Bench of this Court in case Commissioner Income Tax v. Sarfaraz Ali Sh. 2000 PTD 374. The proposed question of law as framed by the appellant in this appeal is not question of law. The appeal is based on pure question of fact, therefore, the same is dismissed in limine.
M.B.A./C-55/LOrder accordingly.