MUHAMMAD SAJID MEHMOOD SETHI, J. Through instant petition, petitioner has assailed noting / observation / order dated 26.04.2019, passed by respondent No.4/Inspector, Land Revenue, Regional Tax Office, Tehsil and District Jaranwala, whereby it was noted that withholding tax under Section 236C of the Income Tax Ordinance, 2001 is applicable on an inheritance within three years from the date of mutation.
2. Brief facts of the case are that petitioner's father Mukhtar Ahmad was owner of agricultural land bearing Khewat No.182, Khatooni Nos.453 to 455 situated at Chak No.105-GB, Tehsil and District Jaranwala through inheritance from his predecessor. After his death on 22.08.2013, petitioner being legal heir of deceased, inherited the said property and mutation No.3035 was incorporated in revenue record on 02.01.2019. He sold out land measuring 04-Kanal 09-Marta to one Abid Hussain in lieu of consideration amount of Rs.6,47,000/- on 02.04.2019, however, upon presentation of same before respondent-authorities for the purpose of registration in their record, as required under Registration Act, 1908 along with stamp papers, registration fee and ownership documents i.e. Record of Rights, respondent No.4 / Inspector, Land Revenue, Regional Tax Office, Tehsil and District Jaranwala, vide observation dated 26.04.2019, noted as under:- "With Holding Tax under section 236-C is applicable on an inheritance within three years from the date of mutation."
The petitioner has assailed aforesaid noting / observation / order through instant petition.
3. Learned counsel for petitioner submits that the levy of withholding tax / advance tax as provided under Section 236C of the Ordinance of 2001 is not applicable to the persons inheriting property being legal heirs of deceased. He argues that impugned observation having been passed without any lawful justification, is unsustainable in the eye of law. In support, he referred to Zohra Bibi and another v. Haji Sultan Mahmood and others (2018 SCMR 762) and Haji Muhammad Hanif v.
Muhammad Ibrahim and others (2005 MLD 1).
4. Conversely, learned Law Officers as well as Legal Advisor for respondent-FBR defend the impugned observation. Learned Legal Advisor contends that petitioner is the seller of property in question which is confirmed by the sale deed. He adds that according to the revenue record, land was transferred in the name of petitioner on 02.01.2019 through Mutation No.3035 and later on it was sold vide sale deed registered on 02.04.2019 i.e. only three months after mutation in the name of petitioner, whereas exemption of advance tax was beyond a period of three years in view of subsection (3) of Section 236C of the Ordinance of 2001. He maintains that even petitioner is liable to pay 10% Capital Gains Tax as he is selling the property after holding, it for a period under one year as per section 37 of the Ordinance ibid.
5. Arguments heard. Available record perused.
6. In order to better appreciate the controversy involved in case, it would be advantageous to reproduce Section 236C of Ordinance of 2001, which is as follows:- "236C. Advance Tax on sale or transfer of immovable Property.----(1) Any person responsible for registering recording or attesting transfer of any immovable property shall at the time of registering recording or attesting the transfer shall collect from the seller or transferor advance tax at the rate specified in Division X of Part IV of the First Schedule.
Provided that this subsection shall not apply to a seller, being the dependent of a Shaheed belonging to Pakistan Armed Forces or a person who dies while in the service of the Pakistan Armed Forces or the service of Federal or Provincial Government, in respect of first sale of immovable property acquired from or allotted by the Federal Government or Provincial Government or any authority duly certified by the official allotment authority, and the property acquired or allotted is in recognition of or for services rendered by the Shaheed or the person who dies in service.
Provided further that if the seller or transferor is a non-resident individual holding Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) or Computerized National ID Card
(CNIC) who had acquired the said immovable property through a Foreign Currency Value Account
(FCVA) or NRP Rupee Value Account (NRVA) maintained with authorized banks in Pakistan under the foreign exchange regulations issued by the State Bank of Pakistan, the tax collected under this section from such persons shall be final discharge of tax liability in lieu of capital gains taxable under section 37 earned by the seller or transferor from the property so disposed of.
Explanation, ---For removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society public and private real estate projects registered/governed under any law, joint ventures, private commercial concerns and registrar of properties.
(2) The Advance tax collected under subsection (1) shall be adjustable.
Provided that where immovable property referred to in subsection (1) is acquired and disposed of within the same tax year, the tax collected under this section shall be minimum tax.
(3) Advance tax under subsection (1) shall not be collected if the immovable property is held for a period exceeding four years.
7. Perusal of record shows that clauses 2 and 3 supra are liable to be read jointly which deal with the situation where the person acquired property and disposed of the same. Clause 2 provides one year period and clause 3 provides three years and after amendment, five years for payment of advance tax at the time of sale or transfer of immovable property. The word 'acquire' has been used for application of advance tax, which means to get or obtain.
8. It is pertinent to mention here that inheritance of a person opens the moment he dies and all the legal heirs become owners to the extent of their respective shares there and then. Sanction of inheritance mutation and issuance of succession certificate etc. are procedural matters regulated by the procedural laws just to make the records in order and also for fiscal purposes, as rightly ruled by the Hon'ble Supreme Court in Zohra Bibi's case supra.
9. It is a proposition too well-established by now that as soon as someone who owns some property, dies, the succession to his property opens and the property gets automatically and immediately vested in the heirs and the said vesting was not dependent upon any intervention or any act on the part of the Revenue Authorities or any other State agencies. It is also an established proposition that a mutation did not confer on anyone any-right in any property as the Revenue Record was maintained only for realization of land revenue and did not, by itself confer any title on anyone. It may also be added that efflux of time did not extinguish any rights of inheritance because on the death of an owner of property, all the co-inheritors, immediately and automatically, became co-sharers in the property.
Succession to the property of porosities becomes a fait accompli immediately after his demise. It, thus, does not need the intervention of any of the functionaries of the Revenue Department and remains as such irrespective of what Patwari, Girdawar and Revenue Officer enter in the mutation sanctioned in this behalf. Needless to reiterate that devolution of inheritance is automatic and the co-heirs become co-sharers, the moment inheritance opens. Even the entry of mutation etc. is also not necessary. Reliance is placed upon Ghulam Ali and 2 others v. Mst. Ghulam Sarwar Naqvi (PLD 1990 Supreme Court 1), Mst. Reshman Bibi v. Amir and others (2004 SCMR 392) and Mahmood Shah v. Syed Khalid Hussain Shah and others (2015 SCMR 869). In this regard, it can safely be said that by means of inheritance, transfer of property cannot be labeled as acquisition.
In this regard, the provisions of Section 236C clauses 2 and 3 are not applicable in matters relating to inheritance.
10. In this backdrop, upon the death of deceased Mukhtar Ahmad on 22.08.2013, petitioner became owner of the property by operation of Islamic Personal Law. It has no relation with the incorporation of mutation, therefore, counting period of three or five years for the purpose of advance tax as per provisions of Section 236C of the Ordinance of 2001 would start from the date of deceased and not from the date of mutation i.e. 02.01.2019.
11. In view of the above discussion, this petition is allowed and impugned noting / observation / order is set aside being illegal and without lawful authority.