1994 PLP (Trib (PTD)

9. Mr. Muhammad Farid has taken us through the judgment of Hon'ble Lahore High Court in the case of Shaikh Abdur Rehman referred in the Circular No. 14 of 1959 issued by the C.B.R. Briefly stated the facts of the cited case were that one Dr. Subhan Ali died leaving two sons and two daughters. The property left by the deceased remained joint but it was not apparent whether the income derived from the property was ever distributed among the heirs of deceased and if so distributed in what shares. The descendants of Dr. Subhan Ali were taxed as an association of individuals. Dr. Subhan Ali died in the year 1911 and in the year 1940 two daughters of Dr. Subhan Ali instituted a suit against their two brothers for partition and rendition of accounts resting their claim on Islamic Law. The suit was resisted by the brothers on the ground that they were governed by customary law and consequently the daughters were altogether excluded from inheritance. In the year 1941-42 Abdur Rehman, elder son of Dr. Subhan Ali claimed to be assessed as an individual relying on subsection (3) of section 9 of the repealed Income Tax Act, 1922 which read as follows: "(3) Where property is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with this section shall be included in his total income." The I.T.O. repelled the contention stating. "It has not been proved at any stage of proceedings that the division of the estate property between the said heirs had taken place in metes and bounds and as such no change in status is warranted. There being co-joint ownership with undefined shares on the basis of previous enquiries and finding, the status has been 'given that of Association of Persons. "The assessee preferred appeal before the Appellate Assistant Commissioner and the appeal was dismissed for the reason that the assets were still being jointly owned, jointly managed and jointly developed and that there was not even a distribution of income earned. It was further held that there was a dispute between the members of the family as to whether they are governed by customary law or by Muhammadan Law and civil litigation was going on between them. This fact amply proves that even the shares of the members of the family were not defined nor were they ascertainable so long as the disputes were not settled. It was, therefore, held that section 9(3) of the Income-tax Act, 1922 was not applicable in respect of the property income. The assessee preferred second appeal before the Tribunal and the decision of I.T.O. was maintained mainly on account of litigation going on between the daughters and sons of Dr. Subhan Ali. The matter was, taken to High Court on reference and the Hon'ble Judges of Lahore High Court observed as follows: "We may say at once that the Income Tax Officer was entirely wrong in basing his decision, inter alia, on the ground that there has been no division by metes and bounds, but this mistake did not appear in the orders of the Income-tax Authorities on appeal. In fact, in the statement of the case it is rightly pointed out that even if the properties were jointly owned, jointly managed or jointly developed and there was not even a distribution of the income earned, the provisions of section 9(3) would be attracted "if the shares of the owners of the properties were definite and ascertainable." It was further correctly stated that ordinarily if the owners of the properties were members of a Muhammadan Family, their shares were definite and ascertainable. But the question still arises whether in the circumstances of this case the Income-tax Authorities could come to a decision that the shares of the owners of the properties in question were definite and ascertainable. On behalf of the assessee it is contended that inasmuch as the share of an heir, whether he is governed by Muhammadan Law or by Customary Law, is ascertainable, the assessee should have been given the benefit of subsection (3) of section 9, irrespective of the fact that a litigation was proceeding between the heirs inter se. We do not, however, consider that so long as litigation is proceeding, it can be justifiably urged that the share of each heir is definite, though it may be ascertainable. The term "definite" in ordinary parlance means "fixed; exact and clear" and in a case where even it cannot be said as to how many heirs will eventually share the property, it cannot be urged that the share of any heir is so fixed or clear." Finally the Hon'ble Judges of Lahore High Court held as follows: "Suffice it to say that as at present advised we are inclined to support the view maintained by the Tribunal that so long as the dispute between the heirs inter se continues, it is impossible to hold that the share of the present assessee is so definite and ascertainable as to attract the provisions of subsection (3) of section 9 of the Income Tax Act."

10. Mr. Muhammad Farid has next contended that the finding of the learned CIT(A) which has been confirmed by the learned Members of the Division Bench in the immediately preceding year to the effect that 1/7th ownership is not ascertainable at any particular point of time for want of' demarcation of the 7th portion in the event of any member choosing to withdraw from the association is contrary to law. He has further maintained that the finding of the learned CIT (A) to the effect that no member can secede from the association without pin-pointing the physical portion of the building identifying as his or her share and thus the association of person becomes a permanent institution as one member is not able to do anything with reference to building without the simultaneous concurrence of the other is also incorrect. Mr. Farid has further submitted that the finding of the CIT (A) to the effect that the shares though definite but are not ascertainable because they are impartible except by a separate agreement whose existence is not yet known, which has been confirmed by the Tribunal vide order, dated 28-4-1992 is also erroneous. In support of his contention he has placed reliance on section 47 of the Transfer of Property Act which reads as follow: "

47. Transfer by co-owners of share in common property.

Where several co-owners of immovable property transfer a share therein without specifying that the transfer is to take effect on any particular share or shares of the transferors, the transfer, as among such transferors, takes effect on such shares equally where the shares were equal, and where they were unequal, proportionately to the extent of such shares."

11. A question further arose during the course of arguments regarding the connotation of words "definite" and "ascertainable" used in section 21 of the Income Tax Ordinance and if they convey different meaning and intentions and whether the word definite has been used to convey the meaning of division of the property by metes and bounds and separable physically from the other share. Mr. Muhammad Farid submitted that the two words "definite" and "ascertainable" have been used to convey the same meaning and in any case the partition of property by metes and bounds is not envisaged which already stands decided by the Honourable Judges of Lahore High Court in the case of Shaikh Abdur Rehman cited above. Mr. Muhammad Farid has continued to argue that from the judgment of Division Bench in the earlier year it appears that a finding has been given to the effect that for applying the provisions of section 21 to any property to which section 19 applies which is owned by two or more persons the respective shares are to be definite, ascertainable and physically divisible by metes and bounds. Thus, this interpretation is not warranted according to the established principles of the interpretation of statutes because the Courts are not permitted to insert any omissions and add words in the statute.

12. Mr. Muhammad Farid has finally argued that all the above points were not considered by the learned Members of the Division Bench while deciding appeal for the immediately preceding year and the finding of first appellate authority was confirmed for the simple reason that in the sale-deed the shares of the co-owners have not been specified although a separate agreement was executed between the co-purchasers on 7th of August, 1982 specifying that all the seven co-purchasers shall have equal share in the property on the very date when the sale agreement was executed. Mr. Farid has contended that there is no dispute between the shareholders regarding the extent of share held by each one of them which is evident from the fact that from the assessment year 1983-84 to 1987-88 the income from property was being assessed in the hands of individual co-owners to the extent of 1/7th share in the income from-property. He has submitted that even otherwise the sale agreement as well as the sale deed was executed by all the co-owners and when the co-purchasers themselves assert that they have equally contributed to the sale consideration and all other expenses the presumption in law would be that all the co-owners are equal shareholders. In support of his contention Mr. Muhammad Farid has placed reliance on another judgment by the same judges of the Hon'ble Lahore High Court who delivered judgment in the case of Abdur Rehman (supra) reported as Nizamuddin Amiruddin of Lahore (1943) 11 ITR

443. This case pertained to the assessment year 1937-38 when section 9(3) of the Income Tax Act analogous to section 21 of the Income Tax Ordinance, 1979 was not on the statute book as this provision was introduced in the year 1939. In this case a property was jointly held by heirs of one Karim Bukhsh which was not divided. The rent deeds stood in their joint names and they had jointly employed as Munshi to manage the property and collect the rents. The assessing officer assessed the income from property in the status of association of individuals. After addition of subsection (3) in section 9 by Income Tax Amendment Act; 1939 the heirs were separately assessed in their respective shares. The Hon'ble Judges of Lahore High Court held that even prior to the insertion of subsection (3) in section 9 of the Income Tax Act the joint co-owners should be assessed on their individual shares as the net income was being distributed in accordance with their respective shares.

13. Mr. Muhammad Farid on the basis of above arguments has vehemently argued that the learned Members of the Division Bench while passing order dated 28-4-1992 in ITA No. 2263/KB of 1991-92 did not consider all above points and, therefore, the view taken by them that until and unless a property held by co-owners is partitioned the shares of the co-owners would not be definite and, therefore, section 21 of the Income Tax Ordinance shall not be applicable, may be reconsidered.

14. On the other hand, the learned D.R. has supported the orders of the learned two officers below and the order of Division Bench of this Tribunal in the immediately preceding year. He has submitted that the investment in sale was made by two co-owners, namely, Q??..A???..and Mrs. Q???.A???only. He has contended that an amount of Rs.1,00,000 was paid by Q...A....and amount of Rs.50,000 was paid by Mrs. Q??..A??..He has further submitted that a loan of.Rs.4,87,750 was taken and the building was constructed with the deposits from tenants amounting to Rs.42,65,

000. He has maintained that the investment in purchasing of property has not been made equally and, therefore, in the absence of specific recital in the sale-deed on the point of holding 1/7th share in the property the co-purchasers cannot be held to be owners of ascertainable share at 1/7th. He has further supported the view that until and unless the property is partitioned by metes and bounds and each shareholder is able to pin-point separate divisible portion in the building the shares would not be deemed to be definite.

15. We have given our anxious consideration to the contentions raised by the learned representatives for the parties before us. We find substance in the contention of Mr. Muhammad Farid that for the purpose of applying the provisions of section 21 the legislature has provided two conditions only. First, that in case of property to which section 19 applies it should be owned by two or more persons and secondly, their respective shares should be definite and ascertainable. The condition of physical divisibility of the property or partition by metes and bounds cannot be imported in this section. We may cite with benefit an extract from Maxwell on Interpretation of Statutes, page 33 (12th Edition) which reads as follows: "It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequate grounds to justify the inference that the legislature intended something which it omitted to express. Lord Mersey said: "It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do:" "We are not entitled," said Lord Loreburn L.C. "to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself." 16: Craies in his Treatise on Statute Law has cited several judgments in this behalf and for the sake of brevity only few authorities appearing at pages 69 and 70 of the 7th Edition are reproduced below: "In R.V. Wimbledon Justices, ex p. Derwent, Lord Goward, C.J. said: `Although in construing an Act of Parliament the Court must always try to give effect to the intention of the Act and must look not only at the remedy provided but also at the mischief aimed at, it cannot add words to a statute or read words into it which are not there, and, if the statute has created a specific offence, it is not for the Court to find other offences which do not appear in the statute': and in R.V. Oakes Lord Parker, C.J. said: `where the literal reading of a statute ....produces an intelligible result ...there is no ground for reading in words or changing words according to what may be the supposed intention of Parliament.'

17. Crawford in his Treatise Statutory Construction (1940 Edition) on page 269 has observed as follows: "Omissions in a statute cannot, as a general rule, be supplied by construction. Thus, if a particular case is omitted from the terms of a statute, even though such a case is within the obvious purpose of the statute and the omission appears to have been due to accident or inadvertence, the Court cannot include the omitted case by supplying the omission. This is equally true where the omission was due to the failure of the legislature to foresee the missing case. As is obvious, to permit the Court to supply the omissions in statute, would generally constitute an encroachment upon the field of the legislature ...where the statute meaning is clear and explicit words cannot be interpolated."

18. In addition to the authorities cited on the interpretation of statute the contention of Mr. Muhammad Farid is supported with the judgment of Honourable Lahore High Court in the case of Shaikh Abdur Rehman (supra) wherein it has been clearly held that, "the I.T.O. was entirely wrong in basing his decision, inter alia on the ground that there has been no division by metes and bounds".

19. We further find force in the contention of Mr. Muhammad Farid that Circular No. 14 of 1959 issued by the C.B.R. is still operative and the instructions contained therein are binding on the assessing officer by virtue of the provisions contained in section 8 of the Income Tax Ordinance, 1979 as interpreted by the Hon'ble Supreme Court of Pakistan in the case of Julian Hoshang Dinshaw Trust (supra). Although this Tribunal is not under any compulsion to follow the circular by the C.B.R. as held by the Honourable Supreme Court of Pakistan, but we do not find any reason to brush aside the instructions of C.B.R. contained in Circular No.14 of 1959. We have not been able to lay hand on any other judgment from the superior Courts in the Sub?continent on the point in issue except in the case of Abdul Rehman (supra) and, therefore, we have extensively cited the facts and the finding. In the case of Abdul Rehman we find that the Hon'ble Judges of the Lahore High Court have held that the benefit of section 9(3) of the Income-tax Act, 1922 (parallel to section 21 of the Income Tax Ordinance 1979) cannot be denied on the ground that there has been no division by metes and bounds. It has been further decided that if the shares of the owners of the properties are not definite the provisions of section 9(3) of the Income-tax Act, 1922 shall not be attracted. The Hon'ble Judges of the Lahore High Court have held that: "The term "definite" in ordinary parlance means fixed, exact and clear and in a case where even it cannot be said as to how many heirs will eventually share the property, it cannot be urged that the share of any heir is so fixed or clear."

20. In the cited case litigation was going on between the heirs of a deceased Muslim and it was yet to be decided where Islamic Law of inheritance was applicable or customary law was to be applied. In the present case we do not find any such controversy among the co-owners of the property. So far as question of definiteness and certainty, exactitude and clearness of the shares of the owners is concerned we find that the department accepted the plea of the appellants from the assessment year 1984-85 to the assessment year 1987-88 when the assessments were completed under section 21 of the income Tax Ordinance, 1979. Even when the department deviated from the practice in the assessment year 1988-89 the learned CIT(A) did not doubt the extent of shares held by each co-owner which is evident from the following observations in his order: "It appears that M....A....building was purchased as building and re?constructed with equal share in cost from the purchase to reconstruction vide agreement dated 7-8-1982. For the purpose of exemption on A.O.P. the law requires share of each to be definite and ascertainable ...equality being definite but the 1/7th shares ascertainability not being definite at any specific point of time."

21. Thus, it is clear that the learned CTT(A) did not doubt that the shares of co-owners in the property were definite but he thought that the shares were not ascertainable and from the tenor of his finding as well as the finding of the learned Members of the Division Bench of this Tribunal who confirmed the said finding it appears that the ascertainability was interpreted to mean divisibility of the property by metes and bounds or demarcation of the seventh portion of the property in the event of any member choosing to withdraw from the association. For this purpose the finding of Lahore High Court in the case of Abdur Rehman (supra) is sufficient wherein it has been held that the I.T.O. was entirely wrong in basing his decision, inter alia, on the ground that there has been no division by metes and bounds. However, we will examine the dictionary meaning of the word "ascertainable" in order to find out if there is any substance in such interpretation. The word `ascertain' has been defined in Cassell's English Dictionary to mean "to find out or learn by investigation, examination or experiment; to make sure of; to find out". According to Shorter Oxford English Dictionary the word "ascertain" means, "to make certain, to insure, to make a thing certain or definite, to decide, fix, limit". According to the Stroud's Judicial Dictionary the word "ascertain" has two meanings (1) known, (2) made certain. In Black's Law Dictionary, 5th Edition, the word "ascertain" had been assigned the meanings, "to fix: to render certain or definite; to estimate and determine; to clear of doubt or obscurity. To insure as a certainty to find out by investigation:" In the same Book the word "definite" conveys the meaning of, "fixed, determine, defined, bounded". In Cassel's English Dictionary the word "definite" has been defined to mean, "limited, determinate, fixed precisely, exact, distinct, clear, positive, indicating exactly limiting". According to Shorter Oxford English Dictionary the word "definite" means, "having fixed, limits, determinate, exact, precise".

22. The above meaning clearly show that none of the words contain and indication of divisibility of the property but connote the sense of exactitude, clearness, certainty and of being fixed. The question arises as to why the legislature has used two words if they almost convey the same meaning. We find the answer in the judgment of an authority which is binding on all of us. The Honourable Supreme Court of Pakistan has observed in the case of Pakistan Fisheries Limited v. United Bank Limited, PLD 1993 SC 109, relevant finding on page 118 as follows: "It is correct that the normal rule of construction of statutes is that when two different words in the same context are used in the same section or in other sections of an enactment, they do not identify the same thing because the legislature does not use two different expressions without intending to convey different meanings. This rule, however, is not of invariable application and cases are not lacking in which departure has been made from this principle. There are instances when the legislature has used two different words, without intending to make any distinction between them. In the words of Black Burn, J in Hardley v. Perks 1866 L.R. 1 O.B. 414, sometimes without intending to convey different meanings the draftsman uses different language "to improve the grace and the style and to avoid using the same words, over and over again". In Biharilal Kalacharan v. Emperor AIR 1949 Bom, 405 the words "screening any person from legal punishment" used in section 213, Penal Code and "to save ...any person from legal punishment" appearing in sections 217 and 218, Penal Code, were treated to have the same meanings. In State of Bombay v, Heman Sandal Alreja AIR 1952 Bombay 16 the two expressions "existing law" used in Articles 366(1) and 372 and "Law in force" appearing in Article 13 of the Indian Constitution, were considered as synonymous terms though of wider and narrower connotation."

23. For the foregoing reasons it is held that the words "definite" and. ascertainable" have been used in section 21 of the Income Tax Ordinance, 1979 to convey the same meaning of exact, fix and clear shares held by the co?-owners and none of the words have any connotation to include the partition of property by metes and bounds.

24. So far the question of holding 1/7th share by each co-owner and apportionment of the property in the same proportion is concerned we have already shown that the Department accepted this plea of fact from the assessment year 1984-85 to 1987-88 and even in the assessment year 19,88-89. The contention of the learned D.R. that the co-owners have not made investment in equal shares and therefore the shares held by each co-owner are not definite and ascertainable is not tenable for the added reason that admittedly there is an agreement dated 7-8-1982 between the co-owners specifically reciting that "all the co-owners have equal share (1/7th) in the building to be constructed by them namely, M ....A....and they shall bear in equal share the purchase price, Court fee stamps, registration charges, cost of construction and incidental expenses". This agreement between the co-owners cannot be interfered with or ignored by the Income Tax Department in view of the clear observations of the Hon'ble Supreme Court of Pakistan in the case of CIT v. Sieman A.G. (1991) 63 Tax 130 (SC Pak) = 1991 PTD 488; wherein it has been held as follows: "A fundamental principle is established that when two contracting parties agree to do something by mutual valid contract or intend doing so, and it is not prohibited by Islam a third party like the Income Tax Department or for that matter the Court has no power to modify either the contract or with what they intended to do with it ....when parties by mutual free consent enter to a valid contract then the third parties have no right to intervene either to frustrate the contract or to change its nature.

25. The last point which requires examination is the finding of learned CIT (A) that the 1/7th share is not ascertainable and definite because any member choosing to withdraw from the association cannot do it as he would not be able to identify his share in the property and that the arrangement is not known to law. The learned CIT (A) has also observed that due to this deficiency the AOP has been brought into existence on permanent basis which was not contemplated by the provisions of law. Mr. Muhammad Farid has submitted that the above observations are not in consonance with the provisions contained in Transfer of Property Act, In this behalf he has placed reliance on section 47 of the Transfer of Property Act which has been reproduced in para 10 of this Order. We are .of the opinion that section 47 is not relevant and is not attracted to the facts of the case because it deals with the transfer by-co-owners of share in common property. In the present case the relevant sections are sections 7, 8, 44 and 45 of the Transfer of Property Act. Section 45 has been referred by Hon'ble Judges of Lahore High Court also in the case of Abdur Rehman (supra). The above sections read as follows: "Section

7. Persons competent to transfer.--Every person competent to contract and entitled to transferable property, or authorised to dispose of transferable property not his own, is competent to transfer such property either -wholly or in part, and either absolutely or conditionally, in the circumstances, to the extent and in the manner allowed and prescribed by any law for the time being in force. "Section

8. Operation of transfer.--Unless a different intention is expressed or necessarily implied, a transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property, and in the legal incidents thereof. Such incidents include, where the property is land, the easements annexed thereto, the rents and profits and thereof accruing after the transfer, and all things attached to the earth; and, where the, property is machinery attached to the earth, the movable parts thereof. and, where the property is a house, the easements annexed thereto, the rent thereof accruing after the transfer, and the locks, keys, bars, doors, windows and all other things provided for permanent use therewith; and, where the property is a debt or other actionable claim, the securities therefor (except where they are also for other debts or claims not transferred to the transferee) but not arrears. of interest accrued before the transfer; and, where the property is money or other property yielding income, the interest or income thereof accruing after the transfer takes effect. Section

44. Transfer by one co-owner: --Where one or two or more co?-owners of immovable property legally competent in that behalf to transfer his share of such property or any interest therein, the transferee acquires, as to such share or interest, and as far as is necessary to give effect to the transfer the transferor's right to joint possession or other common or part enjoyment of the property, and to enforce a partition of the same, but subject to the conditions and liabilities affecting, at the date of the transfer, the share or interest so transferred. Where the transferee of a share of a dwelling-house belonging to an undivided family is not a member of the family, nothing in this section shall be deemed to entitle him to joint possession or other common or part enjoyment of the house. Section

45. Joint transfer for consideration.--Where immovable property is transferred for consideration to two or more persons, and such consideration is paid out of a fund belonging to them in common, they are, in the absence of a contract to the contrary, respectively, entitled to interest in such property identical, as nearly as may be, with the interest to which they were respectively entitled in the fund; and, where such consideration is paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contrary respectively, entitled to interest in such property identical, as nearly as may be with the interest to which they were respectively entitled in the fund; and, where such consideration is paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contrary, respectively entitled to interest in such property in proportion to the shares of the consideration which they respectively advanced. In the absence of evidence as to the interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such persons shall be presumed to be equally interested in the property."

26. The observation of the learned CIT (A) that the AOP has been created on permanent basis because no co-owner can secede at any point of time for want of partition provision is not correct. It has been held by Andra Pradesh High Court in the judgment reported as AIR 1957 AP 619 that the interest of a co-sharer in common property can be sold, mortgaged or leased to another co?-sharer or to a stranger. Sections 7, 8 and 44 of the Transfer of Property Act, recognize the validity of such transfers.

27. For the foregoing reasons we are of the considered view that the Assessing Officer was not justified in refusing to extend the benefit of section 21 to the appellant and likewise the learned C.I.T.(A) misdirected himself in holding that the treatment meted out by the Assessing Officer was justified because the property was not partitioned by metes and bounds to the extent of shares held by the co-owners. The learned C.I.T. (A) also fell in error in holding that in the absence of partition provision the A.O.P. was created on permanent basis and no co-sharer could secede from the arrangement arrived at between them or that the arrangement was compulsive. The provisions contained in the Transfer of Property Act clearly envisage such arrangement and acquiring of property in co-ownership as done by the appellants. The right, title and interest of each co-sharer in the joint property is well protected under the provisions of the Transfer of Property Act. It is further held that the view taken by the learned Members of the Division Bench while deciding the appeal for the immediately preceding year does not lay the law correctly. It appears that the learned Members of the Division Bench seized of the case in the immediately preceding year were not properly assisted and thus due to lack of assistance the points requiring consideration could not be thrashed out and exposed properly.

28. Consequent to above findings it is held that the learned two officers below misdirected in refusing to extend the provisions of section 21 of the Income Tax Ordinance, 1979 to the appellants and, therefore, the impugned findings of the learned two officers below are hereby vacated. The assessment order is set aside and the assessing officer is directed to complete the assessments in respect of the property income from M?A?in accordance with the provisions contained its section 21 of the . Income Tax Ordinance, 1979.

29. The appeal is allowed as above. M.B.A./23/T.T,??????????? Appeal allowed.