1999 PLP (Trib (PTD)

MANSOOR AHMAD (ACCOUNTANT MEMBER).

This appeal by the assessee is directed against the order, dated 20-11-1996 by the learned AAC, Islamabad in respect of assessment year 1995-96.

2. Mr. Zafar Iqbal, for the department and Mr. Nadeem Ahmad Khan, Advocate, present on behalf of the assessee/respondent. Parties have been heard.

3. The facts of the case are that the assessee, an individual, is owner of 1/2 share in a plot with structure thereon. The area of plot is 2,778 sq. yds and the covered area of the building thereon is 1600 sq. ft. The assessee declared the value of his share in the said property at Rs.2,30,

000. The assessing officer considered this value to be too low. He adopted the value of the plot a Rs.964 per sq. yd. on the basis of sale price of another plot in the same area measuring 1944 sq. yds. The value of plot was thus, determined at Rs.26,77,

992. The value of building was estimated at Rs.560000 by adopting the cost of construction at Rs.350 per sq. ft. The total value of property was thus, determined at Rs.32,37,992 and assessee's 1/2 share was taken at Rs.16,18,

996. The learned AAC reduced the value of plot by directing that it be determined by adopting the rate of Rs.500 per sq. yd on the ground that during the financial year 1994-95, the sale rate fixed by CDA remained at Rs.500 per sq. yds. However, the valuation of building was confirmed. The department agitates the reduction in the value of plot as allowed by the learned AAC.

4. The learned DR supports the valuation of plot as determined by the assessing officer by asserting that the valuation had been made on the basis of an actual sale transaction of a plot in the same area which provides a more reliable basis than the CDA's rate. On the other hand, the learned AR of the assessee states that in I-9, I ..A ..of I different plots are allocated for different types of industries and as such the value of two plots having different industrial use would be different. Secondly, the smaller plots have higher market value and as such the assessee's plot could not be compared with a much smaller plot referred to by the assessing officer.

5. We find that both the assessing officer and the learned AAC have erred in not following the provisions of Rule 8(3) of the Wealth Tax Rules, 1963, which govern the method of valuation of immovable property. In the case of a constructed property, the said rule does not provide for valuation of plot and building thereon, separately. The valuation is to be made on the basis of market value of property subject to the limit on value so determined on the basis of gross annual rental value thereof, as laid down in the first proviso to Rule 8(3). In the present case, separate valuation of plot and building thereon has been made which is improper and against the aforesaid rule.

6. While dealing with appeals relating to wealth tax assessments of immovable property, we have noted that most of the departmental officers do not seem to fully comprehend the method of valuation as laid down in Rule 8(3). Therefore, for the guidance of officers we would like to explain the aforesaid rule. The first important and necessary step is to determine the market value of property, whether it is an open plot or a constructed property (building). Thereafter, in the case of a building, the value is to be determined on the basis of gross annual rental value as laid down in the first proviso to the said rule. The lower of the two values, determined as aforesaid, is to be adopted for wealth tax purposes. In the case of an open plot of land also the market value is first to be determined. Thereafter, the valuation is to be determined as per the provisions of the first proviso, if applicable. The lower of the two values is to be adopted. Valuation of immovable property without first determining its market value is not permissible.

7. In view of the foregoing, the orders of the authorities below are vacated and the assessing officer is directed to strictly follow the provisions of the Rule 8(3) of the Wealth Tax Rules, 1963 while determining the value of the property and after providing the assessee an opportunity of being heard in respect of the valuation to be adopted. 8.The departmental appeal is, therefore, disposed of to the extent and in the manner indicated above. A.A./5/Trib. Appeal disposed of.