1988 PLP (Trib (PTD)

MUJEEBULLAH SIDDIQUI (JUDICIAL MEMBER).--The above appeals are directed against the order dated 6-1-1983 by the learned Commissioner of Income-tax (A) Zone-3, Karachi.

2. The admitted facts are that the appellants are AOP by a fiction of law under the provision of section 2(m) explanation (iii) of the Wealth Tax Act, 1963. It is further admitted that the two properties held by the A.O.P. at Karachi and Sukkur have been let out by the predecessor--in-interest of the appellants since more than two decades ago. In these circumstances the two properties held by the A.O.P. have been subjected to wealth-tax under the provisions of section 3 read with section 2(m) (iii) and section 2(e)(11) of the Wealth Tax Act, 1963. The appellant has taken plea before us that the two properties though held by the AOP and let-out to the tenants but still they are not to the levy of wealth-tax, because they are not held for the purpose of business of letting out and as such are out of the purview of the assets for the purpose of wealth-tax as defined: under section 2(e)(ii).

3. We have heard Mr. I. N. Pasha, learned counsel for the appellant and Mr. Shahid Jamal, learned D.R. for the respondent. Mr. Pasha has contended that mere holding of immovable property by an AOP, and letting out thereof is not sufficient for levy of wealth-tax. While elaborating his contention Mr. Pasha has maintained that only that property can be subjected to wealth-tax, which come, within the purview of wealth-tax as defined in section 2(e) of the Wealth Tax Act, 1963. According to the definition of assets as contained in section 2(e) every movable or immovable property held by an individual or Hindu Undivided Family shall be treated as asset except those excluded in the definition itself. So far the firm, an association of persons, a body of individuals and company are concerned only that immovable property shall be treated as asset which is held for the purpose of business of construction and sale or for the purpose of business of letting out. Mr. Pasha has attempted to make a distinction in letting out of the property and business of letting out the property. According to him mere letting out of the property is not sufficient to bring it within the purview of wealth-tax. The condition precedent is that property should be held for the business of letting out which denotes that the firm or .AOP or company as the case may be should remain busy in the transaction of letting out of property. Mr. Pasha has submitted that if the property is merely let out and the landlord is not engaged in a continuous process of activity relating or incidental to letting out of the property it would not amount to business of letting out of property and as such the property so held would not be treated as asset for the purposes of wealth-tax. Applying the above principle to the facts of the present case Mr. Pasha has argued that the properties in question were let out by the father of the present appellants being predecessor--in-interest somewhere in fifties. The appellants have inherited the property in equal share from their father and now they merely receive one or two cheques in the year and Mass on the receipts. They cannot get tenants evicted because of the rent restriction laws. Except for receiving one or two cheques and passing on the receipts thereof in the entire year, the appellants have nothing else to do and as such it does not amount to the business of letting out of property. In support of his contention Mr. Pasha has placed reliance on the observations made by the Honourable Judges of Sind High Court in the case of 'Pasha Biscuit factory Ltd. Karachi 1981 P T D 217 (H. C. Kar.). Mr. Pasha has relied on the following observations:- "We have no doubt in our mind that the word "or" has been used in the amended clause 2(e)(ii) in disjunctive sense and immovable property held or possessed by petitioners for the purpose of business of letting out of property, is included in the assets of the company within the meaning of section 2(e) (ii) and that it would be subject to assessment under the Wealth Tax Act, 1963."

4. On the other hand Mr. Shahid Jamal, learned D.R. has also placed reliance on the ruling in the case of B. P. Biscuit Factory (supra) and has contended that the facts of the cited case were that the petitioners were carrying on business of manufacturing Bread and other items of confectionery and for that purpose they constructed the factory. Since all the business premises were not always occupied they licensed out certain spare spaces on the basis of square foot. The go downs so licensed out were considered to be subject to assessment of wealth-tax and notices were issued to the petitioners, which were challenged before the Honourable High Court. In the above circumstances the notices issued were upheld and, therefore, the ratio decidendi is that letting out of immovable property by an AOP, firm or company would be treated to be holding of the immovable property for the purpose of business of letting out and thereby shall be subject to levy of wealth-tax.

5. We have carefully considered the contentions raised by the representatives for the parties. In order to appreciate the respective contentions of the learned representatives raised before us it would be appropriate to examine the definition of asset as contained in section 2(e)(ii) of the Wealth Tax Act, 1963, which reads as follows: 2(3) 'assets' includes:- (i) x x x x x x x (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."

6. It has already been decided by the Honourable High Court of Sind in the case of Messrs B.P. Biscuit Factory that the word "or" in between the words 'construction and sale' and 'letting out' has been used in disjunctive sense. We are, therefore, of the opinion that in order to infer true intentions and for bringing out a correct import of the disjunctive use of the word "or" in the above provision it should be read in the two situations envisaged under the law as follows:- ' (a) "Immovable property held for the purpose of the business of construction and sale of property. (b) Immovable property held for the purpose of letting out of property."

7. We have formed the above opinion for the reason that it is an established principle of interpretation of statutes that no superfluity is to be attributed to the legislature. Thus the word "business" is used with the construction and sale because the construction per se is not a business and likewise isolated act of sale may not amount to business. Thus if the property is held by an AOP firm or company for mere construction which may be for self-use, it is not liable to be subjected to wealth tax, but if the immovable property is held for the purpose of business of construction and sale it is liable to be charged to wealth-tax. Thus the word "business" was necessary to be used in relation to the construction and sale. On the other hand the word "business"' is not required to be used with letting out because the letting out is per se business and, therefore, the use of word "business" with letting out would be superfluity which is not to be inferred on the part of legislature. We are, therefore, of the opinion that the word "business." is to be read with construction and sale only and is not to be read with letting out of property and only then the true import of use of disjunctive "or" could be discerned.

8. Mr. I.N. Pasha has contended that letting out is not a business in itself until and unless the letting out is done in such a manner, which engages the landlord frequently and keeps him busy in the management thereof. We are not impressed with this interpretation of the term "business" as remaining busy is not the necessary ingredient of business. We have posed a situation to Mr Pasha in which a0 person inherits business and thereafter sits idle and keeps himself, absolutely secluded while the entire business inherited by him is rung by his employees and agents. Such person neither manages anything nor actively involves himself in any transaction but nevertheless he is proprietor of the entire trade and business concerned, whether such person would be deemed to be doing business or not? Mr. Pasha has conceded that without remaining busy such person would be deemed to be doing business. Thus the contention that for the purpose of business a person should remain busy is not tenable. The word "business" is not defined in the Wealth Tax Act, 1963. The definition of word "business" in the Concise Oxford Dictionary includes habitual occupation, profession, trade, dealings with men and matters, thing that concerns one, that one may meddle with, process, concern and affair etc. Thus it will be seen that a business is a very wide term. It has been observed by KANGA AND PALKHIVALA in the LAW AND PRACTICE OF INCOME-TAX, Volume 17th Edition at page 343 that the word "business" has even a wider content than the word "trade". The trend of judicial decisions has been in the direction of enlargement rather than restriction of the connotation of trade and business. It has been further observed on the same page that the frequency or repetition of the activity, though at times a decisive factor, is by no means an infallible test, and a transaction though repeated may not amount to a trade or an adventure in the nature of trade. Conversely, an isolated adventure may fall within the definition of "business". The word business connotes some real, substantive and systematic or organized course of activity or conduct with a set purpose. The mere holding of property does not amount to "business" but when it is leased out or licensed 'out with a set [words missing] such course of activity or conduct amounts to "business" and as such holding of property for the purpose of letting out amounts to business in itself. We have therefore no hesitation in holding that any immovable property belonging to an AOP and let out on rent would be deemed; to be asset as envisaged under section 2(e)(ii) of the Wealth Tax Act, 1963 and shall be subject to assessment under the Wealth Tax Act, 1963.

9. For the foregoing reasons we are of the considered opinion that the Wealth Tax Officer has rightly subjected the immovable properties held by the appellants to the wealth-tax as they have been admittedly let out to the tenants.

10. The learned CIT (A) was justified in confirming the order of Wealth Tax Officer and no interference is called for. The appeals are devoid of any merits and are dismissed accordingly. M.B.A./552/T Appeals dismissed.