COMMISSIONER OF INCOME-TAX/WEALTH TAX (APPEALS), COYS-III, LAHORE VS Messrs SHAHZADA A. MANOO, 2005 PTD-LAHORE-HIGH-COURT-LAHORE 2020 (2005)

Wealth Tax Rules, 1963---

----R. 8(2)(c)(ii)---Wealth Tax Act (XV of 1963), S. 27---Appeal to High Court---Ascertained liability of company---Question of law involved was as to whether provision for taxation and/or deferred 'taxation was the ascertained liability of company in terms of rule 8(2)(c)(ii) of Wealth Tax Rules, 1963 and was deductible in determining the break-up value of shares---Rule 8(2)(c)(ii), Wealth Tax Rules 1963 did not in any manner prohibit exclusion of provision for taxation while computing the value per share of a non-listed company but only required that a provision for liabilities in the balance-sheet should be carefully scrutinized by the Assessing Officer with a view to exclude therefrom items which should really form part of reserves---Appeal was decided accordingly.

Shahid Jamil Khan, Sardar Ahmed Jamal Sukhera and Mian Yusuf Umar for Appellant.

Muhammad Iqbal Kh. for Respondent.

ORDER

The question of law claimed by the Commissioner of Income Tax/Wealth Tax to arise in the present appeal is as to whether provision for taxation and/or deferred taxation was the ascertained liability of the Company in terms of rule 8(2)(c)(ii) of the Wealth Tax Rules, 1963 and was, therefore, deducible in determining the break-up value of the shares.

2. The above question as raised in this appeal was considered and decided by the Honourable Division Bench of this Court in a number of judgments including judgment, dated 12-6-2003 in W.T.A. No.3 of 2002 and judgment, dated 12-6-2003 in W.T.A. No.20 of 2002. Interpreting the provisions of Rule 8(2)(c)(ii) of the Wealth Tax Rules, 1963 which prescribes the manner to determine tax break-up value of shares, the Honourable Division Bench held that:--

"(8) That rule does not in any manner prohibits exclusion of

provision for taxation while computing the value per share of a non-listed company. The rule only requires an Assessing Officer that a provision for liabilities in the balance-sheet should carefully be scrutinized with a view to exclude therefrom items which should really form part of the reserves. In other words the reserves are to be included in the paid-up capital, while computing valuation per share. However, the provisions for liabilities are to be excluded with the, only rider that the Assessing Officer will examine them on case to case basis in order to see if these provisions really form part of reserves or are required to be taken as part of liabilities.

(9). Since the view adopted by the Tribunal is supported by the aforesaid provisions of rule as well as the authoritative pronouncement made by this Court as well as by the Supreme Court of Pakistan, we will return an affirmative answer to the questions."

The question of law raised in the present appeal is the same. Being in respectful agreement with the reasons and the principle settled in the above-referred judgments in W.T.A. No.3 of 2002 and W.T.A. No.20 of 2002, this appeal is also decided in terms thereof.

H.B.T./C-77/LOrder accordingly.