P L D 1975 Karachi 370 (PLP)

NOORUL ARFIN, J. The Income‑tax Appellate Tribunal has stated the following question to the High Court under section 59‑A of the Estate Duty Act, 1950: Whether in the facts and circumstances of this case there was any material or evidence on the record to prove that the sum of Rs. 3,00,000.00 (Rupees three lacs) standing to the credit of (1) Ayoob Haji Omer and (2) Abdul Karim Haji Omer from before the death of Haji Omer in the firm of Ayoob Bros. and Rs. 50,000.00 in the names of Tar Muhammad Haji Omer and Salim Haji Omer each in Modern Textile Mills, belonged to deceased Haji Omer at the time of his death?

2. The question stated to the High Court arises on these facts: One Haji Kassim was partner in the firm known as "Haji Omer & Sons" along with his two sons and three other persons. Haji Kassim died on the 21st of September 1950. His eldest son, Sulaiman Haji Omer, being the countable person under the Estate Duty Act, 1950, filed a statement of assets and liabilities of his deceased father. In the course of the scrutiny of this statement, the Controller of Estate Duty learnt that two sons of the deceased were partners in a firm known as "Ayoob Bros.", in which they had invested Rs. 3,00,000.00 in equal proportion, and that these two sons had also invested Ltd. 1,00,000.00 in another firm called "Modern Textile Mills". again in equal shares. The firm of "Ayoob Bros." was set up on 1st June 1950, and the other firm, "Modern Textile Mills", on the 21st September 1950. It is the admitted position that the deceased, Haji Kassim was not a partner in either of these two firms. The Controller of Estate Duty held the amount of Rs. 4,00,000.00 to be the property of the deceased and also held this amount as his taxable asset which passed on to the accountable persons. Consequently, this sum was subjected to estate duty. The Controller, in coming to this conclusion, rejected the contention of the accountable persons, particularly the two sons of the deceased who were partners in the aforesaid two firms, that Haji Kassim had, in 1947, before the Partition of India, made a gift of Rs. 6,00,000.00 to his four sons, out of which Rs. 4,00,000.00 were gifted to the two sons, who had set up the firms of "Ayoob Bros." and "Modern Textile Mills". The accountable persons questioned the order of the Controller of Estate Duty in a direct appeal before the Income‑tax Appellate Tribunal. This appeal failed, as also an application for reference made under section 59‑A(l) of the Estate Duty Act, 1950. Consequently, the accountable persons made an application to the High Court under section 59‑A(2) of the Estate Duty Act, 1950, which was decided on 9th February 1967. The High Court, in its judgment, directed the Appellate Tribunal to state the aforesaid question of law to this Court along with the statement of facts and relevant documents.

3. We are, therefore, called upon to decide whether the Controller of Estate Duty acted correctly in treating the sum of Rs. 4,00,000.00 found in the books of "Ayoob Bros." and "Modern Textile Mills" to the credit of two of the sons of Haji Kassim, as part of the estate left by the deceased Haji Kassim. It may be noted here that these credits were not found in the names of the two accountable person in the books of the firm in which the deceased, Haji Kassim, himself was a partner, that is, "Haji Omer & Sons", but in the books of two other firms, "Ayoob Bros." and "Modern Textile Mills", with which the late Haji Kassim apparently had no connection. The Controller of Estate Duty treated this sum of Rs. 4,00,000.00 as part of the deceased's estate mainly due to the reason that he disbelieved the accountable persons' version that this amount represents as part of the gift of Rs. 6,00,000.00 made by the deceased in 1947 before the Partition of India, and, having disbelieved this version the Controller of Estate Duty, as also the Appellate Tribunal arrived at the inference that the sum of RS. 4,00,000.00 was held by the two accountable persons in the aforesaid two firms ay 'Benamidars' for the deceased Haji Kassim. The question is whether there was any material before the Controller of Estate Duty and the Appellate Tribunal to support this conclusion. In our view, the question stands concluded by the following finding of their Lordships of the High Court who decided the accountable persons' application under section 59‑A(2) of the Estate Duty Act, 1950: " . . It is an admitted position that there was no material on record for coming to conclusion that the amount of Rs. 4,00,000 belonged to the deceased. Apart from that, it is not disputed that the applicants were the partners in a firm known as Ayoob Brothers which had been registered with the Income‑tax authorities. This amount of Rs. 4,00,000 could very well have been the money, belonging to the applicants having accrued to them from the earning of the firm in some form or the other. At any rate, the fact that their explanation Was not accepted will not necessarily give rise to a presumption that the amount of Rs. 4,00,000.00 belonged to the deceased for which there was no material on record." We have not been referred to any material to show that this finding was not justifiable. In our respectful view, in the passage of their Lordships' judgment quoted above, the legal position on the question which is before us. has been correctly stated. We may, in this connection, refer to a decision of the High Court of Lahore, K. B. Sheikh Muhammad Naqi v. The Commis?sioner of Income‑tax; Punjab ((1945) 13 I T R 452), in which Din Muhammad and Sale, JJ., held that the onus in cases of the nature before us lies upon the Department, that is, it is for the Income‑tax Department, and, in this case, for the Controller of Estate Duty, to show that the ostensible owners of the sum of Rs. 4,00,000.00 were not the real owners. In stating this rule, their Lordships of the High Court of Lahore placed reliance on a decision of the Patna High Court, that is, Ramknikar Banerji v. The Commissioner of Income‑tax, Bihar & Orissa ((1936) 4 1 T R 108). In this case, the assessee, who had an interest in a colliery, paid a sum of about Rs. 15,353.00 as royalty to his wife who had acquired the interest of the superior landlord. The Income‑tax Authorities, however, refused to allow the assessee to deduct this amount from his income on the ground that there was no evidence to show that the rights of the superior landlord were acquired by the assessee's wife out of her own funds. The High Court of Patna held that, since the rights of the superior landlord ostensibly stood in the name of the assessee's wife, she must be taken to be the owner of it unless there was any evidence to show that she was `benamdari', and that there was no presumption that the property, standing in the name of a married Hindu lady, did, in fact, belong to her husband. The rule laid down in this case was followed in a later Patna decision, Sovaram Jokhiram v. The Commissioner of Income‑tax, Bihar & Orissa ((1944) 12 I T R 110). We may add that, in the Lahore decision, just referred to above, the Income‑tax Authorities attempted to bring within the assessee's assessment to income‑tax certain incomes which accrued from properties which stood in the names of his sons. Notwithstanding the finding that the sons had no substantial income of their own, and the assessee had admitted that he paid maintenance to his sons, still it was held that this would not necessarily militate against the possibility of the sons' acquiring property on their own account, and that, though `benami' transactions were common in the country, this practice alone should not be allowed to prejudice an ostensible owner without any evidence to establish that the real beneficiary was not he himself, but some other persons, and that this should be especially so in the case of Muhammadan families where an individual holds the property for himself and not for the family he represents. The learned counsel for the Revenue was unable to refer us to any decision where a view contrary to the view taken in the Lahore and Patna cases was adopted. In the case before us, admittedly the sum of Rs. 4,00,000.00 stood to the credit of the two accountable persons in two firms of which they were ostensible owners and with which the deceased, Haji Kassim, had no apparent connection. Even if the version of the accountable persons, that the sum of Rs. 4,00,000.00 represented part of the gift made by Haji Kassim in 1947, was disbelieved, this would not lead to the conclusion that this sum was part of the deceased's estate, and not the individual property of the accountable persons. In 18 coming to the conclusion that this sum was part of the deceased's estate, the Controller of Estate Duty as well as the Appellate Tribunal fell into error, in that they based their conclusions merely on surmises and inferences without any evidence or material to support these conclusions.

4. In view of what we have said, the question stated by the Appellate Tribunal, reproduced above, is answered in the negative. K. B. A. ?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? ?Reference answered