Wealth Tax

Only those persons are granted exemption who arc firstly chargeable to tax and no one can be granted an exemption unless the legislature intends it so by clear and unambiguous direction.

If one is in a position to satisfy with clarity that the provision has come out to redress an injury or to cure a disease or to provide remedy to an unjust situation it has to be applied retrospectively

Remedy can be by way of a notification, by legislation or through an administrative order but it .has to be for the purpose of redressing some grief or a situation which is patently unjust.

Principles.

General character of the land, has to determine whether it is agricultural or not, and the actual use to which it is put at a particular point of time is of importance only, insofar as it throws light on the general nature or character of land

­Capacity of the land for being put to agricultural use must be. regarded as the sole exclusive test for deciding the general nature or character of land namely whether it is "agricultural" or not.

Appellate Assistant Commissioner directing Wealth Tax Officer to refer matter to Valuation Officer and adopt Valuation Officer's Report

Questions whether such reference would be valid, whether report of Valuation Officer is not binding on Wealth tax Officer and whether Wealth Tax Officer bound to adopt Valuation Officer's Report

Are questions of law

Indian Wealth Tax Act, 1957, Ss. 16-A & 27

[CWT v. A.A. Patel (1990) 181 ITR 543 reversed].

Assessee reduced the losses of retention money and income tax refund which were not refundable from total value of equity of company while calculating break-up value of shares

Assessing Officer rejected such contention and computed the break-up value of shares as per balance-sheet

First Appellate, Authority considering the history of the case and other parallel case directed the Assessing Officer to adopt the value of shares at cost value declared by the assessee

Validity

Shares of a private company were to be valued at break-up value, as shown by the balance-sheet, or at the face value whichever was higher

Total worth of the Company should not be reduced by some amounts which had not been recovered or were not considered recoverable as the Company itself had not recognized such amount as charges in its balance-sheet

If such claim of the assessee was accepted then the balance-sheet of the company had to be rejected as false and that would attract actions under the Company law against the assessee and also "the management as well as the Auditors of the Company

Value assessed by the Assessing Officer was restored by the-Appellate Tribunal.

Principles of res judicata would not apply to the income tax/wealth tax proceedings because each year was a separate assessable entity.

If the Assessing Officer had given a finding of fact about the assessee's nature of activity during the income-tax assessment proceedings, even then it will not be applicable to wealth tax assessment proceedings-Both Income Tax Act and Wealth Tax Act were independent enactments or statutes and although both the statutes were administered by one tax machinery but both have got different temperaments and different modes of operation

Finding of fact under one statute did not bind the Tax Administering Authority to apply it to the other statute also.

Period of five years was prescribed for the finalization of assessment.

Remand order generally does not operate to the prejudice of revenue.

Value of the property in question having been assessed at Rs.8 lacs in 1990-91 value determined for the year 1991-92 at Rs.12 lacs and in the year 1992-93 at Rs.15 lacs was excessive and contrary to the history

Assessing Officer was directed to adopt the value of the said property at Rs.9 lacs and Rs.10 lacs respectively for the years under consideration by the Appellate Tribunal.

Legal issue, which goes to the root of the assessment, can be raised even at any stage of apex Court of Pakistan.

Indian Wealth Tax Act, 1957, S.5(1)(i).

Granted certificate under S.80G of Income Tax Act as established for charitable purposes and under S.10(23) that its income was exempt

Not assessable entity under Wealth Tax Act

Notice to bring to tax wealth escaping assessment

Invalid

Wealth Tax Act, 1957, Ss.3, ,5(1)(i) & 17

Indian Income Tax Act, 1961, Ss.10(23) & 80G

BombaY Public Trusts Act, 1950.

Assessee had received securities from the tenants which were refundable to the tenants when they vacated assessee's premises

Agreement with the tenants and rent deeds had been produced Wherein the amounts of securities received had been mentioned separately from the rent with clear commitment that the same would be refunded to the tenants when the tenants vacated the property

Nature of refundable securities being quite different from the "unadjusted advance rent", both could not be treated alike and disallowed

Assessee's appeal was accepted and claim of refundable amount of securities was allowed as an admissible liability by the Appellate Tribunal.

Cancellation of an assessment cannot be approved if the same was cancelled on the basis of a judgment, which was subsequent to the date of framing of the assessment order.

Neither the value of assessee's godown could be assessed on the basis of bank report nor it could be estimated in accordance with the history of the case without any cogent reason.

"Lease" means a contract authorizing the use and possession of land and/or building for a fixed time and for specified rent or fee to rent a building or property by contract for a fixed time and rental

" Rent" means compensation, fee or payment made at intervals to the owner of ' a property by the tenant or user

Rent, as term of economics means the return from agricultural land in excess of production costs or revenue or yield from land as production factor

Rent also means to let on lease, to be leased or let for rent

No difference between 'rent' and "lease" as both the terms are interchangeable.

Concept of reserve being applicable to companies only, expression has to be understood in its ordinary meaning, which would govern through construction for the purposes of both the enactments, the Income Tax Ordinance, 1979 and the Companies Ordinance, 1984

Reserve

Surplus

Distinction

Reserve was an appropriation of profits, the asset or assets by which it represented being retained to form part of the capital employed in the business

Definition of "reserve" was negative in form and not exhaustive in the sense that it only specified certain amount which were not to be included in the term "reserve"

If retention of appropriation of sum was not a provision, i.e. it was not designed to improve depreciation, renewal or diminution in the value of asset or any notional liability the same was not necessarily a "reserve"

Question whether a particular amount could be called "reserve" or not will have to be decided by having regard to the true picture and character of the sum appropriated.

Assessee had not only been afforded proper opportunity of hearing but his views and explanations had also been specifically considered and discussed on each issue involved in the assessment-Assessment order passed was a speaking order and every issue involved had been properly discussed

No complaint could be entertained from the assessee regarding lack of opportunity of being heard in the circumstances.

If a person had already been divested of his title in the property, the property could not be considered to be belonging to him.

Person can be treated as an owner of a property even though he has no- possession over it provided other incidents of ownership are complete i.e. title etc.

Land declared as agricultural land was in the process of conversion into `Sikni'land and it had to be surveyed and demarcated

Assessing Officer, in view of the entries in Form VII of Sindh Revenue Department, observed that the land had been converted into non-agricultural land vide order, dated 18-7-1995 passed by the Mukhtiarkar, Central Karachi and valued the plots at Collector's rate

First Appellate Authority deleted the addition observing that estimated value of agricultural land at Collector's rate was illegal

Validity

Assessing Officer failed to distinguish the term "Sikni" and "residential"

Revenue Authorities could convert agricultural land into "Sikni" but have no powers to convert the "Sikni" land as "residential", "commercial" or "industrial"

Entries in record of rights/Form VII or Form II were simply recorded for the purposes of maintaining a record and would not be sufficient to declare or change in the status or nature of land as residential

Payment for conversion of land had been made on 17-7-1997 in the head "outer development charges of land" which showed that till that time process was incomplete

Appellate Tribunal maintained the order of the First Appellate Authority which had deleted the addition made on account of valuation of land at Collector's rate.

Appellate. Tribunal fixed the value at Rs. 30,000 per Marla and rate of construction at Rs. 65 per sq. ft. in circumstances.

Indian Wealth Tax Act, 1957, Ss.7 & 27.

Indian Wealth Tax Act, 1957, Ss. 18(1)(a) & 27.

Indian Wealth Tax Act, Rule, 1957, R.1D.

Indian Wealth Tax Act, 1957, R.1 D, Expln. 11 & (ii)(e).

[C.W.T. v. Prince Muffakkam Jah Bahadur (1990) 186 ITR 421 reversed].

[CWT v. S. Jindal (1992) 194 ITR 539 reversed].

Indian Wealth Tax Rules, 1957, R.1 BB.

Object of trust was utilisation of trust income outside India and order of City Civil Court could not alter that position

Situs of property held under trust is irrelevant but what is relevant for granting exemption is that public purpose of charitable or religious nature should be in India-Trust was not entitled to exemption

Indian Wealth Tax Act, 1957, S.5(1)(i).

Indian Wealth Tax Act, 1957, Ss. 18. & 27.

Indian Wealth Tax Act, 1957, S.27.

Indian Income Tax Act, 1961, S.32, Sched. IX, Entry No. 21.

Reassessment proceedings cannot be initiated so long as assessment proceedings are not terminated-Application for refund by trust alongwith return

Trust claiming refund o basis of tax ducted at source

ITO making a note that question of giving credit for tax deducted at source could be considered in case of beneficiaries and that question of refunding additional surcharge would have to be considered

Note was inconclusive and it was not also communicated trust

Assessment proceedings had not been terminated

Reassessment proceedings could not be initiated

Indian Income Tax Act, 1961, Ss. 143 147 & 237

[CIT v. Trustees of H.E.H. The Nizam's Second Supplement Family Trust (1985) 151 ITR 562 reversed].

Burden on Revenue to prove that valuation was not correct and that market value exceeded it by more than twenty per cent.

Burden of .proof not discharged by Revenue

Tribunal was justified in holding that R.2B(2) was not applicable

No question of law arose from its order

Indian Wealth Tax Act, 1957, Ss.7 & 27

Indian Wealth Tax Rules, 1957, R.2B.

Constitution of India, Art. 226.

Tribunal was justified in allowing Revenue to raise question whether property in question consisted of one or two houses and remanding matter

Indian Wealth Tax Act, 1957, S.24.

Constitution of India, Art.226.

Indian Wealth Tax Act, 1957.

Indian Wealth Tax Act, 1957, S.7(l).

Indian Wealth Tax Rules, 1957, R.1D.

Indian Wealth Tax Act, 1957, S.17.

Tribunal correct in holding that partner was entitled to exemption in respect of his share in firm in respect of property owned by firm

No question of law arose

Indian Wealth Tax Act, 1957, Ss.5(1)(iv) & 27.

Indian Wealth Tax Act, 1957, S.27.

Valuation made for earlier valuation date could not ipso facto be applied for valuation for later years.

Indian Wealth Tax Rules, 1957, R.1 D.

Indian Wealth Tax Act, 1957, S. 5(1)(i).

Indian Wealth Tax Act, 1957, S.5(lA).