1985 PLP 157 (PTD)

I.N. Pasha for Respondent. Date of hearing: 25th October, 1983. SALEEM AKHTAR, J.‑‑ By this judgment following Income‑tax References shall be disposed of: (1) I. T. R. Nos.565/72, 589/72, 590/72, 591172, 592/72, 593/72, 594/72, 596/72 relating to Ismail Adamji, the assessee in respect of assessment years 1962‑63, 1963‑64, 1964‑65, 1965‑66, 1966‑67, 1968‑69 and 1969‑70, respectively and (2) I.T.R. Nos.56i/72, 562/72, 563/72, 564/72 and 588/72 relating to assessee Mst. Zubaida wife of Ismail Adamjee. These matters have been taken together as the facts and the question of law raised therein are common. Mst. Zubaida Bai had constructed a bungalow on plot No.20‑4/B, P.E.C.H. Society, Karachi belonging to her with the funds advanced to her by her husband Ismail Adamjee, the respondent assessee. Up to April 1961 a total amount of Rs.70,000 was advanced as loan, thereafter on 4th December 1961 a gift of this amount was made by the assessee, to his wife in lieu of dower debt and for natural love and affection. In the Wealth Tax Return for the year 1962‑63 filed by the assessee the amount of Rs.70,000 was shown by him as a gift and not as a loan. The Income‑tax Officer did not accept that the amount in question was given to the wife as gift for adequate consideration, and therefore the income derived from this property was clubbed in the hands of the respondent. The appeal filed by the respondent was allowed by the Tribunal and it was held that the gift was made for adequate considera tion. In matters relating to Zubaida Bai during assessment year 1963‑64 to assessment year 1968‑69 when she filed the return, the Income‑tax Officer ordered that the income from the aforestated bungalow should be clubbed in the hands of the respondent. However, the Tribunal found it otherwise holding that gift of the amount was made to her for adequate consideration. In these circumstances the Department has filed application under section 66(1) raising the following questions: "(1) Whether in the facts and circumstances of the case the learned Income‑tax Appellate Tribunal was justified in holding that adequate consideration was available for the transfer, of money to the wife of assessee? (2) Whether in the facts and circumstances of the case the provisions of section 16(a) (iii) were attracted? (3) Whether the proviso to section 16(3) would have its application to gift made before 1‑7‑1964?" From the order of the Tribunal it is clear that the respondent had gifted Rs.70,000 to his wife Zubaida Bai from which she had constructed the house and that this gift was made in lieu of dower debt. Section 16(3A) reads as follows:‑ "In computing the total income of any individual for the purposes of assessment there shall be (a) So much of the income of the spouses or minor child or such individual as arises directly or indirectly, (i) ......... (ii).......... (iii) From the assets transferred directly or indirectly to be spouses otherwise than for adequate consideration or in connection with an agreement to live apart." The income of an spouse can be clubbed with the income of an individual provided that income is derived from the assets which have been transferred to the spouse without adequate consideration. Where the transfer has been made with adequate consideration, income from such assets in the hand of a spouse cannot be clubbed with the income of the individual transferor. Mr. Waheed Farooqui, the learned counsel for the department has contended that the gift has to be separately treated from transfer as contemplated by section 16(3‑A). He further contended that as the gift is not made for consideration, it should be excluded from the ambit of the word 'transfer'. We are unable to agree with the contentions of the learned counsel for the department. If a person gifts away his property to the donee he divests himself of its ownership and the same is vested in the donee. A gift is a proper, legal and valid mode of transfer of property, movable or immovable. In the present case, all along the respondent's case has been that the money had been first advanced to Zubaida Bai, and thereafter, it was gifted to her under a gift‑deed, which shows that it was made to Zubaida Bai on 14‑12‑1971 in lieu of dower debt. The learned Tribunal also found that "the building on plot No.20/4‑D, P.E.C.H.S., Karachi remains to be owned by Zubaida Bai and not her husband. This being the position, it cannot be said that any assets were transferred directly or indirectly to Mst. Zubaida by her husband or otherwise than for adequate consideration. The adequacy of consideration in the instant case may be sufficiently covered by the discharge of the dower debt by the husband to his wife." These facts have not been challenged by the department. Once a gift with adequate consideration is accepted the Department cannot club the income derived from the gifted property with that of the donor's income. The Tribunal on the material on record has found the gift for adequate consideration, and therefore, there is hardly any scope to challenge this finding. In this regard Mr. I.N. Pasha has referred to Gori Parshad Bagaria and others v. Commissioner of Income‑tax West Bengal (1961) 42 I T R

112. In that case while explaining a credit entry the assessee stated that it represented the sale‑proceeds of gold purchased in 1918 and kept in the family chest and was sold in the account year. The Income‑tax Officer rejected this explanation and treated it as income from undisclosed source. The Tribunal accepted this explanation in appeal but in Reference the High Court held that there was no material before the Tribunal for its finding. This judgment was challenged in the Supreme Court where appeal was allowed and it was observed as follows: "In our opinion, this was a perfectly simple case, in which a question of law hardly arose. The Tribunal had believed the assessee's word in view of his conduct and past history, such as they had been able to see. Where the assessee's statement is believed, there is obviously material on which the finding is based and to seek for other material is tantamount to saying that a statement made by an assessee is not material on which a finding can be given. In our opinion, the Tribunal having believed the assessee's statement, there was an end of the matter in so far as that fact was concerned, and if the finding was based upon a statement, which was good material on which it could be based, no question of law really arose. However, treating the question as one of law, the answer is irresistible that there was material, viz. the statement of the assessee believed by the Tribunal, on which the finding could be given." In the present case, the respondent had produced material on record, which has been accepted by the Tribunal. The learned Tribunal has also believed that there was a transfer in the shape of gift for valid and adequate consideration. Therefore, question No.l can hardly, arise out of the order of the Tribunal, but in any event treating the Question No.l as a question of law, on the assessment of the entire case our answer is in the affirmative. In view of this discussion our reply to the question No.2 is that provision of section 16(3‑A) (iii) was attracted and the income from the property gifted to the wife could not be clubbed with the respondents income. As regards question No.3 it has been held that the gift was made on 4‑12‑1961, therefore, the proviso added by Finance Act, 1964 to Section 16(3) will not apply to the present cases. M.A.K. Reference answered accordingly.