1988 PLP (Trib (PTD)

FARHAT ALI KHAN (CHAIRMAN).--In this appeal quite interesting point of first impression has arisen under the following circumstances:-- The wife of the respondent owned a house bearing No. 6/II, 16-South Street, Defence Housing Society, Karachi. M/s Pak Libya Holding Co. Ltd. hired this house for its Managing Director who was none else but the respondent himself. Thus, since 15th April, 1982 the appellant started residing in this house as a tenant with his wife and their children. The house, therefore, became the residence of the appellant, his wife and children though it remained in the ownership of the wife of the appellant. While filing his wealth return the appellant disclosed the house belonging to his wife in his return as required by Explanation-I of clause (m) of section 2 of the Wealth-tax Act of 1963, hereinafter referred to as 'the Act'. However, he did not claim- its exemption under section 5(1)(XVI) of the Act, before the Wealth-tax Officer. Consequently while framing assessment the Wealth Tax Officer added Rs.9,00,000 as the value of the house ignoring the annual letting value of the house to be worked out at the rate of Rs.4,000 per month as its rent. Having been aggrieved and dissatisfied the respondent went up in appeal. Here it was contended for the first time that since the appellant was residing with his wife and children in the aforesaid house, he was entitled to the exemption thereof for wealth tax purposes under section 5(1)(XVI) of the Act. Reliance was placed on a case of Gujrat High Court reported as (1978) 114 ITR 415, CIT Masore v. K.M. Eapeh. Moreover, it was further contended before learned CIT (A) that even though the appellant did not agitate this issue before Wealth-tax Officer, he was entitled to raise it for the final time before the learned CIT(A). In order to fortify this submission, the respondent cited at Bar 94 I T R 26, C'IT v. Sayagi Mills Ltd. again a case from Gujrat High Court. The learned CIT(A) upheld both the submissions of the appellant and directed the W.T.O. to allow the exemption to the appellant as claimed by him under section 5(1)(xvi). This time the department feels aggrieved and has come up in second appeal before us. Mr. A.K. Bhurgari, the learned D.R. vehemently argued that since the respondent did not claim the exemption before W.T.O., the learned CIT(A) grossly erred in entertaining it at the appellate stage. Mr. I.N. Pasha, the learned counsel for the respondent, however, reiterated his submission advanced before the learned CIT(A) and once again put his reliance on Sayagi Mills Ltd.'s case (supra). We have heard both the learned D.R. as well as the learned counsel for the respondent. In our judgment the learned CIT(A) has rightly relied upon the case of Sayagi Mills Ltd. (supra) in entertaining the plea of the appellant regarding exemption for the first time in first appeal before himself. The admitted position before the W.T.O. was that the house belonged to the wife of the respondent and that the respondent alongwith his wife and children resided in it as it p was hired by Pak Libya Holding Co. Ltd., for his residence. Now if out of these admitted facts any relief could be granted to the respondent, it was the duty of the W.T.O. himself to grant it to the respondent whether he had claimed it or not. The law on this point is very much settled. However, if the respondent for some reason did not claim any relief which he was entiled under the law to claim before the assessing officer and which was also not granted to him by the latter while framing assessment, he was very much competent to agitate it before the learned CIT(A). If the first Appellate Authority did not require fresh facts in order to dispose of the plea taken before him for the first time, he can conveniently dispose of the matter on the basis of the material available on record. Surely, he cannot only entertain such plea for the first time but can also grant the relief to the assessee. The departmental appeal, therefore, is found to be devoid of any merit on this point. The order of learned CIT(A), is hereby confirmed on this point. Now turning to the other point let us start with Explanation-I of clause (m) of subsection (1) of section 2 of the Act. It reads:- Clause (m)......................................................... .................. .................. .................. .................. .................. .................. .................. .................. .................. .................. .................. (i) any immovable property, other than agricultural land, owned by the spouse or any (minor) child of the assessee shall be deemed to belong to the assessee: Provided that any immovable property so deemed to belong to the assessee shall not be included in the net wealth of the spouse or (minor) child of the assessee." Let us also reproduce here the provisions of section 5(1)(xvi) of the Act. It reads:-- Section 5(1) (xvi) ............................................. .................. .................. .................. (xvi) so much of the market value of immovable property excluding agricultural land as does 'not exceed rupees five lakhs, or, at the option of the assessee, one house, irrespective of its value, used by the assessee and the spouse and (minor) children of the assessee as their own residence." Now from perusal of both the provisions as reproduced above it appears that an assessee who has to file his return under the Act is required to include in his return any, immovable property owned by his wife or any minor child provided it is not an agricultural land. For purpose of Explanation-I of Clause (m) of subsection (1) of section 2 of the Act such property owned by his wife or minor child is to be treated as property belonging to the assessee. Since the house in dispute was belonging to the wife of the respondent, therefore, he was bound by law to disclose it and by fiction of law it was to be treated as his' property. The contention of Mr. Pasha, the learned counsel, however, is that since the respondent resided with his wife and children in the same house, therefore, it was to be excluded in computation of the net wealth of the respondent. According to the learned counsel since the property is deemed to be the property of the respondent by one fiction of law as contained in Explanation-I of clause (m) of subsection (2) of section 1, it, therefore, should also be deemed to belong to him by another fiction of law contained in para (xvi) of subsection (1) of section

5. For this proposition of law he has relied upon the case of Eapeh (supra). We have gone through it. It is true that the provisions of Indian Wealth-tax Act as contained in 5(1)(iv) are different from the Act as reproduced above. Section 4(1)(iv) of the Indian Act provides:-- "Wealth-tax shall not be payable by an assessee in respect of the belonging assets, such assets shall not be included in the wealth of the assessee;. (iv) House or a part of a house belonging to the assessee exclusively used by him for residential purposes provided that whether the value of such house or part situated in a place with a population exceeding 1,000 exceeds Rs.1,00,00f the amount that shall not be included in the net wealth of an assessee under this section." Thus, under this provision the exemption eau be granted regarding one house provided it belongs to the assessee and is exclusively used by him for residential purposes whereas under the Act the condition is that the house sought to be exempted should have been under the use of the assessee as residence for his spouse and minor children. Thus, it is clear that under Indian provision the use by the assessee of a house for residential purposes is not enough but it should also belong to him. Nevertheless their Lordships of Gujerat High Court held that it was to be assumed even for purposes of Section 5(1)(iv) of the Indian Wealth-ta2c Act that the house belonged to the husband as he was residing in it. It was further held by their Lordship that since the house was transferred by the assessee to his wife and since it was included in the net wealth of the husband by fiction of law created by Section 4(1)(ix) of the Indian Wealth-tax Act, it should be deemed that it belonged to him. It is true that in clause (xvi) of subsection (1) of section 5 of the Act, the ownership has not been highlighted and the emphasis has been placed only on the use thereof as the residence but nevertheless we feel that that ratio of Eapeh's case (supra) applies with full force in the instant case. Here also the respondent disclosed a house in his wealth return under compulsion of law and by fiction of law it was treated to belong to him. Now if by fiction of law it belongs to him and admittedly he is residing in it with his wife and children, we feel no hesitation in holding that the respondent was entitled to the exemption. We, therefore, respectfully agree with the conclusion of the learned CIT(A) and find no force in this departmental appeal. It stands rejected accordingly-. M.B.A./439/T Appeal dismissed.