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Member's Assistance Committee
Mr. Haider Ali Patel (Convenor)
Mr. Abdul Qadir Memon
Mr. Waseem Hashmi
Mr. Ali A. Rahim
Mr. Arshad Siraj Memon
Ms. Yasmeen Ajani
Mr. Asif Ali Khan
Mr. Kazi Anwar Kamal
Mr. Rehan Siddiqui
Syed Hassan Naeem

A monthly publication of the Karachi Tax Bar Association covering information on recent important judicial pronouncements, circulars and clarificationss
NV # 1/2002 September/October, 2002

SYNOPSIS OF IMPORTANT CASE LAW
CITATION
SECTION
ISSUES INVOLVED
INCOME TAX
2002 PTD 2440 (H.C.)
2 & 3 of the Sales
Tax Act,1990
The Hon'ble High Court, after examining the provisions of Section 2 & 3 of the Sales Tax Act has held that the Sales-tax is not chargeable on the advances received by the petitioner without going into existence of the transaction of the sale. The Hon'ble High Court decided the issue and the petitions in the following manner:
   
1. The petitioners are liable to pay the sales tax under section 3 of the Sales Tax Act, 1990, on taxable supplies at the time when the transaction of supply takes place.
   
2. The transaction of supply shall come into existence when a contract of sale of goods comes into existence I.e. when the supplier transfers or agrees to transfer the specified goods to the buyer or a lease or other disposition of goods in furtherance of the business if carried out for consideration or the other conditions prescribed in section 2(33) of the Sales Tax Act, 1990 are satisfied.
   
3. Where a transaction of supply takes place under a contract of sale, meaning thereby, transfer of goods from supplier to buyer or where an agreement to sell takes place meaning thereby, that the transfer of goods is to take place at a future time, the sales tax shall be charged on the happening of any of the following events:-

(a) When a delivery of goods is made; or
(b) The price is paid in full.

   
4. If after coming into existence of the transaction of sale, as explained above any part payment is received by the supplier from the buyer, the supplier shall be liable to account for the part payment in the return of tax for that tax period and the sales tax shall be charged accordingly.
   
5. If no transaction of supply has taken place and the supplier has received any advances or deposits from the buyers, such advances/deposits are not liable to the charge of sale tax. However, as soon as a contract of sale or agreement to sell is executed with the stipulation of adjustment of full or part payment from the advances/deposits, the said adjustment in full or in part shall be deemed to be in pursuance of the transaction of supply and such amount shall immediately become liable to the imposition of sales tax.
   
6. Whether the deposits/advances received by the petitioners were in pursuance of any transaction of supply or were mere advances/ deposits in pursuance of any Dealership Agreement or any Agency Agreement or any other arrangement, is a question of fact. We would not like to give any finding on this question of fact and the concerned tax officials shall decided such question of facts, after obtaining necessary particulars and giving opportunity of being heard to the petitioners and shall decide the question of chargebility to sales tax or otherwise of the advances/deposits in the light of findings.

2002 PTD 2457 (H.C.)
7 of the Sales Tax
Act, 1990
In this case question in respect of claim of refund of Sales-tax on the basis of invoices came before the Hon'ble High Court of Sindh and the Hon'ble High Court after examining the provisions of Section 7 of the Sales Tax Act held that the provision contained in subsection (2) of section 7 is mandatory in nature. Subsection (2) of section 7 is couched in negative language and specifically prescribes that registered person shall not be entitled to deduct Input tax from output tax unless he holds a tax invoice. It has been held that therefore, subsection (2) of section 7 prescribes a particular manner of claiming deduction/adjustment/refund and on plain reading of the provision, it is abundantly clear that the non-compliance disentitles a registered person from deducting input tax from output tax. It has been further observed that on plain reading of the above provision further shows that, the conditions precedent for claiming deduction etc. of input tax is that the claimant should hold a tax invoice, meaning thereby that, he should be in possession of the tax invoice. The invoice has been defined in section 2(40) to mean, a document required to be issued under section 23. The definition is conclusive meaning thereby that no other document can be treated as a tax invoice. It is admitted position that under Section 23, a tax invoice should contain name, address and registration number of the recipient. It is further admitted proposition that under second proviso to section 23(1) not more than one tax invoice shall be issued for taxable supply.
2002 PTD 2694 FTO  
Delay in rectification and issuance of refund held to be without reasonable cause and due to negligence of the department, therefore falls under maladministration.
WEALTH TAX
2002 86 TAX 165 (H.C.)
17B
The Hon'ble High Court has held that powers contained in Section 17-B of the Wealth Tax Act, 1963 was to take effect from 1st July, 1992 and, therefore, the IAC had the power under Section 17-B only for assessment year 1992-93 onwards.
2002 PTD (Trib) 2370
2
In this case argument was that assessee Company. has given the building on lease as such they were not taxable under the Wealth-tax Act. The Hon'ble Tribunal after examining the meaning of the terms "lease" and "rent" held that both the terms are interchangeable and falls within the definition of the term "let out". Thus Company was chargeable to Wealth-tax.
2002 PTD (Trib).2390
Rule 8(3)
Wealth Tax
Valuation of godown by bank for loan purposes adopted for wealth tax purposes - Tribunal held that neither the value of godown can 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, because wealth tax law prescribed it`s own method of valuation which is binding on the assessing officers
2002 PTD (Trib) 2695
35 of the Wealth Tax
Proceedings under Section 35 of the Wealth-tax Act initiated on the recommendation of the audit party held to be illegal and approved by the Hon'ble Tribunal.
2002 PTD (Trib) 2413
2
Wealth-tax - Exemption of assets and cash credit out of foreign remittance from Wealth-tax under Clause 7(I) read with 7(ii) of the Second Schedule. The Hon'ble Tribunal, after examining the statutory provisions has held that exemption would be available on the basis of valuation date. In the instant case, the assess received foreign remittance on 29.12.1992 and relevant valuation date for the assessment of his assets fall on 30.6.1993 so the first year of exemption for his remittances under Clause 7(I) would be assessment year 1993-94 and, therefore, the exemption would be available for the following 5-year upto the assessment year 1998-99.
2002 PTD (Trib) 2528
2
After examining the statutory provisions of Wealth Tax it has been held that Trust cannot be treated as Company for the Wealth Tax purposes.
2002 PTD (Trib) 2512
14,17
In this case important question of jurisdiction arose before the learned Tribunal, assessee company had filed return of Wealth Tax in compliance of notice u/s 14 and challenge was made that correct procedure was to issue notice u/s 17. Various issues arose which were formulated by the learned Tribunal which has been answered after examine plethora of case laws cited by the appellant's counsel. The question and their answers are briefly given below.
   
1. Whether the provisions of section 14(2) of the Wealth Tax Act 1963 are similar to the provisions of section 56 of the Income Tax Ordinance, 1979?

Conclusion: The provisions of section 14(2) of the Act are materially different from the provisions of section 56 of the Income Tax Ordinance, 1979.

   
2. Whether can section 14(2) of the Act and section 17 of the Act simultaneously give jurisdiction to the assessing officer?

Conclusion: Assumption of jurisdiction in different periods of times is subject matter of two different provisions of law. During the relevant financial year proceedings for procuring the return are to be taken under section 14(2) and after end of the assessment year the jurisdiction can be assumed only under section 17. There is no concept of having concurrent/simultaneous jurisdiction under both the provisions of law viz. 14(2) and 17 of the Act.

   
3. Can assessment proceedings be initiated by issuing notice under section 14(2) beyond the relevant assessment year?

Conclusion. The assessment proceedings cannot be initiated beyond the assessment year by issuing a notice under section 14(2) of the Wealth Tax Act, 1963.

   
4. Whether assuming jurisdiction under a provision other than the legal provision of law is a technical mistake which need not be looked into by the appellate courts?

Conclusion: Assuming jurisdiction under other than the legal provision is not a procedural mistake and being fatel to the whole proceedings cannot be ignored by the appellate authorities.

   
5. Can the assessee challenge the jurisdiction after filing the return in response to an invalid notice?
   
Conclusion: It is also the right of the appellant to be treated in accordance with law without any discrimination. For argument's sake if it is considered that on the basis of submission of his return on receipt of an invalid notice, the proceedings cannot be challenged then would amount to discrimination against the person who submits return vis-a-vis a person who does not submit a return in response to an valid notice.
    6. Can an order passed without validly assuming jurisdiction stand the test of appeal?
   
Conclusion: Even consent of the assessee can not give jurisdiction to an authority which is not legally vested with the jurisdiction. When there is no jurisdiction or no valid jurisdiction with an authority the orders passed in these circumstances are void and nullity in the eyes of law. Waiver even where both the sides had agreed to waive a portion of a statutory provisions, cannot confer jurisdiction which according to statute is not there.
   
7. Is an assessee entitled to call in question the jurisdiction of the wealth tax authority after he has made the return of net wealth, notwithstanding the provisions of sub-section (5) of section 10 of the Act?
   
Conclusion: It may be stated that the assessing authority has jurisdiction over the case in two ways, firstly as officer incharge over the area or cases and secondly by exercising the statutory powers for assessment. Sub-section (5) of section 10, included in the Chapter-III (Wealth tax Authorities) pertains to assignment of administrative jurisdiction to an assessing officer by his superior authorities. This means the jurisdiction assigned generally to a circle in the field pertaining to the area or persons as prescribed in clause (c) of sub-section (1) of section 10. Once an assessee files a return in a Circle, he cannot challenge that this circle does not have jurisdiction over his case. So far as the exercise of legal jurisdiction for assessment proceedings is concerned, this is the foundation of the legal orders and therefore, can be challenged at any stage because it goes to the very root of the assessment order.
2002 PTD (Trib) 2292
17-B

In this case the Hon'ble Tribunal after examining the facts of the case held that action of Section 17B was not sustainable in law . It has been held that agreement to sale though was registered but would not be considered equivalent to a registered deed which transfers the title of property from seller to purchaser and without which a mutation of Revenue record could not take place. Agreement to sale could not confer any right on the assessee and he could not be considered to be full owner of the property. Mere possession of property declaration by the assessee in his Wealth Tax return was not sufficient to bring the property within the definition of net wealth has defined in section 2(6).

2002 86 Tax 165 (H.C.)

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