2007 PLP (Trib (PTD)

KHAWAJA FAROOQ SAEED (CHAIRPERSON).

These three appeals by the Department are on the basis of common grounds which are as follows: (i) That the order of the learned Commissioner of Income Tax/Wealth Tax (Appeals) Zone-II, Islamabad is against the facts and circumstances of the case. (ii) That the learned CIT(A) was not justified to annul the assessment completed under section 221, as the title of the property was not mutated in Revenue Record, hence income from rent of such property was to be included in the income of the person in whose name property is existing in Revenue Record.

2. Learned' D.R. supporting the departmental contention said that the assessee's income was earlier accepted as per broad based Self--Assessment Scheme. However, it was later found that the property income was not disclosed in full. The assessee had claimed that the property belonged to him and his spouse as well as children but at no stage of the proceedings even on demand he could furnish the evidence with regard thereto. The case, therefore, was re-assessed by rectifying the order being a mistake apparent from record. The assessee in his appeal before the First Appellate Authority asserted that the rectification was illegal. The argument in support of the contention was that the assessee gifted shares of the property on 29-6-1998 and that the respective shares were subsequently separately assessed in the hands of the other co-owners. The Department's point of view that the agreement has been made by this assessee in his opinion, therefore, is of no help. He, therefore, directed to accept the declared income being supported by the gift deed. The CIT(A) in support of his point of view, referred 2004 PTD (Trib.) 1523 and 2006 PTD

529. He further referred that in this case the ingredients of gift have been met with and, therefore, there was no question of assessment of the income of the entire property in the hands of one assessee.

3. The Department before us has reiterated its earlier arguments. The D.R. says that the assessee even after providing opportunity did not furnish the evidence with regard to the position of the gifted asset. He said that neither any transfer through C.D.A. has been made nor any mutation before any other authority has been produced. He said that no one can object to the validity of oral gift, as it has the support of the Supreme Court judgment reported as 1987 SCMR 1403. However, an oral gift needs evidence of the said oral transaction. The most important of which is acceptance and actual transfer thereof. Assessee at no stage of the proceedings has been able to provide any evidence so as to support the claim of his evidence of oral gift. There is obviously no argument against the fact that an oral gift is a valid gift in Muslim Law and the same prevails in our system as well. However, an oral gift would also need some tangible support to prove that the said transaction actually took place and the claim is not only an arrangement to receive revenue. The concept of offer, acceptance and transfer requires at least some witness and subsequent actions must support the factum of the said transaction. An affidavit or gift deed is undoubtedly a piece of evidence but, however, under the law of the land one does not become owner of an immovable property unless it is registered in some form with the concerned agencies. One need not apply this' principle if' the gift is in respect of some money or an article which does not need any registration otherwise. Deposit of the said cash in the account of the recipient can be an evidence. However, in the case of immovable property some effort of its transfer in the name of the donors so as to confirm that an oral gift has been given is deficiently required for proving the claim. In cases like the one before us, doubt arises because the bifurcation has resulted in loss of revenue. In such like situations the oral gift obviously becomes doubtful, particularly in respect of an immovable property if the subsequent facts and actions speak otherwise. If apparently the ingredients of gift have not been completed or that the gift was revocable or it has not been actually made in the Islamic spirit and is only an attempt to reduce the burden of tax, one would obviously require proof of the said transaction to dispel the doubts. Registration of an immovable property which has been gifted by one person to another is a legal requirement so as to alienate the title of the asset to the receipts. In fact the cost of transfer for (Hiba) a gift is rather less than the cost of transfer of the property sold. This recognition of this Muslim Law transaction alone is enough to convey that the spirit is duly acknowledged and accepted at all forums including the Revenue Authorities. There should not have, therefore, been any hesitation on the part of the so-called donor for transfer of the property to the person to whom he has actually donated it. The fact alone that the oral gift was given in 1998 and until this day no subsequent transaction of its actual transfer has been made support the doubt. Further the language of the rent deed which declare this assessee as the owner of the entire property also has enhanced this doubt in favour of the Department. The existence of' even an oral gift in factual premises is not supported by the facts and circumstances of this case.

4. So far as reference to the provisions of section 19 of the Income Tax Ordinance, 1979 (repealed) is concerned, the same also squarely apply on the situation of this case. This is merely a case of splitting up of the income by way of transfer of assets through a revocable gift deed which does not have any subsequent action in support to convey that the intention was to donate the property. In this regard one can get support from a recent judgment of the Lahore High Court given reported as 2006 PTD 590.

5. Another angle of the case which earlier escaped the attention of the concerned officer is that section 19 applies on the rent received by an assessee from the property of which assessee is the "owner". This is evident from the following language of the provisions of law:

19. Income from house property.--(1). The annual value of property shall be chargeable under the head "Income from house property". (2) For the purposes of' subsection (1):-- (a) "house property", means any property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, but does not include any such property (or any portion thereof) which is occupied by the assessee for purposes of any business or profession carried on by him the profits whereof are chargeable to tax under this Ordinance; and

6. It is obvious from above provisions that only the owner of a property can be brought to tax in respect of his income from the said property. No one becomes owner of an immovable property unless the gift deed is registered with Collector of Land Revenue. "Owner", in law means: "One who has the right to possess, use and convey something; a proprietor".

7. This obviously means that an owner who has possession to use the said property and has power to convey it to the others is the owner. The possession of the property does not mean that a person is owner of the same. Like for example in case of tenancy right the tenant holds, possession. The right to convey i.e. right to further transfer in some form to somebody, determines the ownership of a property. So unless the donee becomes owner which means that he is equipped with the rights to further convey the said property to anybody of his choice and requirement, he does not become owner and unless a person becomes owner of a property he cannot be brought to charge of tax under section 19 for the rental income he is receiving therefrom. Even if one does not doubt the actuality of so-called oral gift still one would not be able to assess the income of a person from a property of which he is not its owner. In this case the claim of the assessee of' the oral gift supported by a gift deed besides having no support whatsoever of the said claimed transaction also becomes of no help to the assessee for the purpose of bifurcation of the property income in his spouses as well as other family members. His action of signing the rent deed as owner is an additional evidence in support of the Department that the income was chargeable in the hands of this assessee under section 19 and that the CIT(Appeals) has totally ignored the facts of the case. In fact the judgment of the Supreme Court of Pakistan also has not properly been read. The honourable Supreme Court while deciding the issue had taken into consideration the facts of the said case ori1y. In that case, there was an oral transaction which subsequently was converted into mutation of the land after which obviously the factual of the transaction stood proved. Thus even if the other matters are ignored judgment of the honourable Supreme Court was not applicable. I, therefore, without any further dilation or discussion disagree with the findings of the CIT(A) and restore the order of the Assessing Officer. C.M.A./218/Tax(Trib.) Appeal allowed.