1981 PTD (Trib (PLP)

Date of hearing : 26th October 1980. This is the appeal of an assessee relating to assessment year 1972‑

73. The only question involved in this appal is as to whether the income from property can be clubbed with the income from business of the assessee.

2. The brief facts of the case are that the assessee is a partner of a firm in which he had 25 % share. Up to the assessment year 1968‑69 the assessee also declared income from property in Market. However, for the year 1969‑70 onwards he did not declare property income on the ground that he had gifted the property to his wife in lieu of dower. In the years under consideration the I. T. O. made addition of income from property at Rs. 7,310 in the following words :‑ "The assessee has not disclosed any income from property. For the year under review, this is taken at Rs. 7,310 as least year. Full facts of the case have already been discussed in the body of assessment order for 1969‑70 assessment year."

3. The A. R. pointed out that the appals were filed before the Tribunal for the years 1968‑69 to 1971‑72 where the Tribunal discussed this question which is agitated in the preset appeal. However the Tribunal maintained the orders of the Income‑tax Officer. A copy of the order of the Tribunal has also been produced by the learned A. R. The learned authorised Representative contended that the Tribunal has in the earlier years failed to take into consideration certain provisions of law and therefore the principle of stare decises has no application. I had the benefit of reading the order of the Tribunal passed for the earlier years by a Single Bench of the Tribunal. Before discussing the case it would be convenient to narrate the facts of this case. A plot of land was allotted to the assessee by the Lahore Improve ment Trust sometimes in 1951 and the land purchase agreement was registered with the assessee on 26‑4‑1954. A building was constructed over this plot by the assessee. Subsequently the assessee made an application to the Lahore Improvement Trust informing that the aforesaid plot beating No. 4‑C, S. . . . Market, had been gifted by him to his wife in lieu of. Haq Mehar. The Lahore Improvement Trust accepting the request of the assessee vide its letter dated 3‑9‑1965 informed Mst. A. . . . Jan the wife of the assessee, that her name had been put in the Trust record as bargainer of the said plot. She was also informed in the same letter that she would abide, by all the terms and conditions laid down in the Lease Purchase Agreement registered with her husband on 26‑4‑1954. It also appears that subsequently a sale -deed was also executed by the Lahore Improvement Trust in favour of Mst. A. . . Jan on 20‑7‑1970. In the Excise and Taxation record also the name of Mst. A, . . . Jan was entered and she had been paying the taxes in regard to the property as owner of the property. The assessee also made a declaration before a Magistrate in which it was stated that he had gifted the aforesaid plot to his wife Mst. A. . . . Jan in lieu of Haq Mehar and the gift was also accepted before the Magistrate by the donee. The assessing authorities in the earlier years as well as m the assessment year under consideration rejected the claim of the assessee on the ground that a valid gift had not been made in favour of assessee's wife because (i) it was for inadequate consideration inas much as the value of the building was about Rs. 2,50,000 while Haq Mehar was Rs. 40,000; (ii) since it was gift Hiba‑Bil‑Awdz it amounted to sale and therefore required registration, and (W) in any case the gift was for the plot and not for the building. The Tribunal also held that under section 16(3)(iii) of the Income‑tax Act, while computing the income of the assessee the income from assets transferred directly or indirectly to the spouse otherwise than for adequate consideration, is to be included. The A. R. however contended before me that all the reasons advanced by the Assessing Officer as well as by the Tribunal were against law. It was further contended that the Tribunal has failed to take into consideration the proviso added to section 16 (3) by the Finance Act of 1964 wherein it has been stated that nothing contained in subsections (W) and (iv) of clauses (a) and (b) would apply to any income from assets transferred by an assessee by way of gift. I am inclined to agree with the learned A. R. The proviso to section 16(3) excludes the transfer of assets made by way of gift. Therefore so far as section 16(3) is concerned that has no application in the facts and circumstances of this case if it could be shown that a valid gift had been made by the assessee in favour of his wife. So far as Hiba‑Bil‑Awaz is concerned the earlier view was that it was nothing but a sale and therefore registration was required where the transfer of immovable property is of the value of Rs. 100 and upwards. However in Bashir Ahmad v. Zebeda Khatoon (1926 A O 186) and Abdul Hamid v. Abdul Ghani ((1934) 148 I C 801) the Chief Court of Oudh held that where a Muhammedan husband transfers the property to his wife in lieu of dower the transaction is not a sale. In the case of Dana Miah Choudhury v. Ganga Chandra De (P L D 1955 Dacca 77) it was held that a gift in lieu of dower is Biba‑Bii‑Awaz and delivery of possession is not essential. In another case of Allah Jawai v. Allah Ditta (P L D 1975 Lah. 1399) it was held that gift of property made by a Muhammadan husband to his wife amounts to Hiba‑Bil‑Awaz and it does not require to be effected through registered instrument. In view of these authorities, notwithstanding the fact that the gift made by the assessee was in the nature of Hiba‑Bil‑Awaz it did not require registration. Mere declaration by the assessee and acceptance by the donee was sufficient for making a valid gift. As regards the adequacy of consideration in the leading case of Rani Khajoorun Nessa v. Roshan Jahan ((1876) 1 Cal. 184=1871 Lah. 3 In App. 291) the Privy Council held "Undoubtedly the adequacy of the consideration is not the question. A consideration may be perfectly valid which is wholly inadequate in amount when compared with the thing given". Some of the cases have gone so far as to say that even a gift of ring may be sufficient consideration; but whatever it amount, it must be actually and bona fide paid". In the letter case the Privy Council has held that even a copy of Qur'an Abbas Ali v. Katim Bux ((1909) 13 C W N 150=4 I C 466). was held to be a good consideration for Hiba‑Bil‑Awaz, In another case Jarafat Mandal v. Kamrezban Bibi ((1955) 1 Cal. 144) even a Jai Namaz and Tasbi was held to be good consideration for Hiba‑Bil‑Awaz. It is therefore, obvious that adequacy or otherwise of the consideration has no relevancy for the validity of Hiba‑Bil‑Awaz. Mere fact that the value of the property was much higher than the dower debt could not invalidate the gift made by the assessee if otherwise valid. Now I come to the evidence which has beeh brought by the assessee in support of his contention. The assessee has produced his declaration of gift and its acceptance by the donee which were made before the Magistrate. Since the delivery of possession was not required in this case as the property had been rented out and the gift was in favour of wife, and all the three ingredients of a valid gift having been complied with there was no room for doubting the factum of gift. In addition to this the assessee did all what he could do to transfer the property in the name of his wife. He informed the Lahore Improvement Trust and the latter not only recorded the name of the donee in its record but subsequently made all dealings with her and ultimately executed a sale‑deed in her favour. Therefore as far as the plot of land was concerned there could be no doubt that the title was transferred in the name of the donee, and the Department could not challenge the validity of transfer made by the Lahore Improvement Trust in favour of the assessee's wife. Now remains the question as to whether the superstructure on the plot was also gifted by the assessee. It is true that in the declaration made before the Magistrate by the assessee as well as in the correspondence with Lahore Improvement Trust plot has been mentioned. However the Lahore Improvement Trust was concerned only with the plot as it had made agreement in regard to plot alone and had no connection with the super structure over the plot. One factor which goes in favour of the assessee is the fact that in the Excise and Taxation record ownership is shown as that of the assessee's wife and it is she who had been paying taxes of the Govern ment. Therefore the presumption is that the plot along with superstructure had been gifted by the assessee to his wife. There is no evidence to the contrary that notwithstanding the transfer of plot by way of gift the assessee retained the superstructure in his own possession and ownership and it cannot be said that the assessee is owner of the superstructure and the income property is to be taken as his.

4. For the foregoing reasons I would hold that the assessee had transferred the property in question validly to his wife and the income there from was the income of the assessee's wife which could not be included in assessee's income. It may not be out of place to mention here that assessee's wife Mst. A. . . Jan is separately assessed at G. I. R. No. 54‑C.

1. Sargodha and she is stated to be assessed for this income. The assessee's appeal is therefore accepted and it is directed that the addition of Rs. 7,310 made in his income should be deleted. Appeal accepted.