Messrs SHAUKAT SOAP FACTORY through Chief Executive VS INCOME TAX OFFICER and 3 others, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 1543 (2005)

(a) Transfer of Property act (IV of 1882)---

---S.5---Right to premises---Evidentiary value---Such right would not create right of ownership in property.

(b) Income Tax Ordinance (XXXI of 1979)---

---Ss. 65 & 66(a)---Framing of additional assessment and revision of assessment---Fresh information for both such proceedings, requirement of---Scope---Action under S.66(a) of Income Tax Ordinance, 1979 could be initiated on basis of record of proceedings---Fresh information would be the requirement of proceedings under S.65, but not under S.66(a) of Ordinance, 1979.

Sh. Ghulam Ahmad for Appellant.

Shahid Jamil Khan for Respondents.

ORDER

Firm under the name and style of Shaukat Soap Factory, comprised of 5 partners namely, Sheikh Abdul Hameed, Sheikh Manzoor Ahmad, Sheikh Muhammad Saeed, Mushtaq Ahmad and Sheikh Sadiq Ali. It was converted into a private limited company on 11-8-1972. Plot measuring 10-Kanal throughout remained in the individual ownership of its partners namely Sheikh Abdul Hameed, Sheikh Manzoor Ahmad and Sheikh Muhammad Siddique. A building was. raised on the said plot and machinery was installed therein, prior to the incorporation of the company.

2. Appellant submitted its .balance-sheet on 1-8-1972 and claimed depreciation value of the property and machinery, which was allowed to the appellant. Show-cause notice was issued on 6-1-1993 under section 66(a) by respondent No.2. Claim for 1987-88 to 1991-1992 was disallowed as the property vests in the name of the individual and has never been transferred to the company nor any amount thereof was paid. The appellant replied to the show-cause notice and claimed that depreciation has been claimed and allowed throughout and there is no justification for the issuance of show-cause notice. Respondent No.2 disallowed the depreciation vide order dated 3-4-1993 and reassessed the earlier assessment. Appellant filed four appeals before respondent No.3, which were dismissed vide order dated 15-12-1993. Appellant also filed four appeals before respondent No.4, which were dismissed vide order dated,1-4-1997 on the question of jurisdiction. The order was conveyed to the appellant on 29-7-1997, which is now being assailed through this appeal.

3. Learned counsel for the appellant has contended that vide vendor agreement dated 11-8-1972, the assets of the firm stood transferred to the company, as per clause 1(d) of the vendors agreement, which reads as under: ---

"All the benefits, running business, goodwill, right to premises, concessions, `licences, stocks and stores etc. of the vendors' firm."

4. He then referred to clause (4) of the vendor agreement wherein property of the firm was transferred to company which pertains to the property in question. After referring to these clauses of the vendor agreement, learned counsel has contended that the vendors/partners of the firm kept in their ownership land measuring 10 Kanals .and the superstructure along with the machinery was transferred to the company and any depreciation in such assets would entitle the appellants to claim depreciation in respect of building vide section 23 of the repealed Ordinance, 1979, read with relevant provisions in Third Schedule. He has then argued that the respondents have proceeded under section 66-A of the Income Tax Ordinance on the basis of information already available to the respondent, while no fresh information was made the basis of issuance of show-cause notice under section 66(a), therefore, the whole proceedings are not sustainable.

5. Learned counsel for the Revenue, on the other hand, has fully supported the impugned orders and judgments. He has submitted that there is no proof of the transfer of the building to the company. Building, depreciation whereof was being sought, is a property which is in the ownership of partners in their individual capacity. He then submitted that land includes any superstructure of building raised thereon. The company is a separate legal entity and the property of the private individuals who were partners cannot be deemed to be the property of the company. He has further submitted that vendor agreement clearly stipulates that business has been transferred and not the property. He lastly argued that while proceeding under section 66(a), Deputy Commissioner can call for the record and order can be passed on material available. There is no requirement of fresh information while proceeding under section 66(a).

6. Heard learned counsel for the parties and perused the record.

7. The appellant claims that the building was transferred to the company and it vests in its ownership. The appellant submitted that building stood transferred to the company as per above referred clause (1)(d) of the vendor agreement. This clause nowhere stipulates that the building and the other superstructure is transferred to the company. At the most "right to premises" as per above clause was transferred. "Right to premises" does not create the right of ownership in the property. There is no express provision in the vendor agreement that building and superstructure has been transferred to the company. Land measuring 10-Kanal is owned by three partners in their individual capacity. In the absence of any express stipulation learned Tribunal has rightly held that land includes the superstructure raised thereon.

8. Vendor agreement even otherwise gives no right inter se the parties. The argument of the learned counsel for the appellant that notice under section 66(a) on the basis of information already available to the assessee cannot be issued and such notice can only be issued if fresh information is made available, has no force. The provisions of section 66(a) even otherwise can be invoked on the examination of the record of any proceeding, if it is found that order passed was erroneous and prejudicial, perverse to the interest of Revenue. Bare perusal of the provisions of section 66(a) reveals that an action under this section can be initiated on the basis of record of the proceedings. There is no requirement of any fresh information, the fresh information is the requirement of proceedings under section 65 and not under section 66(a).

For the foregoing, we do not see any merit in the instant appeal and the same is dismissed.

S.A.K./S-68/L??????????????????????????????????????????????????????????????????????????????????? Appeal dismissed.