Lt. Col. (Retd). AMANULLAH KHAN and another vs PAKISTAN and others
The petitioners, a husband and wife who are both independent assessees, challenged the Wealth Tax Officer's decision to club their separately owned properties for wealth tax assessment purposes. The authorities relied on the Explanation to Section 2(m) of the Wealth Tax Act, 1963, which deems immovable property owned by a spouse to belong to the assessee. The petitioners contended that this provision does not authorize the clubbing of income or assets of two independently earning spouses and argued that such interpretation is repugnant to the charging provisions of Section 3 of the Act. Furthermore, they challenged the valuation methodology applied to their properties. The High Court had previously dismissed their constitutional petition on the ground that it was premature as no final order had been passed. Upon petition for leave to appeal, the Supreme Court observed that the case involved substantial questions of law regarding statutory interpretation and the validity of the clubbing provisions. Consequently, the Court granted leave to appeal and ordered that further wealth tax proceedings against the petitioners be held in abeyance pending the final decision.
- Does the Explanation to Section 2(m) of the Wealth Tax Act 1963 authorize the clubbing of assets owned by two independently earning spouses?
- Is the clubbing of properties under the definition clause of the Wealth Tax Act 1963 repugnant to the charging provisions of Section 3 of the Act?
- Can a constitutional petition be dismissed as premature when it raises substantial questions of law regarding statutory interpretation, despite the existence of alternate remedies?
- Section 2(m), Wealth Tax Act 1963
- Section 3, Wealth Tax Act 1963
1. ' ABDUL KADIR SHAIKH, J.-- The two petitioners who are husband and wife are officers of the Armed Forces of Pakistan and arc independent assessecs in respect of their income from salary and other sources. In 1978, each constructed a separate house being No,32/B/II and 32/B/I, situated on Circular Road, Defence Housing Society, Karachi. According to petitioners, each property having been constructed at the cost of about 3.5 lakhs falls within the limit of Rs,5 lakhs under the Wealth Tax Act, 1963 and both cannot be clubbed together under the provisions of Exception 1 to section 2
(m) of the Act.
2. ' Petitioners raised these pleas in an application addressed to the Wealth Tax Officer, Karachi who however rejected it under letter dated 30-12-1984 on the ground that the valuation of the properties for the purposes of wealth tax is to be 10 times of the gross annual rental value which was determined at Rs,72,000 and Rs,51,000 respectively. As regards the clubbing of the properties learned Wealth Tax Officer referred to Explanation to clause (m) of section 2 of the Act whereby any immovable property, other than agricultural land, owned by the spouse or any minor child of the assesse is deemed to belong to the assesse. The Wealth Tax Officer therefore called up the first petitioner to revise his wealth tax return and declare his immovable wealth and that of his minor child with his immovable property. Petitioners made a representation to the Commissioner of Wealth Tax, Southern Zone, Karachi, but it was also rejected for the aforesaid reasons.
3. ' Thereupon, petitioners sought relief in a petition under the constitutional jurisdiction of the Sind High Court, but it was dismissed by the judgment dated 23-5-1984 on the ground that since no final order was passed and only an opinion was expressed by the Wealth Tax Officer the petition was premature.
4. ' Mr. Mansoor Ahmed Khan, learned counsel appearing in support of this petition for leave to appeal firstly referred us to the definition of 'Net wealth" under clause (m) of section 2 which reads as follows:- 2.(m) "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owned by the assessee on the valuation date other than--
(i) debts which under section 6 are not to be taken into account; and
(ii) debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth-tax is not payable under this Act; ' Explanation--For the purposes of this clause,--
(i) any immovable property, other than agricultural land, owned by the spouse or any (minor) child of the assessee shall be deemed to belong to the assessee: ' Provided that any immovable property so deemed to belong to the assessee shall not be included in the net wealth of spouse or (minor) child of the assessee;
(ii) "assessee" shall be the spouse determined by the Wealth Tax Officer; and
(iii) where the right, title or interest to or in any immovable property other than agricultural land vests in more than one person, such person shall, in respect of such property, be assessed as an association of persons and the value of such right, title or interest shall not be included in the net wealth of an individual provided wealth-tax is charged on such right, title or interest;"
5. Learned counsel then referred to the charging provision which is contained in section 3 which reads as follows:
3. Charge of wealth-tax--Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of July 1963, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family, firm, association of persons or body of individuals, whether incorporated or not, and company at the rate or rates specified in the Schedule.
6. ' Learned counsel submitted that the explanation appended to definition of net wealth in clause
(m) of section 2 of the Wealth Tax Act does not purport to club two independent earning spouses.
7. Learned counsel further submitted that the clubbing of the properties under the definition clause is repugnant to the charging section 3 and is therefore ultra vires. As regards the evaluation of the property learned counsel submitted that the Act does not envisage evaluation which is in excess of what was invested unless the investment is realised.
8. ' Learned counsel then submitted that since the case involves no factual controversy and the question raised only relates to interpretation of statutes, the petition should not have been dismissed on the ground that alternate remedies were open to the petitioners. In this behalf, he relied on decisions of this Court in Usmania Glass Sheet Factory v. Sales Tax Officer (PLD 1971 SC 205); The Burmah Oil Co. Ltd. v. Trustees of the Port of Chittagong (PLD 1962 SC 113); Pakistan v.
9. Ziauddin (PLD 1962 SC 440 Nagina Silk Mills v. Income Tax Officer and (PLD 1968 SC 131).
10. ' Since questions of substantial legal importance likely to affect large number of cases have been raised leave to appeal is granted. Security Rs,2,500.
11. ' Appeal to be heard on the present record; parties are, however, at liberty to file additional documents, if any Further proceedings in respect of wealth tax against the petitioners shall be held in abeyance till this appeal is decided. .