Capital value tax (CVT) has been imposed through section 7 of the Finance Act, 1989 which places the responsibility of collecting CVT on the registering or attesting authority at the time of registering or attesting the transfer.
Ordinarily, the title of immovable property is transferred through a registered document which is required to be registered with the Registrar of documents in terms of provisions of the Registration Act, 1908. In this case the authority to collect CVT vests with the registration authority i.e. the Registrar of Documents.
The Supreme Court through subject mentioned decision has discussed the liability to collect and pay CVT in the situation where properties are transferred privately without involving the registrar of documents. Such modes of transfers include issuance of transfer letters, allotment letters, agreements to sell and other similar documents which do not require registration.
The Supreme Court held that where sale of properties is made through agreement to sell and issuance of other related documents without involving the registrar of documents, it is obligation of the agency registering or attesting the transfer to collect the CVT and pay the same to the Federal Government.
“For the reasons enumerated above, we are in no manner of doubt that the sale, purchase, transfer and other similar transactions are undertaken between the petitioner-company which is the owner of the immovable assets and buyer in whose favour the transfer takes place, therefore, it is only logical that the petitioner should be obligated to collect CVT from the purchaser and deposit it with the Federal Government. Even otherwise, the petitioner squarely falls within the purview of sections 7(d) and (4) of the Act read with Rule 4 of Rules, 1990 cannot deny its liability by relying upon hyper technicalities and stratagems.”Unquote [Emphasis supplied]