MUHAMMAD SALEEM BHATTI VS INCOME TAX APPELLATE TRIBUNAL, LAHORE BENCH, LAHORE, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 2424 (2005)

Wealth Tax Act (XV of 1963)---

----Ss.2(5)(ii), 2(16)(iii), 16(3), 17-B & 27(6)---Distinction between Association of Persons, `capital' and its `assets'---Appeal to High Court---Immovable property of Association of Persons being capital contribution of its members, it was required to be included in the net wealth of individual members---No legal bar existed that one asset could not be brought to tax in the hands of two different assessees---Where co-owners in a property had been assessed as an Association of Persons, their share in the property assessed as Association of Persons, was not includable in their net wealth---In case of Association of Persons whose assets attracted the incidence of taxation in view of S.2(5)(ii) of Wealth Tax Act, 1963, was an independent and different assessee though it certainly comprised of individual members---Since an Association of Persons holding immovable property for the purpose of business of construction, sale or letting out was contemplated to be an independent assessee under the definition contained in S.2(5)(ii) of Wealth Tax Act, 1963, the definition of "net wealth" in its respect as contained in S.2(16)(iii) of the Act, was not attracted---Observation of Tribunal made in impugned order with regard to the distinction between an Association of Persons and its asset, was not open to exception.

Tariq Aziz for Appellant.

Shahid Jamil Khan for Respondents.

Date of hearing: 20th September, 2005.

JUDGMENT

NASIM SIKANDAR, J.---Through this single judgment W.T.As. Nos. 8, 9, 10, 11 & 12 of 2003 shall be disposed of.

2. The appellant in these appeals under section 27(6) of the late Wealth Tax Act, 1963 (for short the Act), during the period relevant to the assessment years 1994-95, 1995-96, 1997-98, 1998-99 and 1999-2000 was an assessee of the Wealth Tax Department. The assessments of the appellant for the aforesaid years were finalized by the Assessing Officer under section 16(3) of the last Act. Subse?quently the L.A.C. as revising authority issued show-cause notice under section 17-B of the Act and finally modified the assessments earlier framed in respect of the assessee by including this capital in Messrs Shafsal Enterprises and AOP of which he was a member. Earlier in the said show-cause notice it was pointed out to the appellant that his capital in the AOP was liable to be taxed in his hands as an asset. The reply of the appellant assessee that his capital in the AOP in the form of share in the immovable property held by the AOP for the purpose of construction and letting out having already been accounted for in assessment of the AOP, these properties could not be included in his personal wealth was rejected.

3. On appeal a Division Bench of the Income Tax Appellate Tribunal while maintaining the order of the revising authority observed that the contention of the assessee that AOP's capital was synonymous with its immovable asset was not correct. It was held that AOP's capital was admittedly not its liability and since such capital was made up of contribution, by the individual members, their individual shares must form part of their total wealth. It was noted that section 2(5)(ii) of the late Act expressly provided that in case of an AOP "assets" would include "immovable property" held for the purpose of business of construction and sale, or letting out. In the view of the learned Members in the case in hand the immovable property of the AOP was not being subjected to tax in the hands of its individual members twice because it was only the capital contribution of the members which was being included in their net wealth.

4. We have heard, the learned counsel for the parties. Learned counsel for the appellant repeats his arguments which were earlier advanced before the Tribunal and were repelled. Learned Members of the Tribunal rightly observed that immovable property of AOP being capital contribution of its members it was required to he included in the net wealth of the individual members. The claim of the appellant that his assets were being subjected to tax twice may very well be right as a fact. However, there is no legal bar, nor the learned counsel for the appellant has been able to bring home any provision of the late Act which in any mariner contemplated that one asset could not be brought to tax in the hands of two different assesses. We will also agree with the learned members of the Tribunal that as the AOP's capital is not its liability the individual share holding of each member must from part of his total wealth.

5. Learned counsel for the appellant has also made a reference to the definition of the word "net wealth" as contained in section 2(16)(iii) of the late Act. However, we are of the view that' the definition excluding the value of right, title or interest of a person in a joint property treated as an asset of an association of persons is not attracted in the case in hand. Where co-owners in a property have been assessed as an association of persons, obviously their share in the property assessed as AOP is not includable in their net wealth. In the case of an AOP whose assets attract the incidence of taxation in view of section 2(5)(ii) is an independent and different assessee though it certainly comprises of the individual members. Since an AOP holding immovable property for the purpose of business of construction and sale, or letting out was contemplated to be an independent assessee under the said definition contained in section 2(5)(ii), the definition of "net wealth" in its respect as contained in section 2(16)(iii) was not attracted. The observations of the learned Members of the Tribunal made in the impugned order with regard to the distinction between an AOP's capital and its assets are, therefore, not open to exception.

6. No case for interference having been made out, we will refuse to interfere.

7. Dismissed.

H.B.T./M-371/L????????????????????????????????????????????????????????????????????????????????? Appeal dismissed.