2005 PLP (Trib (PTD)

1998‑99 14,141,520 14,141,520 23,641,520

3. The learned CIT(A) dismissed all the three appeals through consolidated order. The ratio thereof stood as under;‑‑ "The perusal of the record shows that assessee having rented out property was under legal obligation to file return of their wealth as an AOP. Since returns were not furnished, statutory notices were issued and served on the appellant through TCS. However, no compliance was made Final Notices along with letters were also served, for compliance on 25‑6‑2002. These notices were also not responded by the appellant. The learned Assessing Officer after recording this fact vide order sheet entry, dated 25‑6‑2002 reserved the case for orders. Afterwards orders were passed on 30‑6‑2002 under section 16(5). Thus grounds on this issue fails. Contractors relates to situation where notices sent through R/Post for 2‑2‑71 were returned back undelivered with remarks "refusal to take delivery" and assessment were completed on 15‑12‑

71. In the instant case process sent through post was not returned back as its delivers was obviously not refused. In the case of CIT v. M .B Engineering (1975) 32 Tax 219 on the contrary it was held that, statutory notices of hearing and for production of accounts issued and served for a date specified in the notices‑Assessee defaulting, on the date of hearing‑Factum of default brought oil record, ex parte assessment on a date subsequent to the date on hearing without issue of fresh notices whether proper and valid‑Held yes. In the instant case factum of default was brought on record as discussed above, therefore, assessments framed subsequent to date of hearing i.e. on 30‑6‑2002 are valid. The number of opportunities provided working of proposed total wealth amply proves that assessments were framed by the Revenue after observing due process of law. "

4. Heard the learned representatives of the two parties, at length. It is vehemently argued that after service of notices under section 17 and reminder for compliance on 24‑6‑2002 the ex parte orders have been finalized under section 16(5)/17 of the Wealth Tax Act, 1963 for all the three years, but without considering the factual position of the case that "appellant is an AOP deriving income from rent of Messrs Jamalistan Shopping Center, the assessment has been finalized after number of days after the date of alleged default which is contrary to law because the Assessing Officer can not pass ex parte order after the date of alleged default reasonable opportunity has not been provided and assessee was not confronted with working and alleged computation. "It is added that the learned CIT(A) was not justified in confirming the order including the hire charges of Neon Sign Boards at Rs.9,50,000 in the rental value of the property for the purpose of valuation of the property as this amount does not fall within the ambit of annual rental value of the property.

5. So far as ex parte decision is concerned we find that from the beginning factum of intentional default is apparent and, there appears gross negligence on the part of the assessee, assessee has not denied the service of notices and also does not possess any reason for not filing the return of wealth in time and thereafter proper service of notices in this context, hence ex parte decision correctly recorded in the matters does not warrant interference.

6. Next argument pertains to delay in assessment order which has been passed on 30‑6‑2002 instead of 25‑6‑2002. The learned CIT(A) has rejected version of the assessee for the reason that vide order sheet, dated 25‑6‑2002 the case was reserved for order and finally passed on 3‑6‑ 2002 under section 16(5) of the Ordinance. The learned CIT(A) has also recorded sufficient reasons in this context which appears to be reasonable, hence appeal on this vary ground does not warrant interference.

7. The learned counsel for the assessee however during the course of argument stressed on further argument that the words "Association of Persons" or body of individuals whether incorporated or not have been inserted by Finance Act, 1997. Earlier these were omitted by Finance Act, 1996, therefore, as per Finance Act, 1996 promulgated on July, 1, 1996 the applicant was not liable to charge of wealth tax and was under no legal obligation to furnish wealth tax return, counsel advancing his version further stressed that he was not liable to charge of wealth tax if it is taken that the amendment brought up through Finance Act, 1996 is applicable in financial year, 1996‑97 and in the alternate it shall not be applicable in the financial year, 1997‑98 in case it is presumed that the words "Association of Persons" were omitted by Finance Act, 1996 shall be applicable in the assessment year, 1997‑

98. In view of the settled law in this context, we are of the considered opinion that the Finance Act, 1996 omitting the words "Association of Persons" from section 3 of the Wealth Tax Act is in respect of income year, 1996‑97 as such the appellant shall not be liable for furnishing wealth tax return for the assessment year 1997‑

98. It is worth mentioning that in the absence of specific directions regarding application of the amended provision in Finance Act, 1996, amendment would affect the assessment year 1997‑

98. In consequence of the discussion, appeal for the assessment year, 1997‑98 stands allowed as appellant would not be chargeable vide section 3 of the Wealth Tax Act (XV of 1963) for the assessment year, 1997‑98.

8. The next argument vehemently pressed in regarding inclusion of the higher charges of Neon Sign Boards in the annual rental value for the purpose of valuation of the property which is now subject‑matter of two appeals only pertaining to the assessment years, 1996‑97 and 1998‑

99. It is argued that hire charges cannot be included in the annual rental value and thus liable to be excluded while computing the annual rental value for the purpose of valuation of the property. The hoarding has been installed at the roof of the building namely Jamalistan Shopping Center. The assessee is admittedly collecting hire charges at Rs.9,50,000 per year which has been included in the rental value of the property for the valuation thereof. It is worth‑mentioning that the roof has been rented out for installation of the hoarding through separate and independent rent agreement executed between the assessee and owner of the Neon Sign Boards.

9. According to Rule 8(3) of the Wealth Tax Rules the value of the building is estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for the similar property whereas gross rental value is also one of the criteria for determining the value of any building which means the sum for which the property might reasonable expected to let from year to year and in case the situation of property is such that its roof can be utilized for fixation hoarding/Neon Sign Boards then it shall reasonably be let out at a better rate than the property situated in the same locality, thus inclusion of the rent of the hoarding/Neon Sign Board would not be possible, however before arriving at a final conclusion it would be necessary to discuss in detail other important factors.

10. In this context the C.B.R.'s Circular Letter C. 14(7)/17‑6/WT‑79, dated August 21, 1979 is important, hence reproduced hereunder: "The value of houses which are let out shall normally be determined by capitalizing the gross annual rental value for ten years. Fixtures like fans; heaters, geysers; water pumps and cooking ranges etc. shall be considered as part of the house and any rent house. If the owner is charging separate rent for furnishings such as carpets, furniture, allocable separately to such fixtures shall be taken as a part of the gross annual rent of the, curtains, etc, a deduction up to 25% of total gross rental‑gross rent of the house and its fixtures plus refit of furnishings shall be allowed and balance rent shall be capitalized for ten years to determine the value of the property."

11. This circular has been withdrawn resulting in withdrawal of the benefit of deduction at 25% after withdrawal of the benefit above, the situation will be reversed, and, the total GARV of both the rent of the premises as well as rent for fixtures will be taken into consideration meaning thereby that rent of premises as well as rent of fixtures should be taken into consideration into valuing the immovable properties under Rule 8(3) of the Wealth Tax Act, 1963 on the basis of GARV. Before parting with this issue we would like to refer the relevant sections of the Sindh Rented Premises Ordinance, 1979 West Pakistan Urban Rent Restriction Ordinance now Repealed which is as under:-- The Sindh Rented, Premises Ordinance defines the term "building" vide section 2(a) as under:‑‑ "Building" means any building or part thereof together with all fittings and fixtures therein if any ..................... The word "building" as defined above connotes any building or part thereof together all fittings and fixtures if any." In addition to this West Pakistan Urban Rent Restriction Ordinance (Now (repealed) define "building" vide section 2(a) the same is reproduced hereunder:‑‑ 2"(a) "Building" means any building or part of a building let for any purpose, whether being actually used for that purpose or not, including any land, godowns, outhouses, together with furniture let therewith ."

12. All the enactments referred above, give the expression "building" of specific connotation and visualizes full of the building let out for any purpose and includes fittings and fixtures let therewith or separately through independent Agreement. As a result thereof we, find that while working the total GARV of the property the rent of the building and fixtures should be taken into consideration. Consequently the order below does not warrant interference in this context.

13. Appeals pertaining to assessment years 1996‑97 and 1998‑99 are accordingly dismissed. C.M.A./306/Tax (Trib.) Appeal dismissed.