SHAUKAT MASOOD, DIRECTOR FAZAL .INDUSTRIES (PVT.) LTD., ISLAMABAD VS FEDERATION OF PAKISTAN through Chairman, Central Board of Revenue/Secretary, Revenue Division Government of Pakistan, Islamabad, 2007 PTD-LAHORE-HIGH-COURT-LAHORE 2202 (2007)

Wealth Tax Act (XV of 1963)---

----Ss.2(16), 4(3), 27, 35 & Second Sched., Part-I, Item 8---Constitution of Pakistan (1973), Art.199---Constitutional petition---Maintainability---Shares purchased with loan obtained against foreign currency account---Refusal of authority to treat such shares as debts owed by assessee in terms of S.2(16) of Wealth Tax Act, 1963---Instead of filing. appeal against decision of Tribunal restoring order-in-original, assessee filed rectification application on the plea that such relief was available to him under S.4(3) of Wealth Tax Act, 1963---Dismissal of rectification application by Tribunal challenged through Constitutional petition---Validity---Provision. of S.4(3) of Wealth Tax Act, 1963 would not apply to such case, wherein assessee had neither claimed to have transferred some assets for consideration irrevocably nor sought some assets transferred by them to be included in their net wealth---No appeal was provided against order of rectification, thus, constitutional petition was maintainable---Tribunal had disallowed rectification for valid reasons---High Court dismissed Constitutional petition in circumstances.

Gatron (Industries) Ltd. v. Government of Pakistan and others 1999 SCMR 1072 rel.

Sikandar Hayat Khan for Petitioner.

Ms. Shahina Akbar for Respondent.

Date of hearing: 22nd May, 2007.

JUDGMENT

MAULVI ANWARUL HAQ, J.---This judgment shall dispose of Writ Petitions Nos.1594 to 1596 of 2003; as common questions are involved in them.

2. In all these cases, the petitioners obtained loans against their respective foreign currency accounts. The amounts of these loans were applied by the petitioners for acquisition of shares in various Companies. In their wealth tax returns, the said assets acquired through the sari loans were sought to be treated as debts owed by them in terms of section 2(16) of the Wealth Tax Act, 1963. The Deputy Commissioner of Wealth Tax did not allow the said prayer of the petitioners. They filed appeals, which were heard by a Commissioner of Income Tax(Appeals) Zone-I, Islamabad. All these appeals were decided vide orders passed on 27-11-1.998 by the said Authority whereby the appeals were accepted. The said assets were treated as debts owed by them. The department filed appeals, which were allowed by the Income Tax Appellate Tribunal, Islamabad Bench, vide consolidated judgment dated 10-6-2002 and the order of the Commissioner of Income Tax was set aside while the order passed by the Deputy Commissioner was restored. The petitioners had a right of appeal against the said judgment of the Tribunal under section 27 of the Wealth Tax Act, 1963. However, they did not avail the said remedy and instead filed applications in all the three cases under section 35 of the said Act claiming rectification of the order of the Tribunal on the grounds stated therein. These applications were heard by the Income Tax Appellate Tribunal, Islamabad, and were dismissed vide order dated 24-3-2003.

These writ petitions came up for hearing before this Court on 16-6-2003 when reports and parawise comments were called. These have been filed.

3. Learned counsel for the respondents with reference to the said comments had raised a preliminary objection that since an appeal was available against the impugned judgment of the Tribunal and the same had not been filed, therefore, the said judgment cannot be questioned by filing the present writ petitions.

4. Learned counsel for the petitioner, on the other hand, contends that the writ petition has not been filed against the main judgment of the Tribunal, rather it questions the order passed on the application filed under section 35 of the Wealth Tax Act, 1963, against which order no appeal is provided in the said Act.

5. In view of the stance taken by the learned counsel for the respondents, I allowed him to address on merits. He has proceeded to argue that the impugned judgment dated 10-6-2002 of the Tribunal is liable to be set aside on the ground that it failed to take note of Item 8, Part-I of Second Schedule to the Wealth Tax Act, 1963, which was inserted vide Finance Act, 1996, while- interpreting section 4(3) as also section 2(16) of the said Act. The precise contention is that upon reading of the said provisions of the Act along with the said Second Schedule, the assets acquired by the petitioners with the loans against the foreign currency accounts would become 'exempt from payment of tax. Learned counsel for the respondents, of course, argues that the said arguments of the learned counsel cannot be entertained in these writ petitions, which admittedly have been filed to question the order passed by the Tribunal pursuant to the rectification applications filed by the petitioners.

6. Learned counsel for the petitioners rejoins to state that he is raising a pure question of law .and notwithstanding the circumstances of this case, this Court can entertain the same while considering this writ petition. He relies on the case of Gatron (Industries) Ltd. v. Government of Pakistan and others 1999 SCMR 1072.

7. I have considered the said submissions of the learned counsel for the parties in the light of the facts and circumstances of this case. As noted by me above, the Deputy .Commissioner in his order dated 29-9-1998 disallowed .the plea of the petitioners holding that upon reading of section 2(16) of the Wealth Tax Act, 1963, it clearly provides that the debt liable to be adjusted against the value of the assets would not include the debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth lax is not payable under this Act. Admittedly, the foreign currency accounts are exempt from payment of said tax. The Commissioner in his order dated 27-11-1998 disagreed with the Deputy Commissioner with reference to a judgment dated 13-9-1981 of the Tribunal that a loan obtained against pledge of non-taxable assets, if utilized for the purchase of .taxable assets, the said loan would be allowed to be adjusted. Before the Tribunal, at the time of hearing of the appeals, it was contended on behalf of the department that the said section 2(16) of the Wealth Tax Act, 1963, leaves no manner of doubt that a debt obtained against exempted assets will not be deducted from the value of the assets. The judgment relief` upon by the Commissioner' was sought to be distinguished. The contentions were answered with reference to the said judgment. The learned Tribunal reproduced the said section 2(16), referred to some judgments, agreed with the department, and allowed the appeals.

8. I have already noted above that a regular appeal available against the said judgment of the Tribunal was not filed. The rectification of the said judgment, however, was sought in terms of section 35 of the said Act with the plea that the relief is available .under section 4(3) of the Wealth Tax Act, 1963. It was complained that the said provisions of law had not been taken note of by .the Tribunal. It was observed by the Tribunal that the point was not raised at any time. However, the plea was examined. The said provisions of law were reproduced and upon reading of the same, it was held .that the said provisions were not applicable to the cases of the petitioners. I have also examined the said section 4 of the said Act. It lays down the procedure for computing the net wealth. Subsection (1) authorizes the inclusion of the value of assets held by the assessee on the valuation date as mentioned in clauses (a) and (b) of subsection (1) of section 4. Subsection (3) provides that where the value of any assets is to be included in the net wealth of an assessee in accordance with clause (a) of subsection (1), there shall be deducted from such value any debts owing on the valuation date by the transferee mentioned in that subsection in so far as such debts are referable to the assets, Clause (a) authorizes the department to include in the net wealth of an individual, the value of such assets which are being held by a person or association of persons to whom such assets have been transferred by the said individual otherwise than for adequate consideration for the benefit of the individual or his wife or minor child) or that such transfer has- been made irrevocable.

9. It will be seen that the said provision of law does not apply to the cases of the petitioners as they do not claim to have transferred some assets for consideration or irrevocably and it is not the case where some assets transferred by the petitioners are being sought to be included in their net wealth.

10. Reverting to the present writ petition, I find that even in the writ petition itself, the point now being raised by the learned counsel for the petitioners has not been taken. I have examined the said judgment of the Hon'ble Supreme Court of Pakistan being relied upon by the learned counsel in the case of Gatron (Industries) Ltd. Their lordships observed that it is well settled that even where leave is not granted on a point, apex Court is competent to allow the same td be canvassed in appeal if it is necessary for doing complete justice, in any case or matter, pending before it, as contemplated by clause (i) of Article 187 of the Constitution. It was further observed that it is also well settled that a pure question of law could be raised at any stage of the appeal depending upon the facts acid circumstances of each case.

11. I have already referred to the facts and circumstances of the case in some detail above. The petitioners opted not to exercise right of appeal provided under the law and claimed rectification, which was not allowed and for valid reasons as noted by me above. The, preliminary objection raised on behalf of the respondents has been answered with the plea that no appeal is provided against the order of rectification. The scope of the writ petitions stands narrowed down to the exercise of jurisdiction by the Tribunal while deciding the applications for rectification and I have already found above that the applications were dismissed for justifiable reasons.

12. The writ petitions accordingly are dismissed but without any order as to costs.

S.A.K./S-122/LPetition dismissed.