Major (Retd.) PERVAIZ IQBAL VS COMMISSIONER OF INCOME TAX/WEALTH TAX, SIALKOT, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 2734 (2006)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 14, 22, 27, 134 & 136---Capital gain---Sale of immovable property---Exemption from income tax---Assessee claimed that the gain arising from the sale/deals of immovable property was a capital gain and not income, but his claim was rejected by the Tribunals below holding that assessee regularly purchased big tracts of land and then under well thought out and contrived plans, converted same into the plots for purpose of sale; and that sales so conducted generated considerable income which was legitimately treated as `business income' attracting levy of income tax---Tribunals below on basis of an elaborate factual inquiry, investigation into record and available evidence, had rightly concluded that real estate dealing made by assessee, were essentially of a `business nature' and that assessee had all along been engaged in the real estate business---Record had shown that assessee never acquired a plot to build a house for himself, but he purchased tracts of land and on division of the same into plots, made sales and gained profits/income from such sales---Jurisdiction of High Court could only be invoked under S.136(2) of Income Tax Ordinance, 1979 on the question of law and not on questions of facts involving inquiry of the nature which had been held and finalized by the Tribunal---Questions involved in the case, in circumstances did not deserve a decision from High Court---Reference was declined by the High Court in circumstances.

Mian Ashiq Hussain for Appellant.

Shahid Jamil Khan for Respondent.

Date of hearing: '4th May, 2006.

JUDGMENT

MUHAMMAD SAIR ALI, J.---Through this judgment, P.T.Rs. Nos. 184 and 185 of 2001, being between the same parties and on the identical questions of law, are decided together.

2. For the assessment years 1992-93 and 1995-96, the appellant assessee filed returns as an individual respectively showing gains of Rs.7,35,000 and Rs.37,80,000 from the sale of immovable property. The Deputy Commissioner of Income Tax assessed the said gains as a business income and rejected applicant assessee's contention to treat it as exempt from the income tax being the capital gains. DCIT's findings were maintained by the CIT(A). Further appeal of the assessee before the learned Income Tax Appellate Tribunal, Lahore was also dismissed on 31-3-2001. Assessee's application under section 136(1) of the Late Income Tax Ordinance of 1979 to refer certain questions to this Court, was also dismissed by the learned Tribunal through order, dated 24-8-2001 whereby the learned Tribunal declined to refer the questions framed by the assessee. Hence the present application.

3. The assessee prays for the consideration of the following four questions by this Court:

"(i) Whether the assessment order and appellate order, dated 24-3-1999 and 20-11-1999 based on no fresh material but the earlier observations of the Tribunal, were sustainable?

(ii) Whether on the facts and in the circumstances of the case, the assessment of applicant's `share' in join deals in immovable property in the hands of applicant instead of the assessment of AOP is unlawful?

(iii) Whether the gain on the sale of immovable property, specifically ousted from the purview of Federal Legislative List in Entry No.50 could be by implication assessed as income under Entry No.47 of the said List? and

(iv) Whether on the facts and the circumstances of the case the gain on the deals in immovable property was capital gain and not business income?"

4. During the course of arguments, the learned counsel for the assessee did not press question No.(i). He however sought opinion of the Court on questions Nos. (ii), (iii) and (iv) by arguing that the learned Tribunals below did not properly address themselves to assessee's contention that the income gains from the sale of immovable property should have been assessed as the capital gain or otherwise the incr. me of an AOP and the share in the hands of assessee should have been determined on that basis. Further that taxes on the capital gains of immovable property were excluded from the Federal Legislative List as per Item-50 of the 4th Schedule of the Constitution of Islamic Republic of Pakistan, wherefor, "taxes on income" thereof could not have been, by implication, incorporated in Item-47 of the said list.

5. Mr. Shahid Jamil, Advocate appearing for the Revenue however stated that assessee's claim that the gain arising from the sale deals of immovable property was a capital gain and not an income, was decided by the learned Tribunals below against the assessee. And that it was throughout held that the assessee regularly purchased the big tracts of land and then under well-thought out and contrived plans, converted the same into plots for the purposes of sale. And that the sale so conducted generated considerable income which was legitimately treated as the business income attracting the levy of income tax. Further stated that this was the main question of fact which had been finally determined uptill the stage of the learned Tribunal and the same cannot be considered by this Court.. Also stated that the assessee filed his return as an individual showing his income from the sale of immovable property and never claimed the same to be a share of income arising from an AOP. Further that assessee's contention that one Iqbal Hussain was his partner in the AOP and should have been taxed along with him was also rejected by the learned Tribunal. Further that Question No.(iii) did not arise out of the order of the learned Tribunal and cannot be considered by this Court.

6. Having attended to the arguments of the learned counsel for the parties, we find substance in the submissions of the learned counsel for the Revenue on Questions Nos. (ii) and (iv). The learned Tribunal on its elaborate reading and consideration of the facts held that:--

(i) all attending circumstances proved that the real estate dealings made by the assessee were essentially of a business nature;

(ii) the assessee had all along been engaged in the real estate business; may be a side business along with his main business of dealing in computers in the partnership of his wife in the firm which was separately assessed;

(iii) the record shows that the assessee never acquired a plot to build B a house for himself but he purchased tracts of land and on division of the same into plots, made sales and thus gained profits/income from such sales under "a well-thought out plan" and cleverly contrived a scheme to escape the levy of income tax; and

(iv) there was no convincing evidence that Iqbal Hussain masterminded the deals and the assessee, as claimed, was an innocent bystander.

7. It is evident from the above concise statement of the learned Tribunal's conclusions that the same were reached on the basis of an elaborate factual inquiry, investigation into record and available evidence. The jurisdiction of this Court can only be invoked under section 136(2) of the Late Income Tax Ordinance, 1979 on the questions of law and not on the questions of facts involving inquiry of the nature that has been held and finalized by the learned Tribunal.

8. We therefore, hold that Questions Nos. (ii) and (iv) do not deserve a decision from this Court. Question No. (iii) was never raised before the learned Tribunal. Furthermore, on concluding that income derived by the assessee from the sale deals of immovable property was a business income, the said question of the law cannot be considered to have arisen in the context of the present case to deserve answer by this Court.

P.T.R. No.184-2001 and PTR No.185 of 2001 disposed of as above.

H.B.T./P-24/LOrder accordingly.