COMMISSIONER OF WEALTH TAX, RAWALPINDI VS Mrs. NAHEED MUJTABA, 2015 PTD-LAHORE-HIGH-COURT-LAHORE 545 (2014)

Wealth Tax Act (XV of 1963)---

----Ss. 14C, 13D & 27(1)---Interpretation of S. 14C of the Wealth Tax Act, 1963---Tax on ownership of certain immovable assets---Scope---Phrase "Final Tax Liability", connotation of---Question before the High Court was whether tax under S. 14C could be treated as only advance tax; while the wealth tax paid under S. 14C was the minimum tax payable on the immovable asset---Held, that S. 14C(2) of the Wealth Tax Act, 1963 could be divided in two portions; segregated by the word "and" and literal meaning of the first portion was that amount of tax under S. 14C(1) of the Act, shall be payable as advance tax in accordance with Ss. 13A & 13D of the Wealth Tax Act, 1963; which shall be the minimum amount of tax payable under S. 14C---Section 14C(2) of the Wealth Tax Act, 1963 provided mode of paying tax under S. 14C(1) of the Act, which was required to be deposited in advance as per S. 13D(2) of the Wealth Tax Act, 1963---Second portion of S. 14C(2) of the Wealth Tax Act, 1963 included the phrase "Final Tax Liability", which was to be determined for any financial year on the "net wealth" which was taxable under the Wealth Tax Act, 1963----Advance tax, paid under S. 14C(1), if was in excess, then it was to be adjustable against "Final Tax Liability"; however if the "Final Tax Liability" was less than the tax charged under S. 14C(1) of the Wealth Tax Act, 1963; then the tax so charged was the minimum tax liability, and no refund was allowable on the tax paid in excess of the Final Tax Liability---No provisions existed in the Wealth Tax Act, 1963 which allowed double taxation of an immovable asset---Section 14C(1) was a non-obstante provision but it excluded only other rates of tax on immovable asset covered under it; had it intended to tax immovable asset in addition to the normal rate of tax, it would have been couched in the words "notwithstanding the levy of tax by any other provisions"---Charging of tax under S. 14C of the Wealth Tax Act, 1963 without show cause notice, after charging tax at normal rate, was therefore, illegal---Reference was answered, accordingly.

Manzoor Hussain for Appellant.

Nemo for Respondent.

Date of hearing: 30th September, 2014.

JUDGMENT

SHAHID JAMIL KHAN, J.---This judgment shall also decide I.T.A. No. 195 of 2000; for having arisen out of same order under similar facts.

2.The appeals, under section 27(1) of Repealed Wealth Tax Act, 1963 ("Act of 1963"), are directed against order dated 15-11-1999 passed by Income Tax Appellate Tribunal, Islamabad ("Appellate Tribunal"), proposing following question of law:--

"Whether on the facts and circumstances of the case the learned ITAT was justified to treat the tax paid under section 14C of the Wealth Tax Act, 1963, as only advance tax while wealth tax paid under section 14C is minimum wealth tax payable on an asset?"

3.Necessary facts are that respondent filed return of wealth tax for assessment years 1997-1998 and 1998-1999, declaring a rented house at Islamabad in net wealth. The declared net wealth was assessed under section 16 of the Act of 1963 and the house in question was charged to tax, on Gross Annual Letting Value ("GALV"), at normal tax rate. The house was again subjected to tax under section 14C and was added to Final Tax Liability relating to respective tax years.

4.This order was successfully challenged, by respondent assessee, before Commissioner Wealth Tax (Appeals) ("First Appellate Authority"). The First Appellate Authority's order was assailed before Appellate Tribunal by appellant department. The Appellate Tribunal treated the tax paid under section 14C as advance tax and directed for its adjustment in Final Tax Liability.

5.Learned counsel for the appellant/department submits that Appellate Tribunal had misconstrued the relevant provisions to hold that tax under section 14C was an advance tax. He argues that under subsection (2) of section 14C, the tax charged under its subsection (1) was a minimum tax.

None has appeared on behalf of the respondent despite repeated notices, hence the case is being decided, on merits, in absence of the respondent.

6.Heard, record perused.

7.To answer the proposed question, examination of section 14C of the Act of 1963 is necessary:--

"14C. Tax on ownership of certain immovable assets.---(1) Notwithstanding anything contained in this Act, every person who owns an immovable asset referred to in clause (d) of subsection (1) of section 14 shall pay wealth tax at the rates specified in paragraph B of Part II of the First Schedule:

Provided that nothing contained in this subsection shall apply to widows, orphans below the age of twenty-five years, pensioners and disabled persons.

(2)The tax under this section payable by way of advance tax in accordance with the provisions of sections 13A and 13D, shall be deemed to be the minimum amount of tax payable under this section and where the final tax liability determined under this Act exceeds the amount paid, if any, under the aforesaid provisions, the amount so paid shall be adjustable against the final tax liability of the assessee. "

(emphasis supplied)

8.Subsection (1) of the section 14C, tells about the rate of tax chargeable on immovable assets, referred to in section 14(1)(d). Section 14 (Return of Wealth) describes the persons who are liable to file wealth tax returns. Under its clause (d) to subsection (1), a person holding a residential plot/house or an apartment/flat was liable to file return. In simple words; a person who owns an immoveable asset (residential plot/house or an appurtenant/flat) shall pay wealth tax at the rates, specified in First Schedule, Part II, Paragraph B.

Subsection (2) of section 14C can be divided into two portions segregated by the word "and". Literal meaning of the first portion is that the amount of tax under section 14C(1) shall be payable as advance tax in accordance with sections 13A and 13D which shall be minimum amount of tax payable under this Section.

Provisions of Section 13D are to be kept in mind for construction of the subsection (2) of section 14C, which is reproduced hereunder:--

"13D. Advance payment of tax.--

(2)A person liable to pay tax under section 14C shall pay, by way of advance tax, on or before the fifteenth day of November and the fifteenth day of May, in each financial year, an amount equal to one half of the full amount of wealth tax payable under the said section 14C in the said financial year."

This subsection requires a person to pay the tax in advance, in two installments i.e., fifteenth of November and fifteenth of May each year in advance. In simple words; section 14C (2) provides mode of paying the tax under section 14C(1), which was required to be deposited in advance as per section 13D(2).

The catch lies in the other portion of this subsection. The phrase "Final Tax Liability", as used in this portion, needs to be understood. Final Tax Liability was determined, for a tax year, on the "Net Wealth" which was taxable under section 3 of the Act of 1963. Net wealth was defined in clause (16) of subsection (1) of Section 2, which meant all the assets belonging to the assessee and required to be included in net wealth of a person under this Act. The tax payable on net wealth as assessed/determined by the Assessing Officer for an assessment year was Final Tax Liability of the assessee.

If the Advance Tax paid, under section 14C(1), was in excess, it was adjustable against Final Tax Liability of the assessee. However, if Final Tax Liability was less than the tax charged under section 14C(1), the tax so charged was minimum tax liability i.e., no refund was allowable of the tax paid in excess of Final Tax Liability.

9.Now we shall advert to the merits of case, in light of provisions discussed above; the Assessing Officer first assessed the house in question at normal tax rate and thereafter it was also subjected to tax under section 14C(1). The treatment given by the Assessing Officer is not in accordance with the law discussed supra. Tax under section 14C could not had been charged without first confronting, through show-cause notice, that the house fell in the immovable asset under section 14(1)(d) and was chargeable to tax under section 14C(1). There is no provision in the Act of 1963, which allows double taxation of an immovable asset. Section 14(1) is a non-obstante provision, but it excludes only other rates of tax on the immovable asset covered under it. Had it intended to tax the immovable asset, in addition to normal rate of tax, it should had been couched in the words, 'Notwithstanding the levy of tax by any other provision'. Charging of tax under section 14C without show-cause notice, after charging tax at normal rate was illegal.

10.We do not agree with the findings of learned Appellate Tribunal that tax under section 14C of the Act of 1963 was only an advance tax and not a minimum tax. As discussed supra, the tax charged under section 14C(1) was to be collected as advance tax, in the manner provided under section 13D(2) and was adjustable against Final Tax Liability, however, if the tax so charged was in excess of Final Tax Liability, then it was a minimum tax.

Since the department has charged tax under Section 14C illegally, therefore, it shall not be treated as minimum tax and shall be adjusted against Final Tax Liability as directed by the Appellate Tribunal (though for different reasons).

11.Our answer to the proposed question is in negative. However, it shall not change the fate of appeal as decided by learned Appellate Tribunal in favour of the respondent/taxpayer. The appeals are disposed of accordingly.

12.Office shall send a copy of this judgment under seal of the Court to the Appellate Tribunal as per section 27(5) of the Wealth Tax Act, 1963.

HBT/C-18/LOrder accordingly.