1982 PLP (Trib (PTD)

MUHAMMAD MAZHAR ALI (PRESIDENT).‑This appeal relating to the estate left by late Khalid Jalil, who died on 18th November, 1979, is directed against the order of the Deputy Gontroller of Estate Duty, Karachi. Notwith standing the several grounds taken in the memorandum of appeal, the learned counsel for the appellant pressed before us only two grounds, one relating to the inclusion of the sum of Rupees 6.15,858 in respect of 186 shares of M/s. Muhammad Amin Brothers Limited allegedly sold by the deceased on 4‑8‑1976, i. e. about 3 years and three months prior to his death, and the other against the inclusion of the value of 18694 shares of M/s. Amin Fabrics Limited, transferred by the deceased to his wife in lieu of her dower and adding a total sum of Rs. 3,19,077 after allowing dower debt in the sum of Rs. 30,000 only. The facts stated at the bar relating to the transfer of 186 shares of M/s. Muhammad Amin Brothers Limited, in favour of Mr. Abdul Hafiz, brother of the deceased for a total consideration of Rs. 1,86,000 and the transfer of 186 (sic) shares of Amin Fabrics Limited by the deceased to his wife, Mst. Nusrat Begum are these. The accountable person did not declare the value of the aforesaid shares in the return of Estate Duty filed before the Deputy Controller of Estate Duty. The Deputy Controller, vide his letter dated 2nd October, 1977 addressed to the accountable person, asked for the details of the gifts, if any, made by the deceased during 5 years prior to his death. The accountable person, in reply to the aforesaid letter, informed the Deputy Controller vide his letter dated 27th October, 1977 that no gift was made by the deceased during 5 years prior to his death. The Deputy Controller vide his aforesaid letter also made enquiries regarding the social, status of the deceased at the time of his marriage so as to ascertain the amount of dower debt, if any, payable by the deceased. The accountable person did not make a reply to the said enquiry of the assessing officer. The Deputy Controller of Estate Duty again sent a letter dated 18th July, 1978 to the accountable person stating that a reference to the wealth tax record of the deceased person indicated that as on 30th June, 1976, he held 18,696 shares of M/s. Amin Fabrics Limited and 136 shares of M/s. Muhammad Amin Brothers Limited of the face value of Rs. 1,86,940 but no value in respect of either of them was shown by the accountable person, in the return filed under the Estate Duty Act. He was, therefore, called upon to furnish the details of the disposal of these shares with names of purchasers and their relationship with the deceased. it was in reply to the aforesaif letter of the Assessing Officer that the account able person, vide his letter dated 13th August, 1978, informed him that 18,694 shares of Amin Fabrics Limited were transferred by the deceased during his lifetime to his wife Mst. Nusrat Begum in lieu of her dower debt. These shares, it was further averred, were duly transferred in the name of wife of the deceased in the record of the said company. With regard to 186 shares of M/s. Muhammad Amin Brothers Limited, it was stated that these were sold by the deceased to one Mr. Abdul Hafiz. The transfer of these shares was also duly recorded in the nave of the transferee above‑named in the records of the company. The Deputy Controller of Estate Duty again addressed a letter dated 2nd September, 1978 to the accountable person asking him to furnish the addresses and relationship with the deceased of the purchaser of 186 shares as well as to notify the amount of dower due prior to the shares in question had been transferred by the deceased to his ‑wife and that whether the gift tax had been duly paid on the gift of the enhanced dower amount. The accountable person, vide his letter dated 23rd September, 1978, replied that the dower debt was of Rupees 3,50,000 and that the deceased enjoyed the status of Vice‑President of Amin Agencies Limited and was also drawing salaries from different companies. He was also stated to be the son of the then Managing Director of Pakistan Refinery. In reply to another letter of the Deputy Controller of Estate Duty, the accountable person admitted that in the balance‑sheet of Muhammad Amin Brothers Limited, as on 31‑3‑1977, a total sum of Rs. 3,51,000 was shown payable to the deceased by Mr. Abdul Hafiz, which included the sum of Rs. 1,86,000 being the value of the shares transferred to him. The Deputy Controller of Estate Duty being of the view that the account able person had understated the value of the property by omitting to include in the accounts the value of these shares that ought to have been included, proposed their value under section 58‑A at Rs. 9,94,935 (value in respect of 18694 shares at Rs. 3,49,077 and the value in respect of 186 shares at Rs. 6,49,858 and required the accountable person to amend the valuation accordingly. Upon accountable person's failure to do so, he treated the transfer of these shares as gifts, falling within the mischief of clause (a) of section 4 of the Gift Tax Art. And since no gift tax had been paid in respect of either of the said gifts made by the deceased during his lifetime, he held them to be the property of the deceased passing on. his death. He did not agree with the contentions of the assessee's counsel that 18694 shares were transferred by the deceased to his wife in lieu of her dower and that the payment of dower could not be treated as a gift. With regard to the allowance of dower debt the assessee's plea was that the question of reasonableness or otherwise of the dower debt arises only when it is deducted from the value of the property passing on the death of the deceased and as the amount of dower had, in the instant case, been paid by the deceased during his life tine, the question of determination of its reasonableness or otherwise for the purpose of levy of estate duty did not arise. The Deputy Controller of Estate Duty repelled this contention also by placing reliance on the provision of clause (a) of section 4 of the Gift Tax Act. The relevant observations made and the finding recorded by the assessing officer in his impugned order are extracted below. "The authorised representative's contention that the payment of Dower Debt was not a Gift is not correct in view of the provisions of clause (a) of section 4 of the Gift Tax Act. Under this clause if any property is transferred otherwise than for adequate consideration, the excess of its market value over the value of the consideration, is deemed to be a gift. The main criterion for determining whether a particular transac tion involves a gift would, therefore, be the value of the consideration for which it was made. The authorised representative's stand is based upon the assertion that the dower debt amounted to Rs. 3,50,

000. However, no evidence whatsoever, has been produced to support this. Such exorbitant dowers are not common in‑ our society and since this amounts to an isolated and singular case of its kind, there must have been some sort of documentary evidence like the 'nikahnama' or any written mutual agreement between the parties concerned. In the absence of any such evidence it is hard to believe that such a huge amount of dower was fixed by verbal contract only. 1, therefore, reject the authorised representative's contention that the whole amount of Rupees 3,50,000 covered the Dower Debt. However, considering social and financial status of the deceased, I am prepared to attribute a sum of Rupees 30,000 to dower debt. The balance amount of Rs. 3,19,077 being property transferred for love and affection, which is not an adequate consideration, is regarded as gift inter vivos. Gift Tax having not been paid thereupon, it is deemed to be property passing on death. As regards the authorised representative's contention that under section 4 only property `passing on death' is liable to duty it is averred that "passing on death" does not contemplate merely physical `passing' but also includes property which is "deemed to pass" under the various other sections of E. D. Act and specially section 9, under which the above additions have been made." Regarding 186 shares transferred by the deceased to his brother, Mr. Abdul Hafeez, it is so stated in the Assessment Order :‑ "Here again, the transaction was made for grossly inadequate conside ration and squarely falls in the clutches of clause (a) of section 4 of the Gift Tax Act. That the consideration was inadequate is admitted by the authorised representative himself as he has calculated the market value of these shares as on the date of transfer at Rs. 2,986 per share as against Rs. 1,000 which was credited to the estate. The difference between the Face Value and market value has, therefore, been correctly treated as gift inter vivos and, in default of payment of gift tax is rightly deemed to pass on the death. As regards the calculation of market value at Rs. 4,264.80 per share it has been correctly worked out on the basis of market value of assets of the company as laid down in sub‑rule (2) of rule 9 of the Gift Tax Rules with section 39 of the Estate Duty Act. The proposed amount of Rs. 6,45,858 is, therefore, maintained." The learned counsel for the appellant pleaded that both the shares in question were sold out or transferred by the deceased during his lifetime and hence these were not shown as the property passing on the death of the deceased. These shares, he so emphasised, did not belong to the deceased either factually or legally at the time of his death. He also urged that no liability for dower debt was claimed by the accountable person and hence it was beyond the competence of the Deputy Controller of Estate Duty to examine the reasonableness or otherwise of the dower settled and paid by the deceased to his wife. The learned counsel vehemently urged that there is no provision in the Estate Duty Act by virtue of which the two sums in question could be treated as a deemed gift. He drew our attention to section 27 of the Indian Estate Duty Act, wherein a similar provision of `deeming gift` has been made as is laid down in section 4 of the Pakistan Gift Tax Act. He submitted that the finding of the assessing officer to the effect that no docu mentary evidence to substantiate the plea that the dower debt amounted to Rs. 3,50,000 was lead, (sic) is perverse inasmuch as a copy of the Agreement dated 22nd May, 1971., executed by and between the spouses raising the dower amount from Rs. 500 to Rs. 3,50,000 was duly produced before the D. C. of Estate Duty as an annexure of the reply to the Notice under section 58‑A. He produced before us a photostat copy of the said Agreement. The learned Departmental Representative could not, on the basis of the record available with him, repudiate this plea of the appellant's counsel nor he objected to the production of the copy of the Agreement before us. He, however, emphasised that no `nikahnama' was produced to substantiate the claim of dower in the sum of Rs. 3,50.000. In reply, the learned counsel for the appellant sought to place reliance on an Order of the Appellate Tribunal passed in KDA. No. 1/KB of 1978‑79 dated 5th September, 1979, wherein it has been held that the provision of section 4 (a) of the Gift Tax Act, cannot be pressed into service for the purpose of Estate Duty Act. We may at the outset state that this decision has no application to the facts of the instant case. There are two important aspects of the matter. Firstly, the assessing officer has not doubted and in our opinion very rightly too, that a legal right was vested in the deceased to increase the amount of dower. He has, however, repelled the contention of the accountable person in this behalf on the plea that there was no documentary .evidence available to support this contention. This finding of fact recorded by the learned assessing officer. as rightly pleaded by the counsel for the appellant, is unsustainable . in the presence of the Agreement dated 22nd May, 1971, duly executed between the deceased and his wife. Mst. Nusrat Begum. This agreement clearly provides that the dower of Nusrat Begum was fixed at the time of marriage at a nominal sum of Rs. 500 but since the status of Khalid Jalil (the deceased) had then considerably improved, and for love and affection, he considered it necessary to raise the amount of dower of his wife to a sum of Rupees 3,50,

000. It is pertinent to note here that a reference to love and' affection in this agreement is not the consideration for transfer of the shares in question but for the increase of the amount of dower. The stage of transfer of shares towards payment of the increased amount of dower came several years thereafter. This agreement also provides and makes a mention that `Mst. Nusrat Begum accepts this increase'. In the above facts and circumstances of the case there is no impediment in our way for holding that the Deputy Controller of Estate Duty committed an error in repelling the assessee's plea on the ground that there was no documentary evidence, like the `nikahnama' or any written mutual agreement between the parties concerned, to establish this fact. As a matter of fact it is perverse in so far the alleged non‑production of `any written mutual agreement between the parties' is concerned. Moreover, the insistence on the production of Nikahnama' showing the increased amount of dower was uncalled for. The execution of a fresh Nikahnama upon increase of the amount of dower is not warranted by law. It is rather an impossibility. And it is a well known proposition of law that no man is compelled to do that which is impossible'. The second aspect of the case is that the Deputy Controller of Estate Duty has treated it to be a gift and for that reason he has, by invoking the provisions of section 9 of the Gift Tax Act, held that the sum of Rs. 3,19,077 (i. e., the proposed value of shares after allowing the dower debt in the sum of Rupees 30,000) was to be deemed as the property passing on the death of the deceased. I think, hereto Deputy Controller of Estate Duty fell into a consequential error. If we hold that the deceased had increased the amount of dower from Rs. 500 to Rs. 3,50,000, then there was no occasion or justification for invoking the provisions of section 9 of the Estate Duty Act. It is also pertinent to note that there is no provision in the Estate Duty Act equivalent to that of section 4‑A of the Gift Tax Act, which lays down that `where the dower money, as originally fixed at the time of marriage is subsequently increased the amount by which such increase exceeds the amount of the original dower, shall, for the purposes of this Act, be deemed to be a gift by the husband to the wife'. The provisions of the Gift Tax Act in so far as they deal with the 'deemed gifts' cannot by a established cannon of Interpretation of law be imported in the Estate Duty Act. As there is no provision in the Estate Duty Act, as already stated, that the increase of dower would be deemed to be a gift made by the husband to wife, there is thus no alternative but to hold that the property to extent of the value of 18694 shares of M/s. Amin Fabrics Limited, transferred by the deceased to his wife during this lifetime, was not a gift, and hence did no pass on the death of the deceased. The scope of a fiscal provision can not be widened by creating a fiction without doing violence to one incontestable principal that fiscal Acts must be construed strictly ; and unless words impos ing the tax are clear and unambiguous no tax is to be imposed. The appeal, therefore, succeeds on this issue. Consequently, the addition of Rs. 3,19,077 made in estate of the deceased, after allowing dower debt in the sum of Rs. 30,000, stands deleted. Now we turn to the next issue raised before us. It is relating to the 186 shares of Messrs Muhammad Amin Brothers Limited, sold by the deceased during his lifetime to Mr. Abdul Hafiz, his brother. Here also the Deputy Controller of Estate Duty observed that the difference of face value and market value of these shares sold by the 'deceased, was a gift within the meaning of clause (a) of section 4 of the Gift Tax Act. He, therefore, added a sum of Rs. 6,45,858 as representing the difference of face value and market value of 186 shares in question. The Deputy Controller of Estate Duty worked a value of Rs.4,364,83 per share : whereas according to the account able person, the deceased has sold the entire shares during lifetime and hence it Was not open to the Deputy Controller of Estate Duty to work out the break up value of these shares. Alternatively and without prejudice to his above contention, the counsel for the appellant urged that the correct value of shares at the time of death was Rs. 2,986 per share and not Rs. 4,369.83 as adopted by the assessing officer. The Deputy Controller of Estate Duty held that the transaction was made for grossly inadequate consideration and hence it fell within the clutches of clause (a) of section 4 of the Gift Tax Act.. It was contended by the learned counsel for the accountable person before us that Deputy Controller of Estate Duty was wrong to treat the alleged difference of face value and market value of these shares as a deemed gift made by the deceased to his brother. He emphasised that the said shares were sold by the deceased during his lifetime and hence there was no question of any gift having been made by him (the deceased) of these shares. He emphasised that, consequently, the amount in question could not be treated as property passing on the death of the deceased. He also stressed that the basis of sale price fixed, was the mutual contract between buyer and the seller and the break up value has nothing to do with it. Without prejudice to his above contention the learned counsel pressed that the break up value determined by the Deputy Controller of Estate Duty is. incorrect and highly excessive. He urged with vehemence that Deputy Controller of Estate Duty was not justified, rather acted illegally, in applying the provisions of the Gift Tax Act to the Estate Duty Act for the assessment under the Act. The Deputy Controller of Estate Duty according to the counsel for the appellant, further omitted to consider that 29120 shares of Amin Jute Mills Limited, were also given by the purchaser, Mr. Abdul Hafiz to the deceased Mr. Khalid Jalil in addition to cash of Rs. 1,86,000 for 186 shares of Messrs Muhammad Amin Brothers Limited. We declined to take into consideration the last‑mentioned contention raised on behalf of the appellant for the simple reason that no such plea was taken before the assessing officer as there is no mention of it in the impugned assessment order. The assessee‑appellant has also not filed an affidavit stating that this plea was taken before the assessing officer and that he did not deal with it. Having given our earnest consideration to the facts of the instant case, we have not the least hesitation in holding that it will not be possible for us to sustain the impugned order in this behalf as well. The learned Deputy Controller of Estate Duty has clearly mentioned in his impugned order that the alleged gift was covered by clause (a) of section 4 of the Gift Tart Act. This section, it may be noted, speaks of a `deemed gift'. It is provided in this section that for the purposes of this Act (the Gift Tax Act, 1963), that where is transferred otherwise than for adequate consideration, the amount which the market value of the property at the date of the transfer exceeds the value of the consideration, is deemed to be a gift made by the transferor. It is thus evident that it is by virtue of legal fiction that the Legislature has, for the purposes of Gift Tax Act, 1963, deemed something as gift which i otherwise not a gift. This legal fiction has not been extended to or adopted for the purpose of the Estate Duty Act and hence it cannot be taken into con sideration for judging the exact nature of a transaction falling under the Estate Duty Act, in the light of the fiction made in the Gift Tax Act. Moreover, the learned Deputy Controller of Estate Duty has not even cared to mention, nor could the learned Departmental Representative urge before us at the hearing of appeal, that the transaction in question was even treated to be a gift for the purpose of Gift Tax Act and that the deceased was assessed to Gift tax in respect of the alleged `deemed gift' under the Gift Tax Act, 1963. For the reasons given hereinabove, we would hold that the treatment accorded by the learned Deputy Controller of Estate Duty in considering the transaction of sale of 186 shares by the deceased to his brother Mr. Abdul Hafiz, as a gift, is improper, illegal and unsustainable in law. In the result, the appeal succeeds and is allowed as indicated above. Appeal accepted.