2002 PLP 1818 (PTD)

3. The assessee‑appellant declared value of two Plots N4.X343 Phase‑III, LCCHS amounting to Rs.14,15,100 and No.310 Block‑D.I., Nespak amounting to Rs.535,000 in his wealth tax returns. However, in the assessment year 1997‑98 both these plots were claimed as txempt from levy of wealth tax on the plea that the same had been purchased out of encashment proceeds of NIT Units on which Zakat was ded4cted in July, 1996 i.e. in the period relevant to the wealth tax assessment year 1997‑

98. But the Assessing Officer rejected assessee's claim of exemption due to the reason that under Wealth Tax Act the exemption is admissible in respect of those assets only which are held on the date of valuation on which Zakat has been deducted during the year. Since no Zakat had been deducted on the plots of the assessee, the exemption' claimed by the assessee was not available to him according to the Wealth Tax Officer. Against this treatment of the Wealth Tax Officer the assessee filed appeal before the Commissioner who in his appellate order, dated 20‑6‑2000 rejected assessee's contention and confirmed assessment order of the W.T.O. on this issue. It is this action of the First Appellate Authority which has brought the assessee in further appeal before us.

4. It has been strongly pleaded by the A.R. that rejection of the assessee's claim of exemption of assets created out of encashment proceeds of Zakat‑paid NIT Units by the Wealth Tax Officer and confirmation of his action by the First Appellate Authority is absolutely illegal and contrary to the provisions of Zakat and Ushr Ordinance of 1980 and Wealth Tax Act of 1963. According to the A.R., Zakat has been deducted from the NIT Units of the assessee during the period relevant to assessment year 1997‑98 and if the assets created out of encashment proceeds of these NIT Units are subjected to wealth tax in this assessment year the same would tantamount to double taxation. The A.R. has submitted that the plots purchased by the assessee out of sale proceeds of Zakat‑paid assets are totally exempt under the relevant provisions of Zakat and Ushr Ordinance of 1980 and Wealth Tax Act of 1963. The alternate plea advanced by the A.R. is that the amount of encashment proceeds of NIT Units should at least be deducted from value of the plots and the remaining value of plots, if any, may be brought to tax, if at all the W.T.O. intends to impose wealth tax on these plots. The abovementioned contentions of the A.R. of the assessee have been strongly refuted by the learned D.R. on behalf of the respondent. It has been contended by the learned D.R. that the action of the Wealth Tax Officer and the Commissioner (Appeals) is correct as the Wealth Tax Act gives exemption only to the assets on which Zakat has been paid. Since no Zakat has been paid by the assessee on the plots which were held by him on the valuation date, the Wealth Tax Officer is justified to impose wealth tax on the valuation of these plots, in the opinion of the learned D.R.

5. We have considered the contentions of both the parties and the arguments of their authorized representatives in the light of the facts of the case and in the light of the relevant law. The view of the A.R. of the assessee that the plots purchased by his client out of encashment proceeds of Zakat paid NIT Units are exempt from wealth tax. in our humble opinion, is not correct as it is not supported by the relevant law. Section 25(1) of Zakat and Ushr Ordinance, 1980 exempts those assets from wealth tax on which Zakat or contribution in lieu thereof has been deducted at source during the relevant period. It reads as follows:

25. Certain tax concessions. ‑‑‑(1) Notwithstanding anything contained in any other law for the time being in force, (a) in determining the tax liability of an assessee for an assessment year,‑‑‑ (i) ........................... (ii) under the Wealth Tax Act, 1963 (XV of 1963), his assets in respect of which Zakat or contribution in lieu thereof, has been deducted at source during the year relevant to that assessment shall be excluded from his taxable wealth; and The Wealth Tax Act of 1963 in its Second Schedule deals with exemptions from wealth tax. Clause (1) of Part I of the Second Schedule which exempts the assets on which Zakat has been paid from the levy of wealth tax reads as follows: "Wealth tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee‑‑‑ (1) assets in tespect of which Zakat or contribution in lieu thereof has been deducted at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), in that year or during the Zakat year commencing immediately before the valuation date. Explanation.‑‑‑`Zakat year' means year according to the Hijra Calendar for which Zakat is chargeable, commencing on the first day of Ramadhan‑ul‑Mubarak and ending with the last day of the following Sha'ban‑ul‑Moazzam;" In the nutshell, if section 25 of the Zakat and Ushr Ordinance of 1980 and clause (1) of Part I of Second Schedule to the Wealth Tax Act, 1963 are read together, the conclusion is that both the provisions of these two enactments exempt those assets of an assessee from the levy of wealth tax on which Zakat or contribution in lieu thereof has been deducted at source under the Zakat and Uhsr Ordinance of 1980 during the Zakat year commencing immediately before the valuation date of wealth tax. In the instant case, Zakat has been deducted at source in respect of NIT Units of the assessee in the month of July, 1996, therefore, the NIT Units of the assessee are exempt from wealth tax. Had the assessee maintained these units on the valuation date i.e. on 30‑6‑1997 which is relevant to the assessment year under consideration i.e. assessment year 1997‑98, no wealth tax would have been charged on assessee's said units and the said units should not have been included in his net wealth. Unfortunately the assessee sold these units and acquired/purchased two plots out of the encashment proceeds. No Zakat has, however, been paid on this newly created asset of plots which the assessee was holding on the valuation date i.e. 30‑6‑1997. Thus no exemption can be allowed to the assessee from wealth tax in respect the asset of plots in the obtaining circumstances. Both the Zakat and Ushr Ordinance of 1980 and Wealth Tax Act of 1963 exempt only those assets from the levy of wealth tax on which Zakat has been paid and not the assets which has been created out of sale/encashment proceeds of Zakat paid assets and no Zakat has been paid on such assets.

6. In view of the discussion made above, we lee no hesitation to reject the claim of the assessee in respect of exemption of plots from wealth tax. In our view both the Assessing Officer and the First Appellate Authority have taken right action on this issue. Hence no interference is made with the impugned appellate 'order which is maintained. Appeal field by the assessee is, therefore, dismissed o this issue. Issue of valuation of plots:

7. It has been contended in the grounds of appeal in all the years under consideration that the value assessed by the W.T.O. of both the plots mentioned above (plot in LCCHS and plot in Nespak) is illegal and unjustified as it is more than the value which can be determined on the basis of D.C. rates under Wealth Tax Rule 8(3). It has been submitted by the A.R. of the assessee that the value of open plots of land which is higher than the value on the basis of D.C. rates cannot be adopted by Wealth Tax Officer under Wealth Tax Rule 8(3) without prior approval of the Commissioner. No doubt, the contention of the A.R, of the assessee is correct that the value of immovable property like open plot of land cannot be assessed at a sum higher than the value specified by the District Collector under the Stamp Duty Act of 1899 without prior approval 'of the Commissioner, However, from the perusal of the assessment order it transpires that the W.T.O. has not made any valuation of assessee's plots under Wealth Tax Rule 8(3), rather he has merely adopted the value which was declared by the assessee himself. In view of this situation, the contention of the assessee is misconceived that the value of his plots as assessed by the W.T.O. without prior approval of the CIT is illegal. Hence the same is rejected and the action of the First Appellate Authority as well as that of the Wealth Tax Officer on this issue is maintained. C.M.A./M.A.K./272/Tax(Trib.) Appeal accepted.