2005 PLP (Trib (PTD)

IMAM ELLAHI SHEIKH (CHAIRMAN).

This departmental appeal is directed against a wealth tax assessee and arises out of an order, dated 28-10-2003 recorded by the learned CWT(A)-II, Islamabad on the following solitary ground: "That the CIT (Appeals) was not justified to allow the credit of CVT for the assessment year, 1997-98 as the CVT was allowable against wealth tax demand on the basis of the Finance Act of 1997 which was promulgated after 30th June, 1997 and that subsection (5) of section 7 of CVT Act substituted through it was applicable for the times after 30th June, 1997 i.e. assessment year, 1998-99.

2. The relevant facts in brief are that the assessee is an AOP and its net wealth was assessed at Rs.5,930,360 giving rise to a demand of tax of Rs.159,185 Such assessment was set aside by the First Appellate Authority vide an order, dated 5-12-1998 with the directions to the Assessing Officer "to allow the credit of CVT against the wealth tax demand in accordance with the provisions of law and after verification of CVT paid" The Assessing Officer in the re-assessment proceedings advised the assessee that the payment of CVT was a final discharge of A liability and no credit could be allowed. The payment of CVT could also not be verified from the Director, EM-II, CDA. Hence the Assessing Officer included that the CVT was not adjustable against the wealth tax demand for the assessment year, 1997-98 and refused to allow the credit. The learned CWT(A) accepted the assessee's argument that the first appellate authority had ordered to allow the CVT vide order, dated 5-12-1998 and he directed the Assessing Officer to allow CVT in the light of the directions contained in the appellate order after due verification.

3. The parties have been heard and the relevant orders perused. Capital Value Tax was introduced by section 7 of the Finance Act, 1989. By such provisions, the registration authorities etc. were required to collect tax on registration/acquisition of vehicles and other property etc. The rates were given in subsection (2)(ii) of the same section

7. Subsection (5) of section 7 provided that these provisions were not to apply to certain classes of assessees borne on National Tax Register of Income Tax Department as assessee as defined under Income Tax Ordinance, 1979. However, this subsection (5) was substituted by the Finance Act, 1997 to read as follows:-- "(5) The amount, of capital value tax paid by an individual, association of persons, from or a company, borne on National Tax Number Register of the wealth tax department shall be adjustable towards the wealth tax payable by such NTN holder for the assessment year corresponding to the financial year ending on the thirtieth day of June in which tax was paid and the two immediately succeeding assessment years, if any." The learned DR has strongly argued that the provisions of new subsection (5) of section 7 of the Finance Act, 1989 were to apply in the "coming years, i.e.', the financial year starting from 1st July, 1997 and that this provision could not be applied to the assessment year, 1997-98 in which year an assessee registered with a National Tax Number was not required to pay any CVT. The learned AR on the other hand submitted that the provision has to be applied to the assessment year, 1997-98. The learned AR was asked to explain as to why the payment of CVT was made in the income year under consideration when it was not required to be paid by a person registered with a National Tax Number. No satisfactory explanation was available to this question. We also find that the name and NTN of the assessee is not consistent in the various orders of income-tax and wealth tax. In the impugned order of the learned CWT(A) dated 28-10-2003, the name of the assessee has been given as Messrs Sharik Internal with NTN/GIR No.18-4-S-70 whereas in the impugned assessment order, the name is given as Mr. Sharik Muhammad Karim although the NTN is the same as given by the learned CWT(A). In the income-tax proceedings, the assessee is described as Messrs Sharik International with NTN 18-4-S-70. Regardless of these technical flaws, we are inclined to accept the arguments of the learned DR that the tax paid by the assessee as CVT is not adjustable as no tax was payable in the period prior to 1-7-1997. Also in the first order, the learned CWT(A) had directed to allow adjustment of tax in accordance with the provision of law after verification. In the absence of fulfillment of these conditions, the learned CWT(A) was not-justified to allow the credit of CVT. Hence the appeal is accepted and the treatment given by the Assessing Officer is restored.

4. As a result, the order of the learned CWT(A) stands vacated. H.B.T./329/Tax (Trib.) Appeal accepted.