COMMISSIONER OF INCOME TAX, ZONE-A, KARACHI VS Messrs SYED IQBAL HAMID C/o Greenwich Public School, Karachi, 2007 PTD-KARACHI-HIGH-COURT-SINDH 1094 (2007)

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

----Second Sched., Part, I, Cl.12(2)--"Shop"---Connotation---Assessee who is running a school in his own house is not entitled to the exemption under Cl.12(2) of Part I of Second Schedule to the Wealth Tax Act, 1963---Principles.

Assessee v. Department PTCL 2000 CL 38 and Commissioner of Income Tax v. Smt. Shushila Devi Tamakuwala (1996) 73 Tax 174 ref.

(b) Words and phrases----

---Shop---Meanings.

Jawaid Farooqui for Appellant.

Muhammad Aleem for Respondent.

ORDER

ANWAR ZAHEER JAMALI, J.---This appeal under section 27(1) of the Wealth Tax Act, 1963, at the instance of Department, proposes following question of law for the opinion of this Court:

"Whether on the facts and in the circumstances of this case the learned Income-tax Appellate Tribunal was justified in arriving at the conclusion that the assessee who is running a school in his own house is entitled to the exemption under clause 12(2) of Part-I of Second. Schedule to the Wealth Tax Act, 1963?"

2. In a nutshell relevant facts of the case are that respondent owns a Bungalow bearing No.259-L, Block-6, PECHS, admeasuring 600 Sq. Yds. with ground and first floor accommodation, having a covered area of 2250 . Sq, fts. and 1800 Sq. fts. respectively. The first floor accommodation is in occupation of the respondent for his personal use for residential purposes while the ground floor accommodation is being used for commercial activity i.e. running of a School under the name and style of Greenwich Public School.

3. The Deputy Commissioner of Wealth Tax/Assessing Officer rejected the claim of the assessee for exemption under the clause 12(2) of Part-I of Second Schedule to the Wealth Tax Act, 1963, as regards the ground floor accommodation, being commercially used for running a school. However, in the appeal preferred by the Assessee/respondent before the Commissioner of Income Tax (Appeals) Karachi, his claim of exemption under the above provision of Wealth Tax Act, 1963 was accepted and accordingly the order of the D.C.I.T./Wealth Tax Officer was set aside. In the Departmental Appeal before the Income Tax Appellate Tribunal Karachi, the Tribunal concurred with the view of CIT (Appeal), and consequently dismissed the appeal of the department.

4. Mr. Jawaid Farooqui learned counsel for the appellant after narration of relevant facts, as recorded above, strongly contended that the Tribunal as well as CIT (Appeals) while passing their respective orders, dated 26-2-1999 and 24-6-1999 had not carefully examined the relevant Clause 12(2) of Part-I of Second Schedule of Wealth Tax Act, 1963 particularly in the context of words "one shop" used in it, which was the crux of the controversy and needed judicious adjudication. He contended that running of a full-fledged school on the whole ground floor accommodation, admeasuring 2250 Sq. ft. can under no stretch of imagination, be equated with "one shop" so as to extend the benefit of clause 12(2) ibid to the assessee. He further contended that nothing has come on record as to what was the actual legal status of "Greenwich Public School" being run and managed on the ground floor of the disputed bungalow and what was the status or concern of the respondent/assessee with the running of such school. In this regard he further contended that once a property is found liable for payment of Wealth Tax then for claiming exemption from the payment of such tax heavy burden was on the assessee to bring his case within the four corners of the exempting provision of law. Learned counsel also made reference to a Full Bench judgment of the Income Tax Appellate Tribunal in the case of Assessee v. Department (PTCL 2000 CL 38) which, according to him, is an exhaustive judgment, resolving a similar controversy as regard the scope and benefit of clause 12(2) of Part-I of the Second Schedule to the Wealth Tax Act, 1963.

5. Mr. Muhammad Aleem learned counsel for the respondent strongly supported the impugned order passed by the Tribunal as well as the order of the C.I.T. (Appeals) in favour of the respondent/assessee. He contended that it was an established position from the record that the ground floor accommodation of Bungalow No.259-L, Block-6, PECHS admeasuring 600 Sq. Yds. which covered area of 2250 Sq. ft. was in possession of the assessee, being used for commercial activity of running a School therein, therefore, it was covered within the meaning of word "one Shop" in its common usage, moreso, as word "one shop" has nowhere been defined in the Wealth Tax Act, 1963 or the rules framed thereunder. Learned counsel also made reference to the definition of `Shop' from the Oxford Dictionary and the case of Commissioner of Income Tax v. Smt. Shushila Devi Tamakuwala (1996) 73 Tax 174 (H.C. Ind.) to add force to his submission that the commercial activity in the form of running of a full-fledged school on the ground floor of a residential bungalow, has entitled the respondent/assessee to seek exemption from payment of Wealth Tax on such property by taking benefit of Clause 12(2) ibid. He further made reference to the order of the Tribunal, dated 24-6-1999 to show that the D.R. on behalf of the department had not disputed the claim of the respondent/assessee, and urged that the department is, therefore, estopped to challenge such findings of the Tribunal recorded in favour of the respondent. However, we are unable to subscribe to such view of the learned counsel, for the short reason that there can be no estoppel against statute. Thus it was the duty of the Tribunal to have examined the case of the respondent/assessee for exemption under Clause 12(2) ibid, on its own merits.

6. Learned counsel when enquired about the actual accommodation on the ground floor of property No.259-L, Block-6, PECHS was unable to disclose it. However, he conceded that the ground floor accommodation having not less than 2250 Sq. ft. covered area, contains the usual 3 or 4 bedrooms accommodation, and an open space of over 3000 Sq. ft. which is also under the use and occupation of school. Further he was unable to explain the legal status of "Greenwich Public School" being run on the ground floor of the bungalow and the status of respondent/assessee Syed Iqbal Hamid in relation to the School management. Learned counsel was also unable to give any satisfactory reply as to whether "Greenwich Public School" in possession of the ground floor, is an independent entity for the purpose of payment of Income Tax or tax on its income is paid by the respondent as its sole proprietor, so as to hold that possession of ground floor accommodation with "Greenwich Public School", is legally possession of respondent/ assessee for the purpose of relevant exemption clause of the Wealth Tax Act.

7. Since the controversy arising from the proposed question of law revolves around the interpretation of clause 12(2) of Part-I of Schedule-II of the Wealth Tax Act, 1963, it will be useful to reproduce the same hereunder, which reads thus:--

"(2) One shop owned and occupied by the assessee for the purposes of his own business;"

8. A careful reading of the above provision of law would show that for claiming its benefit the assessee has to show that it is (a) one shop (b) owned by him (c) in his occupation (d) and being used by him for his own business therein. If the case of the present assessee is judged on these parameters the first point which needs consideration is that what is the true import of word `one shop' used under the relevant provision of the statute, referred above. In other words whether the whole ground floor accommodation of a Bungalow admeasuring 600 Sq. Yds. with covered area of not less than 2250 Sq. ft., consisting of several bedrooms and other amenities with open space of over 3000 Sq. ft., could be equated with `one shop' as provided under the relevant provision of law, reproduced above to extend its benefit to the assessee. Indeed the Wealth Tax Act, 1963 does not give any definition of word `shop' but in that case either its definition is to be borrowed from some other statute or ordinary meaning of word `shop' is to be gathered from the dictionary or from its normal usage. In our view in the ordinary day to day usage the word `shop' is being used for the space where goods are kept usually in small quantities for sale to the actual consumers or part of the building meant for retail sale of some commodity, service or some business purpose, but it will not cover the whole ground floor accommodation of 600 Sq. Yds. Bungalow, with covered area of 2250 Sq. fts. and open space of over 3000 Sq. ft., even if used for the commercial activity of running a School, as claimed by the respondent. This interpretation further gets support from the prefix "one" used before the word "shop" in Clause 12(2) ibid, which restricts the import of word "shop" only to a limited area surrounded by walls and not 3 or 4 bed Rooms' independent accommodation of a Bungalow with more than 3000 Sq. ft. open space. This view also finds support from the definition of shop under the West Pakistan Shop and Establishment Ordinance, 1979, which reads as under:-

"2(u) `Shop' means any premises used wholly or in part for the wholesale or retail sale of commodities or articles for cash or on credit, or where services are rendered to customers, and includes an office, a store room, godown, warehouse, or place of work, whether in the same premises or otherwise, mainly used in connection with such trade or business."

9. Moreover, during the course of his arguments Mr. Muhammad Aleem could not offer any satisfactory reply, that how the open space of over 3000 Sq. ft. available with the ground floor accommodation of 2250 Sq. fts. could not form part of one shop within the meaning of Clause 12(2) ibid.

10. We have also availed the benefit of the judgment of Full Bench of Income Tax Appellate Tribunal referred by Mr. Jawaid Farooqui, which shows that pains were taken by the author of this judgment in recording his conclusion about the definition of the word `shop' by taking its definition from various dictionaries Law Dictionary as well as some judgments on the subject from the Pakistani and Indian jurisdiction. The conclusion recorded by the Tribunal on the basis of such deliberations is contained in Para 58 of the judgment which reads thus:-

"(58). We, therefore, without any hesitation hold that the word `shop' means a place where goods or merchandise are kept for sale to consumers usually in small quantities on retail and/or wholesale basis. The examples of the same are, a trader's shop selling any kind of utility items a printing shop, a place where goods are prepared and sold for human consumption i.e. bakery and sweetmeat shop, a specialized department in a large store, a Gourmet Shop, chemists shop. There is, however, exception in this rule. The word used in clause 12(2) is `one shop', hence if any of the above activity is done by the assessee in two or more shops, he shall be entitled to the exemption of one only. This obviously concludes that, a motor mechanic workshop, a factory, a departmental store, a doctor's clinic, a hospital, a marriage hall, a cinema hall, a school or such other educational institutions are not a `shop' within the meanings of clause 12(2) of the Second Schedule of the Wealth Tax Act."

11. Besides, for availing the exemption from payment of wealth tax in terms of clause 12(2) ibid the burden to bring his case within the ambit of the said provision of the Act was on the respondent but on another crucial point as to what is the legal status of "Greenwich Public School" and what is the status/connection of the present respondent/ assessee as regards such school, there is no satisfactory reply from his side.

12. For the foregoing reasons the question proposed in the reference is answered in the negative and this reference application is disposed of accordingly.

13. A copy of this order under the seal of this Court and signature of the Registrar be sent to Income Tax Appellate Tribunal Karachi for passing of orders in conformity to this order.

M.B.A./C-3/KOrder accordingly.