MUHAMMAD HAMEED vs DISTRICT OFFICER (REVENUE), LAHORE and another

ORDER

NASIM SIKANDAR, J.---By way of section 7 (Levy of tax on Capital Value of certain assets) of the Finance Act, 1989, (V of 1989), a tax on the capital value of assets, to be called the Capital Value Tax was levied. It was payable by every individual who acquired by purchase an asset or a right to use thereof for more than twenty years. Subsection (2) of section 7 detailed the assets referred to in subsection (1) thereof. Through section 15 of the Finance Act, 2006 (III of 2006) subsection (1) and subsection (2) of said section 7 of Finance Act, 1989 (V of 1989) were amended in the following manner:--- "15. Amendment of Act of 1989.--The following further amendments shall be made in Finance Act, 1989 (V of 1989),namely:--- In section 7,---

(1) in subsection (1),---

(a) before the word "surrender", the words and comma "power of attorney" shall be inserted; and

(b) the words and comma "or purchase of air ticket" shall be omitted.

(c) in the Explanation to clause (i) after paragraph (d), the following shall be added, namely:-- "(e) "urban area" means area falling within the limits of:--

(i) the Islamabad Capital Territory;

(ii) a cantonment board; or

(iii) a municipal body;

(iv) in case of Karachi up to 40 kilometers from the outer limit of municipal or cantonment limit;

(v) in case of Lahore and Faisalabad up to 30 kilometers from the outer limit of Municipal or cantonment limits;

(vi) in other cases, up to 10 kilometers from the outer limits of municipal bodies or cantonment boards; and

(vii) includes area defined as such in the Urban Immovable Property Tax Act, 1958 (W.P. Act V of 1958) and such areas as the Central Board of Revenue, may for time to time, by notification in the official Gazette, specify.

(2) in subsection (2),--

(a) after paragraph (C), the following new paragraph shall be inserted, namely:-- "(CA)

(a) immovable property, (other than commercial property and residential flats), situated in urban area, measuring at least one Kanal or 500 square yards whichever is less.

(1) Where the value of immovable property is recorded. 2% of the recorded value

(ii) Where the value of immovable property is not recorded Rs,50 per square yard of the landed area;

(b) Commercial immovable property of any size situated in urban area.

(i) Where the value of immovable property is recorded. 2% of the recorded value

(ii) Where the value of immovable property is not recorded. 50% per square yard of the landed area;

(c) Residential flats with covered area measuring 1500 Sq. Feet and above.

(i) Where the value of immovable property is recorded. 2% of the recorded value

(ii) Where the value of immovable property is not recorded. 50% per square yard of the landed area;

(3) paragraph (D) shall be omitted; and

(4) in paragraph (E), for the figure "0.01", the figure "0.02" shall be substituted."

The Finance Act 2006 and all amendments made through it were, unless otherwise provided, to come into force on 1st day of July, 2006.

2. The petitioner claims to have purchased 5 Marlas commercial plot at Timber Market, Lahore for a total consideration of Rs,35,00,000. The sale deed was scribed on 14-6-2006 on a stamp paper which was earlier purchased on 13-6-2006. It was completed and presented before respondent No,2, the Sub-Registrar, Ravi. Town, Lahore on 15-6-2006. At the request of the parties a Local Commission was appointed by the respondent No,2 on 15-6-2006.The Local Commissioner got the execution completed by obtaining the signatures and thumb-impressions of the parties to this transaction as well as the witnesses on 23-6-2006. According 'to the petitioner the Local.

Commissioner submitted the completed sale-deed in the office of respondent No,2 on 24-6- 2006.However, allegedly the respondent No,2 subsequently refused to accept that document for registration on the ground of non-payment of the Capital Value Tax. It is the case of the petitioner that the execution of the demand having been completed and the document having been presented for registration on 24-6-2006 it was not subject to levy of Capital Value Tax which came into force on 1st day of July, 2006.

3. The respondents in their reply have admitted that the Local Commissioner re-submitted the sale deed on 24-6-2006 for recording of an endorsement/certificate for registration under, section 60 of the Registration Act. However, according to them "as it was not supported with any documentary proof of ownership, therefore, the document was deferred under Rule 137 of the Punjab Registration Rules, 1929 to make up the FLAW. In the meantime the Central Finance Act, 2006 came into existence through which the Central Board of Revenue levied, Capital Value Tax on any transaction since 1-7-2006". It has, however, been admitted in the reply that "as the transaction of this document had been completed prior to 30-6-2006, therefore, the matter was referred to the learned District Officer (Revenue), Lahore vide Memorandum No, DDO(RT)-279, dated 12-8-2006 with the request that the Chief Inspector of Stamps, Board of Revenue, Punjab, may kindly be asked to intimate about reference already made to him whether. The CVT is chargeable on such documents or these may be delivered after recording the number of registration, thereon". Lastly, that "on reference a meeting held on 28-8-2006 express the view that all documents endorsed/registered on or after 1-7-2006 were liable to CVT under Notification No,4(16)ITP/2006

(CVT) dated 29-6-2006 issued by the Federal Government".

4. After hearing the learned counsel for the petitioner, learned Assistant Advocate-General and the Deputy District Officer (Revenue) in person I am inclined to allow the prayer made in this petition which in extenso reads as under:-- "It is, therefore, respectfully prayed that the demand of Capital Value Tax on a deed which had been duly presented within time may be declared to be without lawful authority, illegal and an abuse of authority on the part of the respondents with the result that the refusal to endorse the sale-deed is also without lawful authority and respondent No,2 may be directed to endorse/register the document as it is without further loss of time"

5. Following are my reasons:-- First, the document admittedly having been re-submitted on 24-6-2006 the transaction was complete both in fact as well as in law. The endorsement/registration by the respondent No,2 was only a ministerial act which he was required under the law to make immediately. The alleged deferring of registration of document under rule 137 of the Registration Rules, 1929 was both factually as well as legally un-justified. In the first place the Registration Act does not empower the respondent No,2 to probe into the ownership of the property which is subject matter of a sale transaction. Even if for arguments sake it was so, the alleged probing or verification of ownership was to be made before asking the seller to put his signatures to authenticate the transaction both directly or through a Local Commissioner. I do not entertain any doubt in my mind that the aforesaid reason of lack of "documentary proof of ownership" has been coined only and is clearly an afterthought in order to explain the inefficiency and delay in authentication/registration of the deed by the respondent No,2. It needs to be mentioned that no notice or any other document has been brought on record to support the contention that the petitioner as purchaser or the seller were ever required to prove the ownership or as the respondents have liked it to describe "to make up the FLAW". The alleged flaw referred to in their reply remains the delay on the part of the office of the respondent No,2 to issue a certificate of registration. The petitioner as purchaser therefore, cannot be held responsible for non-registration of the document deforest of July, 2006. And, Second, the interpretation of the said notification alleged to have been issued by the Federal Government as made in the meeting of all Sub-Registrars of Lahore presided over by District Officer (Revenue) Lahore on 28-8-2006 is too pedantic to be endorsed. There view as reproduced above at the end of para.3 that the CVT was applicable on all documents endorsed/registered on or after 1-7-2006 partly amounted to make the levy retrospective in its effect. Section 7 of the Finance Act, 1989 by which the levy was originally made expressly states that it shall be payable "by every individual who acquires by purchase an asset or a right to the use thereof for more than twenty years "This provision does not speak of the date of generation but the acquisition of an asset by purchase or a right to use thereof for more than twenty years. In other words it is the date and time of purchase or acquisition of the said right which provides for the falling of levy and not the day or date of its registration under the Registration Act. A sale transaction in case it is brought into in black and white is complete when it is confirmed by the parties. In this case the transaction was completed when the seller put his signatures and thumb-impressions on the document in the presence of witnesses as also the Local Commissioner appointed by respondent No,2. The seller having accepted the receipt of consideration the purchase or acquisition of title by the petitioner as purchaser was complete. Since the amendment in section 7 of the Finance Act, 1989 by way of section 15 of B the Finance Act, 2006 providing for levy on such like transactions came into effect on 1-7-2006, it was a past and closed transaction as far the levy was concerned. It could not be brought to the levy merely for the reasons that its registration, for any reason whatsoever took place or was to be made after 1-7-2006. The petitioner having presented the document well before the date of levy viz. 1-7-2006 he cannot be held responsible for its non-registration. Therefore, for the same token the impugned levy cannot fall upon him.

6. In terms of the prayer.