1989 PLP 1044 (PTD)

TANZIL-UR-REHMAN, J.--Brief facts, as stated in the petition, are that the petitioner is a company limited by shares and registered under the Companies Act, 1930. The petitioner owns a building known as Gadiali Building, which is held as an investment. The income from the building was taxed as an income from property under section 9 of the Income-tax Act, 1922 at the relevant time and now it is taxed as income from property under section 19 of the Income tax Ordinance, 1979. Respondent No.2 (The Wealth Tax Officer, Special Officer Circle, Karachi) finalized wealth-tax assessment for three years i.e. 1980-81, 1981 82 and 1982-83 holding that the business of construction for sale or letting out has been carried on and passed an order dated 14-6-1981. The order of respondent No.2 was confined by respondent No.l (the Commissioner of Income-tax (Appeals) Zone-V, Karachi) in appeal filed by the petitioner, by his order dated 19-7-1984. The petitioner has now filed the above petition under Article 9 of the Provisional Constitution Order of 1981 read with the Constitution of Pakistan, 1973.

2. Mr. Nasimuddin Khan, learned counsel for the appellant submits that the petitioner has been wrongly held to be carrying on, the business of construction and sale, or letting out of the immovable property. On the other hand, Mr. Waheed Farooqi, learned counsel for the respondents submits that it is a question of fact which cannot be enquired into by this Court under its Constitutional jurisdiction.

3. It is apparent that the respondents have based their findings on the Memorandum and Article of Associations of the petitioner company which, inter alia, also provide for carrying, out the business of construction of properties for sale, and letting out, and (ii) the profit and loss account furnished by the petitioner for the assessment years 1980-81 and 1981-82 indicates that the petitioner has also declared income from contract services and property profit Reliance has also been placed by respondent No.1 on a decision of this Court reported as B.P. Biscuit Factory Ltd. v. W.T.O. 11 Circle, Karachi and others 1981 P T D 217 wherein it was held that in such a situation the assessee was liable to wealth-tax. Learned counsel for the petitioner has produced a certified copy of the judgment dated 19-1-1979 (so far unreported) of the Hon'ble Supreme court in Civil Appeal K-140 of 1981 B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer and another, whereby the appeal against the judgment of this Court, referred to above, was allowed and notice and the assessment made upon the appellants, in the said case, were declared as passed without lawful authority and of no legal effect. The case before the Hon'ble Supreme Court seems to be distinguishable inasmuch as in that case, as stated in the last para of the judgment; "it is not the case of the Department that the immovable properties of the appellants brought to tax were being held for the purpose of business of construction and letting out." However, the analysis of the relevant provision of Section 2 of Ordinance II of 1980, as amended, is of great value to the case before us. Let us, in the first instance, reproduce the relevant portion of clause (c) of Section 2 which reads as under:

"assets" includes-- ... .. (ii) in, the case of a firm, an association of persons or a body of individuals, whether incorporated or not, and a company, immovable property held for the purpose of the business of construction and sale; or letting out, of property." Interpreting the above provision of law, the Honourable Supreme Court observed that-- The definition does not seem to be very happily worded. It can be interpreted as referring to three different categories of immovable properties, to wit - (i) immovable property held for the purpose of ..letting - out of property, (ii) immovable property held for the purpose of business of letting out of property, and (iii) immovable property held for the purpose of business of construction and sale or business of construction and sale or business of construction and letting out, of property. There is a slight difference between properties falling in categories (i) and (ii), thus the property of an assessee who carries on business of letting out its properties will fall in category No. (ii) whereas the property of an assessee who occasionally leases out the space not immediately needed by him will fall in category No. (i). The last category, that is, category No. (iii) relates to the properties of those assessees who are engaged in the business of construction of properties for the purpose either of sale or of letting out. Now, the definition as it stands worded can refer to any one of these categories."

4. The learned respondents have relied on the Memorandum and Article of Associations, which include the business of construction of property for sale, or letting out. Mere mention of it as one of the aims and objects of the formation of the company in the memorandum and articles of association of the petitioner company will not furnish a ground for assessing the company to wealth tax under section 2 (e) of the Ordinance II of 1980, as amended. A company, at the time of incorporation, may include hundred and one objects for its formation but for the purpose of taxation it is to be examined whether a certain particular object is being carried on or not. Such purpose, therefore, by itself will not suffice for the purpose of taxation. 4-A. The learned Appellate Authority has, however, relied on the fact that the petitioner has also declared income from contract services and "property profit" which indicate that there seems to be some business of the construction for the purpose of sale, or letting out. The learned counsel for the petitioner has not adverted at all to this aspect of the matter.

5. We, therefore, are of the view that the said question is a question of fact which lies within the domain of the Income-tax Authorities and the question not being a question of jurisdictional fact cannot be inquired into by us under our Constitutional jurisdictions. Reliance is placed by us on Naved Taxtile Mills Ltd. v. Collector of Customs (Appraising) P L D 1985 S C 92.

6. We, therefore, find no force in the petition and the same is dismissed with costs. MA.K./H-175/K Petition dismissed.