Last Updated: Monday May 21, 2007

Following letter was written to Central Board of Revenue to get the clarification on the levy of Capital Value Tax on Mortgage Deeds:---


 

Nasir Nazir Butt

Advocate High Court

Advocates & Solicitors

 

 

 

Phones: PABX: 0092-42-6280190-2

Telefax: 0092-42-6280187

Mobile: 0092-304-4076937

E-Mails: nnbutt2000@yahoo.com

nnbutt2000@hotmail.com

Web Site: www.nnbutt2000.0catch.com

Residence:

House No. 47-D/2, Islam Street No. 5

Karnal Pura, Shah Kamal

Near Mosque Aouqaf

LAHORE No. 16, Post Code No. 54600

Islamic Republic of Pakistan.

Office:

ASGHAR ALI & ASSOCIATES

22 First Floor, Sadiq Plaza

Shahrah-e-Quaid-e-Azam, The Mall

LAHORE

Islamic Republic of Pakistan.

 

Mr. Sajjad Ali

Secretary (IT Policy)

Pakistan Civil Secretariat

ISLAMABAD.

Phone No. 0092-51-9205561.

 

Ref. No.

NNB/LH-8/002

Date:

September 09, 2006

Subject: Clarification regarding Circular No. 2 of 2006, dated July 01, 2006 Levy of CVT.

Dear Sir MBjI "A NYi μ nA,

Please refer to your letter No. F.4(1)ITP/2006-CVT, dated Islamabad July 31, 2006, addressed to Mr. Haji Ahmad, on the subject matter.

I had submitted a Mortgage Deed duly executed in favour of Bank Alfalah Limited to DDO(R)/Sub-Registrar Nishter Town, Model Town Courts, Lahore, but he has put objection for the payment of CVT basing on the last paragraph of the letter referred above.

My query is that whether CVT is levied on Mortgage Deeds, if so, under which legislation? Can you furnish its copy? I shall be very thankful to you.

Kindly expedite the matter.

,MBjI "A NYi μ nA

Truly yours,

---sd---

Nasir Nazir Butt

c. c.: Mr. Haji Ahmad, Regional Commissioner of Income Tax, Eastern Region, Lahore for necessary information please.

 

Permanent Address: House No. 8, Street No. 1, Mohallah Karmabad, Post Office Rehman Pura, Lahore

No. 16, Post Code No. 54600.


Following reply has been received which is being reproduced for the benefit of lawyers practicing in corporate sector:---


GOVERNMENT OF PAKISTAN

REVENUE DIVISION

CENTRAL BOARD OF REVENUE

****

No.F.4(1)ITP/2006CVT Islamabad, September 15, 2006

Subject: CLARIFICATION REGARDING CIRCULAR NO.2 OF 2006 DATED JULY 1, 2006 LEVY OF CVT.

I am directed to refer to your letter No.NNB/LH-8/002, dated September 9, 2006 on the subject and to say that the issue as to whether CVT is leviable on mortgage deed has already been considered and was clarified via Boards letter of even number dated September 14, 2006 (Copy enclosed).

Enclosure: (as above)

 

 

---sd---

(Sajjad Ali)

Secretary (IT Policy)

Tel: 9205561

Mr. Nasir Nazir Butt

Advocate High Court

Asghar Ali & Associates

22 First Floor, Sadiq Plaza

Shahrah-e-Quaid-e-Azam, The Mall

Lahore.


GOVERNMENT OF PAKISTAN

REVENUE DIVISION

CENTRAL BOARD OF REVENUE

****

No.F.4(1)ITP/2006CVT Islamabad, September 14, 2006

To : Regional Commissioner of Income Tax

Central Region

Multan.

Subject: CLARIFICATION REGARDING CIRCULAR NO.2 OF 2006 DATED JULY 1, 2006 LEVY OF CAPITAL VALUE TAX (CVT).

I am directed to enclose copy of e-mail received from Bank Alfalah, Multan, wherein it has been brought to the knowledge of the Board that Registration authorities are demanding CVT on mortgage deeds executed by the banking companies without power of attorney.

The matter has been considered in the Board and it is clarified that registration of mortgage deed in favour of a Bank (without power of attorney) does not attract CVT. However, CVT will be charged at the time of actual transfer of asset, in case of default in loan repayment.

 

 

(Sajjad Ali)

Secretary (IT Policy)

Tel: 9205561

Copy for information to all Regional Commissioners of Income Tax and Director Generals of Large Taxpayers Units.

 

 

 

Secretary (IT Policy)


Letter above could not attract the action of Sub-Registrar Nishter Town, Lahore, without having the letter reproduced below, whereas the charge of CVT on Mortgage Deeds was unjustified and without any lawful authority and/or legislation.


Government of Pakistan

Central Board of Revenue

Department of Income Tax

20/09/2006

Deputy District Officer (Registration)

Nishter Town

Lahore.

 

SUBJECT: CHARGE OF CAPITAL VALUE TAX

Please refer to the above mentioned subject.

I am directed to enclose a copy of Central Board of Revenues letter No. F.4(1)ITP/2006-CVT, dated September 14, 2006 and to say that necessary action be taken in this regard.

 

-sd---

(FAROOQ AZMAT CHATHA)

Assistant Commissioner of Income Tax

Withholding/ Broadening of Tax Base.

 

Enclosure: (as above)


Capital Value Tax which has been paid is not refunded whereas it must be refunded without lodging its claim. It may be refunded to the respective local commissions.


Nasir Nazir Butt

Advocate High Court

Advocate & Solicitor

Mr. Sajjad Ali

Secretary (IT Policy)

Pakistan Civil Secretariat

ISLAMABAD.

Phone No. 0092-51-9205561.

 

Ref. No.

NNB/LH-8/004

Date:

February 02, 2007

Subject: Levy of CVT on Power of Attorney.

Dear Sir MBjI "A NYi μ nA,

Please recall the legislation and notifications on the levy of Capital Value Tax on Power of Attorney.

Registration Authorities are consistently demanding the payment of CVT on Power of Attorneys at the rate of 2% of DC Rate even where value is not recorded without annexing any support of law.

On the complaint to IT Authorities, they provide mere their indigestible thinking.

Also please let me know whether any authority in Pakistan except to National Assembly of Pakistan has right to levy tax? Or is there any authority except to higher/superior courts to interpret law? May any authority impose its thinking to general public except to express provisions of legislation?

Is there any legal document in English Language supporting the impugned contention of Registration Authorities, as stated earlier?

Kindly expedite the matter.

,MBjI "A NYi μ nA

Truly yours,

 

 

Nasir Nazir Butt

c. c.: 1. The Chairman, Central Board of Revenue, Islamabad.

2. The Member, Large Taxpayers Unit, Central Board of Revenue, Islamabad.

3. Mr. Haji Ahmad, Regional Commissioner of Income Tax, Eastern Region, Lahore.

4. Mr. Farooq Azmat Chatha, Assistant Commissioner of Income Tax, Y Block, Defence Housing Authority, Lahore.

 

Page No. 1 of 1

47-D/2, Islam St. 5, Karnal Pura, Shah Kamal, Near Mosque Aouqaf, Ichhra, LAHORE

(: 0333-4076420, 0321-4624078, 042-7553841

e-mail: nnbutt2000@yahoo.com Web: www.nnbutt2000.0ctch.com


Nasir Nazir Butt

Advocate High Court

Advocate & Solicitor

 

His Excellency

Mr. Pervaiz Musharraf

President

Islamic Republic of Pakistan

President House

ISLAMABAD.

Phone No. 0092-51-???.

 

Ref. No.

NNB/LH-8/019

Date:

March 17, 2007

Subject: Levy of Capital Value Tax on Power of Attorney.

Your Excellency MBjI "A NYi μ nA,

Please recall the legislation and notifications on the levy of Capital Value Tax on capital value of assets.

Section 7 of the Finance Act, 1990 (as amended from time to time) is reproduced:---

7. Levy of tax on Capital Value of certain things:- (1) A tax on the capital value of assets, to be called the capital value tax, shall be payable by every individual 1[, association of persons, firm or a company which] acquires by purchase 2[gift, exchange, 3[power of attorney,] surrender or relinquishment of rights by the owner (whether effected orally or by deed or obtained through court decree) except by inheritance, or gift from spouse, parents, grand parents, a brother and a sister] an asset or a right to the use thereof for more than twenty years, 4[ ] 5[or purchase of modaraba certificate or a registered instrument of redeemable capital as defined in the Companies Ordinance, 1984 (XLVII of 1984), or shares of a public company, listed on a registered stock exchange in Pakistan by a resident person defined in section 81 of the Income Tax Ordinance, 2001 (XLIX of 2001)] such as is specified in sub-section (2), 6[at the rates specified in that sub-section].

The language of the above section in English clearly states that Capital Value Tax is not applicable on Power of Attorney except where assets are acquired through it. Even then Capital Value Tax is not applicable on Power of Attorney but on the instrument by which assets are acquired/transferred such as Sale Deed, Gift Deed, Exchange Deed, Surrender Deed, or Relinquish Deed.

It is understood that Power of Attorney is not an acquisition of assets but mere delegation of power to sign some other instruments including transfer deeds.

Registration Authorities are consistently demanding not only the payment of Capital Value Tax on Power of Attorneys but at the rate of 2% of DC Rate even where value is not recorded, without annexing any support of law.

On the complaint to IT Authorities, they do not reply the pubic queries indispensably. Their replies are indigestible thinking thus not acceptable even to the person of common prudence.

Please take notice whether any authority in Pakistan except to National Assembly of Pakistan has right to levy tax? Or is there any authority except to higher/superior courts to interpret law? May any authority impose its thinking to general public except to express provisions of legislation? Central Board of Revenue has levied Capital Value Tax on Power of Attorneys without any lawful authority.

There is no any legal document in English Language supporting the impugned contention of Registration Authorities, as stated earlier.

In the light of above, you are therefore, requested to please bring us out of this dilemma taking measures to stop illegal practice of charge of Capital Value Tax on Power of Attorneys.

Also please note that what will ensue if it is presumed that Capital Value Tax has been levied on Power of Attorney? Following is notable:---

1.      It amounts Double Taxation, once at the time of execution of Power of Attorney which is merely delegation of authority and secondly at the time of an execution of conveyance deed.

2.      Levy of Capital Value Tax on Power of Attorney amounts taxation without transaction of conveyance.

3.      Definition of Urban Areas in Notifications is not in conformity of earth realities.

4.      Cultivation area is also included n the definition of Urban Area which is undesirable.

5.      Under the Notifications of Central Board of Revenue all the target deeds are conveyance deeds except to Power of Attorney.

6.      Power of Attorney is a deed, which can be revoked at any time on the behest of its Maker or Donor or Principal. What will be the status of Capital Value Tax when the same will be revoked? Therefore, s called, levy of Capital Value Tax on Power of Attorney is, in any way, unreasonable and inconsistent.

7.      Capital Value Tax is levied in the pretext of prevention of speculation of land so that its prices may be controlled. Power of Attorney is not subject mater of such contention of parliament. This contention was also expressed in News Clippings.

8.      Even it is presumed that Power of Attorney is transfer of property then Capital Value Tax may also be levied on Rent Deeds and Lease Deeds. It may also be extended on the Military Land in Cantonment Areas. Why these deeds and areas are excluded from the levy of Capital Value Tax?

Till now Registration Authorities have collected million of rupees on account of Capital Value Tax on Power of Attorneys. Central Board of Revenue is on the back of such Registration Authorities. They have caused huge financial loss to general public. Would you like to send Reference against these authorities on appropriate forum?

Kindly expedite the matter being Most Urgent having public interest.

,MBjI "A NYi μ nA

Truly yours,

 

Nasir Nazir Butt

c. c.:

1.      Mr. Sajjad Ali, Secretary (IT Policy), Constitution Avenue, Islamabad.

2.      The Chairman, Revenue Division, Central Board of Revenue, Constitution Avenue, Islamabad.

3.      The Member, Direct Taxes, Revenue Division, Central Board of Revenue, Constitution Avenue, Islamabad.

4.      Haji Ahmad, Regional Commissioner of Income Tax, Eastern Region, Lahore.

5.      Mr. Wajid Akram, Additional Commissioner, (H.QS-II), Regional Tax Office, 40 Lawrence Road, Lahore.

6.      Mr. Farooq Azmat Chatha, Assistant Commissioner of Income Tax, Y Block, Defence Housing Authority, Lahore for necessary information please.

Page No. 14 of 14

47-D/2, Islam St. 5, Karnal Pura, Shah Kamal, Near Mosque Aouqaf, Ichhra, LAHORE

(: 0333-4076420, 0321-4624078, 042-7553841

e-mail: nnbutt2000@yahoo.com Web: www.nnbutt2000.0ctch.com

Monday September 18, 2006

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