QAISAR A. MANOO VS INCOME TAX APPELLATE TRIBUNAL, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 1508 (2005)

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

----S.5 & Second Sched., Cl. (12(1))---Residential house---Exemption from wealth tax---Essential conditions stated.

Under clause (12(1)) of Second Sched. of Wealth Tax Act, 1963, exemption from wealth tax is available to an assessee on (i) one residential house, (ii) owned by him, (iii) occupied by him, (iv) for the "purpose" of his own residence.

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

----S.5 & Second Sched., CI. (12(1))---Residential house---Exemption from wealth tax, claim for---Rejection of claim by Assessing Officer and Tribunal on the ground that house at place "K" was not maintained by assessee for his own residence, rather he permanently maintained his residence at place "L"---Validity---Conditions attracted to exemption were that claimed house must be residential, which must be owned and occupied by assessee and such occupation by assessee must be "for the purpose" of his own residence---Appellate Tribunal had omitted to read the word "purpose" in Cl. (12(1) of second Sched. of Wealth Tax Act, 1963, but attached exemption to actual residence of assessee, while no such condition was prescribed by legislature---Assessee by claiming exemption of house at place "K" as owned and occupied by him with object of his own residence, had shifted onus upon Revenue to prove otherwise through strong evidence that purpose of such occupation by assessee was not his own residence---Revenue had not pleaded that some one else was occupying and residing in house at place "K though owned by assessee---Tribunal had misinterpreted exemption provision---High Court accepted appeal of assessee in circumstances.

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

---Ss.5, 27 & Second Sched., Cl. (12(1))---Residential house---Exemption from wealth tax, claim for Appeal to High Court---Normally, the question as to whether a residential house is occupied for purposes of assessee's own residence or not is a question of fact, which cannot be the subject-matter of further appeal before High Court. [p. 1511] C.

(d) Words and phrases---

---"Purpose"---Definition.

Blacks Dictionary, 7th Edition ref.

M. Iqbal Khawaja for Appellant.

Ilyas Khan for Respondents.

Date of hearing: 3rd May, 2005.

JUDGMENT

MUHAMMAD SAIR ALI, J.---This judgment shall deal with and decide I.T.A. No. 591 of 2000 and I.T.A. No. 593 of 2000 being on the identical questions of law and facts and between the same parties.

2. The appellant assessee claimed exemption from the incidence of wealth tax of the house at Karachi being owned and occupied by him for self-residence. The Assessing Officer rejected the claim of the appellant assessee through assessment order dated 28-5-1992 for the reason that the assessee was permanently residing at 70 Main Boulevard, Lahore and had not shifted his residence to the house at Karachi. The appellant filed an appeal before the Commissioner of Income Tax/Wealth Tax, Lahore. This appeal was accepted through order, dated 30-3-1993. The Revenue filed an appeal thereagainst before the learned Income Tax Appellate Tribunal, Lahore. Accepting the appeal of the Revenue, the learned Tribunal restored the order of the Assessing Officer holding as under:---

"The Assessing Officer noted that the assessee was residing permanently at Lahore and had not shifted his residence to Karachi ..The learned C.I.T. (Appeals), however, allowed the exemption after assessee's A.R. rebutted the allegation of the Assessing Officer that the assessee had been maintaining residence at 70 Main Boulevard, Lahore. The learned C.I.T. (Appeals) found that such premise belonged to Messrs Ravi Construction Company, Lahore for the assessment year 1990-91 and that the ownership of such property had been discussed in the assessment order of such company for that year .The onus of proving that the house was "maintained" by the assessee for his own residence lies on the claimant of exemption. Merely because premises described as 70 Main Boulevard Gulberg, Lahore were property of Ravi Constructions (Pvt.) Ltd., Lahore did not mean that the same were not used by this assessee for residential purpose. In any case, we do not find any mention of such reason being given in the assessment order. Hence we find that there was no sufficient evidence or clause to allow the exemption of this property to the assessee by the learned C.I.T.(A). Hence, we restore the orders of the Assessing Officer in all the three years on this issue. All the three appeals 'of the revenue succeed to the extent indicated above."

3. Hence the present appeal by the assessee seeking opinion of this Court on the following question:---

"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in accepting the appeal and confirming the disallowance of exemption of residential house although there was no allegation that house was occupied for any other purpose than residential purposes?"

4. We have heard the learned counsel for the parties. The powers to grant exemption from the wealth tax were provided for in section 5 of the Wealth Tax Act, 1963. The exemptions were granted from time to time. The original clause (xvii) was substituted by the Finance Ordinance, 1984 and was incorporated in clause (12(1) of the Second Schedule of the Act, providing for the exemption of "one residential house" to the assessee. It reads as under:---

"Wealth tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee:---

(1) ..

(2) ..

(3) .

(4) .

(5) .

(6) .

(7) .

(8) .

(9) .

(10) .

(11) .

(12)(1) One residential house, owned and occupied by the assessee for purpose of his own residence, where the assessee opts to exclude such house from his assets:

Provided that such option may be exercised by either of the spouse;

."

5. Bare reading of the above reproduced clause shows that the exemption from the wealth tax was available to an assessee on:---

(i) One residential house;

(ii) owned by the assessee;

(iii) occupied by such assessee;

(iv) for the "purpose" of assessee's own residence.

6. In the present case, the parties are not at dispute that the house at Karachi for which the exemption was claimed by the assessee was not a residential house owned and occupied by the assessee. The Assessing Officer and the learned Tribunal took the view that the said house was not "maintained by the assessee for his own residence and that no evidence was produced by the assessee thereto." The exemption was, thus, denied by the Assessing Officer as well as by the learned Tribunal to the assessee. It was held by them that "since the assessee is permanently residing at 70-Main Boulevard Gulberg, Lahore and had not shifted his residence to Karachi, the exemption claimed is, therefore, not allowed."

7. Normally, the question as to whether a residential house is occupied for the purposes of assessee's own residence or not is a question of fact which cannot be the subject-matter of further appeal before this Court. In the present case, however, the observations of the Assessing Officer and those of the learned Tribunal as referred to above have changed the nature of the litigated question into a question of law.

The Assessing Officer and the learned Tribunal denied exemption to the assessee for the reasons that the assessee permanently maintained his residence at 70-Main Boulevard Gulberg, Lahore and had not shifted his residence to Karachi and also that there was no evidence produced by him to prove that Karachi house was "maintained by him for his own residence."

8. The concise issue that legally arises for determination in the present case is as to whether the actual shifting into and maintenance of own residence, was mandatory for the assessee to earn the exemption. The view of the learned Tribunal is in the affirmative that the assessee must own, occupy and personally reside in the claimed house to avail of the exemption clause.

9. Our considered view is that the Assessing Officer and the learned Tribunal misconstrued the exemption clause and restricted the scope thereof to a limit that the legislature had not imposed. An additional condition was read into the exemption clause while no such condition had been so prescribed.

10. The exemption clause applied to "one residential house owned and occupied by the assessee for the purposes of his own residence ." The conditions attracted to the exemption were that the claimed house must be residential. It must be owned and occupied by the assessee. And that such occupation by the assessee must be "for the purposes" of his own residence. The word "purpose" has been defined by the Blacks Law Dictionary, 7th Edition as under:---

"Purpose: an objective, goal, or end ."

Considered in the context of the meaning of the word "Purpose", the exemption clause would read that the assessee should own and actually possess the house with an object or a goal or an end of having his own residence therein. Such a house should be in the occupation of the assessee who must hold and possess the same with the object of his own residence therein either at present or in future. The law does not impose upon the assessee the precondition of actual shifting into or/and maintaining self-residence in the house. Holding for such a purpose is adequate to avail of the exemption.

11. It appears that the learned Tribunal omitted to read the. word "purpose" in the above referred exemption clause. Instead it attached the exemption to the actual residence of the assessee while not such condition was prescribed by the law givers. In the present case, therefore, it was immaterial that the assessee was residing at 70-Main Gulberg, Lahore (a property admittedly not owned by the assessee at the relevant time and had not shifted into the Karachi house). The assessee was entitled to the exemption from the wealth tax on one residential house owned and occupied by him and where in Pakistan provided the purpose of occupation of such house was his own residence. By claiming exemption of only the Karachi house as owned and occupied by him with the object of his own residence, the assessee had declared his intention, goal or the purpose. The onus shifted upon the Revenue to prove otherwise through strong evidence that the purpose of such occupation by the assessee was not his own residence. It was not the case of the Revenue that some one else was occupying and residing in the Karachi house though the same was owned by the assessee.

12. We are, therefore, of the opinion that the learned Tribunal misinterpreted the above exemption provision. It was not justified in accepting the departmental appeal to disallow-the exemption of the Karachi house to the assessee. The question as raised in this appeal is answered in the negative. Consequently, this appeal is accepted.

S.A.K./Q-4/LAppeal accepted.