Mst. ZARINA YOUSAF VS INSPECTING ADDITIONAL COMMISSIONER OF INCOME TAX/WEALTH TAX, SIALKOT, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 1574 (2004)

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

----Ss.16(3), 17-B & Second Sched. Cl. 7(i)(ii)---Central Board of Revenue's Circular No.8/42-WT/84, dated 30-6-1995---House owned by wife purchased out of foreign remittances in her husband's name---Exemption from sales tax, claim for---Validity---Case of present assessee was not covered by Cl. 7(i) of Second Schedule to Wealth Tax Act,1990, whereunder exemption was not related to an assessee, but related to assets brought or remitted by him/her into Pakistan or received by him/her from outside Pakistan---According to Cl. 7(ii) of Second Schedule, Wealth Tax Act, 1963 an assessee would be entitled to exemption, when creation of asset happened to be out of remittances received in or brought into Pakistan through normal banking channels---Not necessary under Cl. 7(ii) of Second Schedule that assessee should be recipient of foreign remittances---Connecting an assessee personally to such exemption would defeat its very purpose---Purpose of such exemption was to encourage people to bring foreign exchange through regular banking channels---Assessee in the present case was allowed exemption in circumstances---Principles.

Masud Ahmad v. The State PLD 1962 (W.P.) Lah. 878 rel.

(b) Interpretation of statutes---

----If two reasonably acceptable interpretations of a provision of law are possible, then the one that goes to the benefit of the subject should be adopted.

Ahmad Shuja Khan for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 1st September, 2004.

JUDGMENT

NASIM SIKANDAR, J.---By this judgment we intend to dispose of W.T.As. Nos. 97, 98, 99, 259 and 260 of 2002. In the first three appeals a consolidated order of the Income Tax Appellate Tribunal, Lahore dated 31-1-2002 is assailed while the later two appeals challenged consolidated order recorded by that Tribunal on 14-9-2002. The assessee and the issues involved being identical, all five appeals are being taken up together.

2. The appellant is an individual and during the period relevant to the assessment years 1996-97 to 2000-2001 was an assessee of the Wealth Tax Department. Three assessments in her respect for the assessment years 1996-97, 1997-98 and 1998-99 were respectively framed on 23-5-1997, 21-5-1998 and 10-12-1998. In all three assessments the claimed exemption from levy of wealth tax in respect of a house property at Gulberg-III, Lahore declared at Rs.27,75,340 was accepted by the Assessing Officer. The house was admittedly rented out to a commercial organization. The exemption was claimed on the basis of the property having been purchased on 28-9-1995 by the assessee out of foreign remittances. The claim was duly supported by a bank statement of Account No.10774 of Mr. Muhammad Yousaf the husband of the assessee.

3. The assessments .so framed under section 16(3) of the Wealth Tax Act were subsequently revised under section 17-B of the Wealth Tax Act, 1963 by IAC Sialkot Range, Sialkot on 11-4-2001 on the ground that the Assessing Officer had wrongly allowed exemption to the assessee in respect of the said house. In the view of the revising authority the claimed exemption was not covered by sub-clause (i) of clause (7) of the Second Schedule of the Wealth Tax Act, 1963. He opined that the foreign remittances were admittedly received in the account Mr. Muhammad Yousaf and, therefore, the assessee, his wife could not have any valid claim under the said exemption clause. Reliance in that aspect was made on C.B.R. Circular No.8/42-WT/84 dated June 30, 1995. Accordingly he held the assessments to be erroneous in so far as these were prejudicial to the interest of the Revenue and, therefore, modified them under section 17-B of the Act by adding to her net wealth the ALV in respect of that property at Rs.96,00,000, Rs.99,84,000 and Rs.1,07,82,720 for the three years involved.

4. The order so recorded on 11-4-2001 was unsuccessfully assailed. before the learned Tribunal. By way of their first impugned order dated 31-1-2002 the learned members of the Tribunal upheld the treatment meted out to the assessee by the revising authority. The operative part of the order summarizes the view of the Tribunal. It reads as under:---

"As is evident that wealth tax is not to be paid by an assessee in respect of assets created by him out of remittances received in and brought into Pakistan. The emphasis in the language is totally on granting exemption to an assessee for an asset created by him out of remittances received by said assessee. It cannot be stretched to include any person other than the said assessee who would mean granting a blanket chit to all subsequent buyers or owners in interest of an asset that has been created from some foreign remittances. This cannot be said to be the intention of the legislature in any manner. It is true that the husband and wife in our culture are mutually exclusive but the law having given them separate exemptions for each one of them has declared them as independent individual assessee. If each one of the two is entitled to two separate basic exemptions in terms of one million or residential house it cannot be said that one can be allowed the benefits of the others. The circumstances in which the Honourable Supreme Court has allowed exemption referred by us supra are entirely different hence we are unable to agree with learned A.R. that the exemption had rightly been allowed by the Assessing Officer. The foreign remittances being in the name of husband it was only he who was entitled to the benefits of clauses 7(i) and 700 and none else. Wife, son, real brother or parents cannot be allowed to take benefit of this remittance in terms of clause (7) of the Wealth Tax Schedule if the same is not in his own name. In this case the order of the IAC under section 17-B, therefore, was well within his legal jurisdiction. The allowance of exemption was an error and the same has caused prejudice to the interest of Revenue also."

5. The first three appeals assail the order of the learned Tribunal alleging that taking of action by the revising authority under section 17-B of the late Act was unjustified and, therefore, the learned Tribunal erred both in law as well as in fact to maintain that order.

6. It appears that the Assessing Officer following the footprints as set by the revising authority in the said order proceeded to frame assessments for the next two. years 1999-2000 and 2000-2001 by refusing exemption to the said property. In the first year vis 1999-2000 as against declared value at Rs.27,75,340 its ALV was adopted at Rs.1,16,45,340 and in the second year vis 2000-2001 at Rs.1,25,76,900. Both assessments framed on 10-5-2001 were challenged before the First Appellate Authority C.I.T.(Appeals) without any success. The order of .the C.I.T. (Appeals) dated 16-4-2002, as noted earlier, was maintained by the learned members of the Tribunal by way of the second impugned order 'dated 14-9-2002. The learned members approved the two assessment orders and the order of the First Appellate Authority with reference to their earlier order recorded in the first round while rejecting the three appeals of the assessee against the order of the revisional authority.

7. After hearing the learned counsel for the parties in the perspective of the operative part of the order recorded by the learned members of the Tribunal on 31-1-2002 as reproduced above, we are of the view that the interpretation by the Revenue authorities of sub-clause (i) of clause (7) of the Second Schedule to the Wealth Tax Act, 1963 as maintained by the learned Tribunal is necessarily incorrect. Earlier these provisions were part of the statute exactly in the same manner as section 5 of the late Act. The said provisions of law added to the Wealth Tax Act as Second Schedule by way of Finance Act, 1996 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 ) to (6) ..

(7) assets

(i)brought or remitted by an assessee into Pakistan, or received by an assessee from outside Pakistan, in the year in which they are brought, remitted or received and the following five years;

(ii)created by an assessee out of remittances received in, or brought into Pakistan, through normal banking channels, during the period referred to in sub-clause (i):

Provided that where investment in the assets is not made entirely out of remittances received in, or brought into Pakistan through normal banking channels, the exemption shall apply in the same ratio as the foreign remittances bear to the total investment."

Our reading to the above clause allowing exemption leads us to conclude that the concession given by the statute is necessarily relatable to the assets and not to an assessee as wrongly concluded by the learned members of the Tribunal. The opening part of clause (7) of the Second Schedule, as reproduced above makes it clear that these two sub-clauses (i) and (ii) encompass two different situations. The principle however, remains the same that exemption is relatable to the assets and not to the assessee as such. In the first sub-clause the assets brought or remitted by an assessee into Pakistan or received by him from outside Pakistan are exempted for five years starting from the year in which they were brought, remitted or received. The case of the present assessee obviously is not covered by sub-clause (i) which was again wrongly thought to be so by the Revenue authorities as well as the learned members. Then sub-clause (II) talks of creation of assets by an assessee "out of remittance received in or brought into Pakistan through normal banking channel" during and for the period referred to in sub-clause (i). Sub-clause (ii) without any iota of doubt visualizes a situation different from sub-clause (i). According to this sub-clause any asset created by an assessee is entitled to enjoy exemption subject to the only condition that it was created out of remittances received in or brought into Pakistan through normal banking channels. This sub-clause does not speak of the recipient of the remittance at all. The only condition being that the remittances were received or brought into Pakistan through normal banking channels.

8. This interpretation is obviously closer to the object of creating exemption which is to allure people to bring more and more foreign exchange in Pakistan through recognized banking channels. If the interpretation of the Revenue as well as the learned members of the B Tribunal is accepted as correct, then there would hardly be any difference between the cases covered by sub-clause (i) and sub-clause (ii). Our way of reading does not lead us to conclude as the learned members of the Tribunal did that the emphasis in the language of the statute was totally on creating exemption to an assessee for an asset created by him out of remittances received by that assessee. The condition of being a direct recipient of remittances is not discernable from the said sub-clause (ii) which is relevant. to the claim of the assessee in this case, therefore, to say that foreign remittances being in the name of the husband of the assessee and, therefore, it was only he who could avail the concession both the clause 7(i) 'and clause 7(ii) and none else is not a correct reading and interpretation of that clause. In our view the Assessing Officer in the first instance was correct in accepting the claimed exemption.

9. Learned counsel for the appellant Mr.. Ahmad Shuja Khan has very rightly argued that in line with the interpretation of the Revenue and the Tribunal one will have to assume existence of at least four situations in one case which is not possible on a plain reading of both sub-clauses. The first sub-clause (i) contemplates three situations only. It is that an asset is brought or remitted by an assessee himself into Pakistan or is received by him from outside Pakistan. The bringing, remitting and receiving is connected and relatable directly to an assessee. Learned counsel for the appellant is correct that in sub-clause (ii) the 4th situation is clearly evident in which the assessee only creates an asset. The only condition being that creation of such, asset happens to be out of remittances received in or brought into Pakistan through normal banking channels. This situation does not in any manner relate the assessee directly to the remittances but to the asset which has been created out of remittances received in or brought into Pakistan in the said. manner. The reliance of the learned counsel in re: Masud Ahmad v. The State 'PLD 1962 (W.P.) Lah. 878 in that regard is relevant and pertinent. It is that the Courts are to presume that absurdity was not intended by law-makers while it will be a sure result if the interpretation of the revenue in the situation in hand is accepted as correct. It needs to be noted that connecting an assessee personally to the exemption is likely to defeat the very purpose of exemption. For, if having been allowed exemption in respect of an asset, he dies before the expiry of statutory period of five years and that asset devolves upon his Iegal heirs by operation of law the exemption will come to an end. That does not appear to be the intention of law makers. In our view an asset once having qualified for exemption will remain so even if it changes hands or ownership by way of death, gift or even sale, Till the period of expiry of the said period, it will carry its exemption along with it even in the hands of a third party. In other words, any person who inherits, or obtains by gift or sale an asset in respect of which an exemption was allowed in accordance with law will not be liable to wealth tax in respect of that asset for the statutory period. This clearly appears to be the purpose of allowing exemption in order to encourage people to bring foreign exchange through regular banking channels.

10. Our conclusion and interpretation of sub-clause (ii) is also based upon the golden rule of interpretation of taxation statutes. It is that if two reasonably acceptable interpretations of a provision of law are possible then the one that goes to the benefit of the subject should be adopted.

11. As said earlier, in the first place we are of the clear mind that the exemption contemplated in sub-clause (ii) of clause (7) of the said schedule is available to an asset which has been created by remittances E received through normal banking channels. Also that in view of the clear words of the statute it is not necessary that an assessee should personally be its recipient. If for the sake of argument the thick line between the two sub-clauses which appeared thin or non-existent to the Revenue and the learned Tribunal is accepted, on the said principle we will hold that the interpretation being placed on sub-clause (ii) by learned counsel for the appellant is as good and reasonable as that of revenue could possibly be. Therefore, we shall go for the second one and, accordingly allow all five appeals.

12. Resultantly the assessment order framed by the Assessing Officer in the first three years vis 1996-97 to 1998-99 shall stand restored. Likewise as a result of our findings the two assessments framed in the years 1999-2000 and 2000-2001 following the pattern set by the revising authority to the extent of denial of exemption in respect of the said property at Gulberg-III, Lahore shall be set aside.

S.A.K./Z-15/LOrder accordingly