Messrs AJWA CENTRE, LAHORE VS COMMISSIONER OF INCOME TAX/WEALTH TAX, ZONE-APPELLANT, LAHORE
2006 P T D 343
[Lahore High Court]
Before Muhammad Sair Ali and Muhammad Khalid Alvi, JJ
Messrs AJWA CENTRE, LAHORE
Versus
COMMISSIONER OF INCOME TAX/WEALTH TAX, ZONE-APPELLANT, LAHORE
Wealth Tax Appeal No. 59 of 2004, decided on 08/12/2005.
Wealth Tax Act (XV of 1963)---
----Ss.2(5)(i) & 3---Mere holding of an immovable property by an AOP is not sufficient to qualify it as an asset---Holding of such property should be with the purpose of the business of construction and sale, or letting out of the property---Where it is proved that the property is held by an AOP with the said purpose it undoubtedly becomes an asset of the AOP chargeable to tax under S.3 of the Wealth Tax Act, 1963---Question as to whether a group of persons is or is not an AOP within meaning of S.2(5)(ii) of the Wealth Tax Act, 1963 is a pure question of fact to be determined keeping in view all the attending circumstances of the case.
Shahbaz Butt for Appellant.
Sajjad Ahmed Jaffari for Respondent.
Date of hearing: 29th November, 2005.
JUDGMENT
MUHAMMAD KHALID ALVI, J.---Brief facts of the case are that Property No.SE-34-4178, a residential house measuring 38 Marlas, 95 sq ft. situated at Cooper Road, Lahore was owned by Mr., Sajid Saleem. He gifted this property through his general attorney in favour of 7 persons through registered gift deeds, dated 24-1-1998. The said 7 persons entered into an agreement to undertake a joint venture with inter alia objectives of acquiring the said property "with all its rights and liabilities" and charges thereon from the date of execution of the title deeds i.e. 24-1-1998 and to erect and raise a plaza namely "Ajwa Centre". The site plan for the construction of the plaza was submitted and approval thereto obtained from L.D.A. by the said persons on 7-9-1998 i.e. before the agreement of joint venture, dated 17-12-1998 was even written and executed.
2. In response to a notice issued by the Wealth Tax Officer treating the said persons as an Association of Persons (A.O.P.) holding the said property. The return was filed, declaring Nil Wealth on the relevant valuation date i.e. 30-6-1998 on the ground that no A.O.P. existed on the-valuation date. The Assessing Officer declined to accept the assessee's version and assessed the property in the ,hands of an A.O.P. for the assessment year 1998-99 at net Wealth of Rs.2,64,94,000. Aggrieved the appellant filed appeal before the Appellate Commissioner of Income Tax/Wealth Tax, who upheld the findings of the Assessing Officer vide order, dated 20-1-2003. Second appeal before the ITAT also failed vide order, dated 21-4-2004, however the matter was remanded to the Assessing Officer for the limited purpose of re-evaluation of the property. Hence the instant appeal claiming the following questions as formulated by the appellant:---
(a) Whether on the facts and in the circumstances of the case, the learned ITAT ignored/misinterpreted the provisions of clause (ii) of subsection (5) of section 2 of the Wealth Tax Act, 1963?
(b) Whether on the facts and in the circumstances of the case, the learned ITAT wrongly confirmed the orders of authorities below regarding status of appellant as an AOP?
(c) Whether on the facts and in the circumstances of the case, the learned ITAT fell in grave error while holding that AOP existed in the assessment year 1998-99?
(d) Whether the act of learned ITAT assigning the status of an AOP to the appellant was beyond jurisdiction as in the same is contrary to the provisions of sections 2(5)(ii) and 2(16) of the Wealth Tax Act, 1963?
3. It is contended by the learned counsel for the appellant that according to clause 19 of the deed of joint venture it had to take effect from 1-7-1998, therefore, no AOP existed on the valuation date i.e. 30-6-1998.
4. It is next argued that since no AOP existed on the valuation date therefore, provisions of section 2(5)(ii) of the Wealth Tax Act, 1963 were not attracted. It is further added with reference to section 3, the charging section, that Wealth Tax could only be recovered against the net Wealth or assets. Since the property in question was not in the hands of A.O.P. on the relevant date, it did not qualify to attract the provisions of section 2(5)(ii) of the Wealth Tax Act, 1963.
5. It is lastly argued that as no A.O.P. was in existence on the valuation date, therefore, the property in question was not an asset of the A.O.P. thus the same could not also qualify to be the net Wealth as defined in section 2(16) of the Wealth Tax Act.
6. On the other hand, learned counsel for the Revenue argued that 7 persons who acquired this property through gift deeds from its original owner Mr. Sajid Saleem, had neither any relationship with the original owner to provide the rationale for the gift of such a valuable property nor were they inter - related. The reason of having joined hands for acquiring this property on 24-1-1998 was nothing but to run a joint business of construction and letting out or sale etc., therefore, for all practical purposes it was an A.O.P. within the meaning of section 2(5)(ii) of the ibid Act.
7. We have considered the arguments of the learned counsel for the parties.
8. Before embarking upon discussion on the merits of the case it would be advantageous to reproduce the relevant provisions of the Wealth Tax Act, 1963:---
2. "Definitions.---????????????????????? (1) ----------------
??????????????????????????????????????????????? (2) ----------------
??????????????????????????????????????????????? (3) ----------------
(4) ----------------
(5) "assets" includes-
(i) in the case of an individual and a Hindu undevided family, property of every description movable or immovable, except-
(a) growing crops, grass or standing trees on agricultural land; and
(b) any building owned or occupied by a cultivator or receiver of rent or revenue out of agricultural land:
Provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of rent or revenue by reason of his connection with the land requires as a store house or an outhouse; and
(ii) in the case of a firm, an association of persons or a body of individuals, whether incorporated or not, and a company, immovable property held for the purpose of the business of construction and sale, or letting out, of property.
The following amendment was introduced through Finance Act, 1991 after the judgment of the Hon'ble Supreme Court dated 19-1-1989 in Civil Appeal No.K-140 of 1981:
Explanation.---For removal of doubt, it is hereby declared that immovable property and the purpose, referred to in this sub-clause, includes-
(i) immovable property held for the purpose of letting out, or business of letting out, of property;
(ii) immovable property held for the purpose of construction and letting out, of property; and
(iii) immovable property held for the purpose of construction and sale of property.
(16) "Net wealth" means the amount of which the aggregate value computed in accordance with the provisions of this Act of all, the assets, wherever, located, belonging to the assessee on the valuation date, including assets required to be included to his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than-
3. Charge of wealth tax.---Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of July, 1963 a tax (hereinafter referred to as wealth tax) in respect of the net wealth or assets on the corresponding valuation date of every individual, Hindu undivided family, from association of persons or body of individuals, whether incorporated or not, and company at the rate or rates specified in the Schedule.
9. Clause (i) of subsection (5) of section 2 deals with the movable and immovable property of the individuals and Hindu undivided family and includes property of every description with certain exceptions while clause (ii) of the same subsection deals only with immovable property held by A.O.P. and others. This clause however prescribes that mere holding of an immovable property by an A.O.P. is not sufficient to qualify it as an asset. Holding of the such property should be with the A purpose of the business of construction and sale, or letting out of the property. If it is proved from the attending circumstances that a property is held by an A.O.P. with the said purposes it undoubtedly becomes an asset of the A.O.P. chargeable to tax under section 3.
10. To determine this question as to whether appellant was or was not an A.O.P. holding taxable immovable property on the valuation date, two paras. of the deed of joint venture executed on 17-12-1998 are relevant and are reproduced for ready reference i.e. paras.4 and 19:--
"4. That the objectives of this joint venture shall be to acquire the Property No.SE-34-R-17/B i.e. 17-Cooper Road, Lahore with all it rights and liabilities and charges thereon as on the date of execution of title deeds viz. 24th January, 1998 and to erect and raise a plaza named "AJWA CENTRE" and to alter on large, improved, manage, renovate, erect and construct into shops, show rooms, offices, workshops, flats and godowns etc. for the purposes of out right sale, mortage or letting out and as the circumstances may permit from time to time.
19. That this deed shall take effect as from 1-7-1998"
11. Para. 4 clearly indicates that seven persons formed themselves into an A.O.P. as a joint venture with the object to acquire this property to construct the plaza comprising shops, show rooms, offices, workshops and godowns etc. for the purposes of sale, mortgage or letting out along with all rights, liabilities and charges thereon w.e.f. the date of the execution of the title deed i.e. 24-1-1998. Meaning thereby that as the joint ventures themselves agreed to acquire the property for the specified purposes much before the valuation date. To achieve this object/purpose they got the site plan sanctioned from LDA on 7-9-1998 i.e. even before executing the deed of joint venture on 17-12-1998. Under clause 19, B merely giving effect to the deed from 1-7-1998 would not nullify the effect of the earlier para. 4 of the deed where under they had agreed to acquire rights, liabilities and charges etc. w.e.f. 24-1-1998 with the specific objects.
12. Even otherwise the question as to whether a group of persons is or is not an A.O.P. within the meaning of section 2(5)(ii) of the Wealth Tax Act, 1963 is a pure question of fact to be determined keeping in view all the attending circumstances. Had it not been the admitted position as in the instant case, the case could have been examined from a different angle i.e. whether the Tribunal had or had not attended to all the circumstances to formulate an opinion regarding the appellant being an A.O.P. within the meanings of section 2(5)(ii) of the Wealth Tax Act, 1963. Of course, where the law provides to do a .particular manner then all other modes are necessarily forbidden.
13. For what has been discussed above, the questions raised in this appeal are answered in the negative. Resultantly the appeal fails and is accordingly dismissed.
M.B.A./A-664/L????????????????????????????????????????????????????????????????????????????????? Appeals dismissed.