2003 PLP (Trib (PTD)

US$ 70.993 26‑4‑1992 US$ 5,000 30‑5‑199 US$ 27,593 3‑9‑1992 US$ 5,000 1‑3‑1993 US$ 20,000 15‑8‑1993 Total: 2,15,536 With the utilization of US$ 215,466.30 (215,536 69.70) the undersigned has created following assets in Pakistan.

1. Share in Sahiwal Ghee Mills Rs. 2,940,000

2. Purchase of Prize Bonds Rs. 500,000

3. Purchase of F.E.B.C. Rs. 15,00,000

4. Cash in hand Rs. 10,93,000 Total Rs. 60,33,000 As all the assets were created out of the foreign remittances enjoy immunity under the provision of section 5(xv)(i) and (ii) of Wealth Tax Act, 1963 (XV of 1963) therefore no tax is chargeable on these assets for a period of 5 years. The undersigned will also like to refer to Notification No. S.R.O. 220(I)/91, dated March 16, 1991 which is reproduced under: "In exercise of powers conferred by subsection (2) of section 5 of the Wealth : Tax Act, 1963 (XV of 1963) the Federal Government is pleased to exempt from the tax payable under the said Act the asset representing the amount deposited in a Private Foreign Currency Account held with any authorized bank in Pakistan in accordance with the Foreign Currency Account Scheme introduced by the State Bank of Pakistan." From the above submissions you would kindly appreciate that the undersigned has no other asset except Rs.5,11,405 other than the assets exempt under section 5(xv)(i) and (ii) of the Wealth Tax Act, 1963 which are shown in the Wealth Tax Return for the assessment year 1994‑95 for which all the relevant informations are available on record. It is, therefore, earnestly requested to kindly do not initiate the proceedings under section 17‑B of the Wealth Tax Act, 1963 as the undersigned has rightly declared its assets for the assessment year 1994‑95.

4. Both the parties have been heard and relevant orders perused. The learned A.R. has vehemently argued the case and contended that the learned I.A.C erred in law while invoking section 17‑B of the Act. He submitted that certificates issued by the respective banks duly showing the foreign currency deposits and assessee's name was available on record and was shown to the concerned officer who brushed aside the same since he was hell‑befit to exercise his revisional jurisdiction. The sole reason which weighed with the learned I.A.C. was that particulars of the person who remitted the remittances should have been probed in was a fallacious and misconceived argument. He further argued that the foreign currency account maintained by the assessee enjoyed immunity as per provisions of section 4 of the 2nd Schedule to the Income Tax Ordinance, 1979. He stated that distinction regarding resident or non resident was removed by Finance Act, 1985.

5. To substantiate his contention, the learned A.R. drew our attention to section 5(1)(xv) of the Wealth Tax Act which provides for grant of exemption in respect of foreign currency account. It will be appropriate to reproduce the same for convenience: assets‑‑‑ (i) brought or remitted by an assessee into Pakistan, or received by an assessee from outside Pakistan, in the year in which they are brought, remitted or received and the following five years; (ii) created by an assessee out of remittances received in or brought into, Pakistan through normal banking channels during the period referred to in sub‑clause (i): Provided that where investment in the assets is not made entirely out of remittance received in, or brought into Pakistan through normal banking channels, the exemption shall apply in the same normal banking channels, exemption shall apply in the same ratio as the foreign remittances bear to the total investment;"

6. He also placed on file Circulars Nos. 32 and 33, dated 14‑2‑1991 which permits to the authorized dealer to open foreign currency account which maybe fed from, the remittances received from abroad by foreign cheques, foreign exchange encashment of bearer certificates. It provided that no question will be asked for acquisition of such exchange. The learned A.R. appearing on behalf of the assessee relied upon judgments of the Tribunal reported as: (i) 1995 PTD (Trib.) 1162; (ii) 1996 PTD (Trib.) 344 and (iii) W.T.A. No. 533/KB of 1999‑2000 (unreported).

7. In the supra cited case reported as 1995 PTD (Trib.) 1162, the Tribunal held that: "The object of law was to generate Foreign Exchange and it was for that purpose that incentive for exemption was given to the non‑resident. So, the only material consideration for the grant of exemption at the relevant time was if the amount relevant pertained to the foreign remittance or not". The learned A.R. also referred to section 5 of 1992 contending that this provides blanket cover to the citizens of Pakistan to hold foreign currency account without being subjected to withholding tax and any inquiry with regard to the source of foreign currency.

8. After hearing the rival arguments tendered by the learned counsel for both the parties, we feel ourselves in full agreement with the contention raised by the learned A. R. We have gone through the law as well as judgments cited at the bar. It has not been provided anywhere‑that person holding foreign currency is under any legal obligation to disclose the name of the remitter of foreign currency. At this stage it would be appropriate to resort to section 5(1)(xv) of the Act which clearly provides that assets ‑brought or remitted are covered by the exemption clause. Obviously, Legislature also used the word brought alongwith the word remitted thus creating a distinction. It is not only when the foreign currency is remitted by someone else that it is covered by exemption clause but foreign currency brought into Pakistan also comes within the purview of section 5(1)(xv). Furthermore, law granting exemption is also to be seen in conjunction with the other laws enacted by the Government from time to time. In this regard section 5 of the Protection of Economic Reforms Act, 1992 is also very much relevant which provides that "all citizens of Pakistan, resident in Pakistan or outside Pakistan to hold foreign currency accounts; in Pakistan and all other person's who hold such account shall continue to enjoy immunity against any inquiry from the Income Tax Department or any other Taxation Authority as to source of financing of foreign currency accounts". Perusal of supra section of Protection of Economic Reforms Act, 1992 is unambiguous and has given absolute and complete immunity to the foreign currency holders irrespective of the fact that whether person was resident or non‑resident or without ascertaining the source of foreign currency.

9. In this view of the matter, we are constrained to observe that the learned I.A.C. was not within the domain of law while exercising his powers under section 17‑B of the Act, since neither the original‑order passed under section 16(3) was erroneous nor any prejudice caused to the Revenue. Hence, original order is restored and order passed under section 17‑B of the Act is hereby annulled.

10. Appeal of the assessee succeeds accordingly. C.M.A./631/(Trib.) Appeal succeeded.