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Commissioner of Gift-tax, Bombay-iii Vs. Matilda Ferreira - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberGift-tax Reference No. 3 of 1967
Judge
Reported in[1978]112ITR934(Bom)
ActsGift-tax Act, 1958 - Sections 2
AppellantCommissioner of Gift-tax, Bombay-iii
RespondentMatilda Ferreira
Appellant AdvocateR.J. Joshi, Adv.
Respondent AdvocateS.E. Dastur, Adv.
Excerpt:
direct taxation - conveyance document - section 2 of gift-tax act, 1958 - whether gift in respect of suit property arose in year when gift taken place and municipality agreed to convey property in favour of purchaser or in year when conveyance documents were executed in favour of donee - according to section 2 (12) gift arises only when conveyance document executed in favour of donee - held, gift arose when conveyance document was executed. - - that in the letter dated may 10, 1954, there was nothing to show that there was a gift intended in favor of the daughter-in law and that the daughter-in-law could at best be the benamidar of the assessee till the actual conveyances were executed in her favour. 19. even apart from that, the other conduct of the parties clearly shows that by.....kantawala, c.j. 1. this reference is at the instance of the revenue and it relates to the gift-tax assessment for the assessment year 1959-60 for which the relevant previous year ended on march 31, 1959. 2. smt. matilda ferreira, the assessee, is an individual. on june 18, 1941, by his letter addressed to the municipal corporation of bombay one, s. rodrigues offered to purchase two plots of land, namely, plots nos. 14 and 15 admeasuring 2,414 sq. yds. and 2,259 sq. yds. respectively, situate at mahim bazar cross road at the rate of rs. 8-8-0 per sq. yd. along with this offer an earnest amount of rs. 3,973 was paid and the balance of the price of rs. 35,747-8-0 was to be paid within one month from the date of the receipt of the intimation that the land was ready for being handed over......
Judgment:

Kantawala, C.J.

1. This reference is at the instance of the revenue and it relates to the gift-tax assessment for the assessment year 1959-60 for which the relevant previous year ended on March 31, 1959.

2. Smt. Matilda Ferreira, the assessee, is an individual. On June 18, 1941, by his letter addressed to the Municipal Corporation of Bombay one, S. Rodrigues offered to purchase two plots of land, namely, plots Nos. 14 and 15 admeasuring 2,414 sq. yds. and 2,259 sq. yds. respectively, situate at Mahim Bazar Cross Road at the rate of Rs. 8-8-0 per sq. yd. Along with this offer an earnest amount of Rs. 3,973 was paid and the balance of the price of Rs. 35,747-8-0 was to be paid within one month from the date of the receipt of the intimation that the land was ready for being handed over. There was a superstructure on the plot which was also offered to be purchased for Rs. 300. Clause 9 of the letter contains one of the terms on the basis of which the offer to purchase was made and it runs as under :

'9. The conveyance shall be purchase was made and it runs as under in the name of such person or persons as may with his/their consent in writing be directed by me/us.'

3. Clause 10 of the terms provides that a sum of Rs. 230 was to be deposited out of which a sum of Rs. 30 was for charges for preparation of a plan and the balance towards professional costs of the legal assistant to the Corporation of Bombay. By a letter dated July, 16, 1941, the Deputy Commissioner (Improvements), Bombay Municipality, sent a reply accepting the offer. On February 15, 1943, M/s. Daphtary Ferreira and Divan wrote a letter to the Estate Agent and Land Manager, Bombay Municipality, informing the municipality that S. Rodrigues had agreed to purchase from the municipality the said two plots as a nominee of Dr. John Joseph Ferreira and Mrs. Matilda Ferreira (the assessee), who had actually paid the entire consideration monies. By this letter the attorneys requested the municipality to confirm that all the monies due and payable in respect of the said two plots were paid by Dr. John Joseph Ferreira and Mrs. Matilda Ferreira. By this letter the attorneys requested the municipality that drafts of two separate conveyances of plots Nos. 14 and 15 should be sent for approval prepared in favour of Dr. John Joseph Ferreira and Mrs. Matilda Ferreira as joint tenants and not as tenants-in-common and informing that in the said conveyances S. Rodrigues would be joining as a confirming party. In view of the request so made for separate draft conveyances the municipality wrote a letter on February 25, 1943, asking for additional deposit of Rs. 230 for the cost of preparation of the additional conveyance, together with a letter from S. Rodrigues requesting the municipality to transfer the receipts in the name of Dr. John Joseph Ferreira and Mrs. Matilda Ferreira. The sum of Rs. 230 which was asked for was paid under the cover of a letter dated November 25, 1943, and the original deposit of Rs. 230 was also transferred to the account of Dr. John Joseph Ferreira and Mrs. Matilda Ferreira. By a letter dated December 20, 1943, the Estate Agent and Land Manager of the municipality informed the attorneys that the Deputy Municipal Commissioner (Improvements) has been pleased to sanction the preparation of two separate conveyances as desired by them. There were certain disputes about the access to the two plots as a result of which actual execution of the conveyances was delayed. On May 10, 1954, the attorneys acting for S. Rodrigues and also for Dr. John Joseph Ferreira and Mrs. matilda Ferreira, inter alia, stated that their clients namely, S. Rodrigues, Dr. John Joseph Ferreira and Mrs. Matilda Ferreira, desired that both the conveyances of plots Nos. 14, and 15 be taken in the name of Francisca Ferreira (daughter-in-law of the assessee). The municipality was informed that no consideration was passing. Accordingly, the attorneys desired that fresh draft conveyances should be prepared by the municipality in favour of Francisca ferreira. That letter of the attorneys was replied to by the Estate Agent and Land Manager by his letter dated July 27, 1954, whereby the attorneys were informed that necessary sanction to prepare the two conveyances in respect of the plots Nos. 14 and 15 in the name of Shri (sic. 'Smt') Frances Ferreira had been obtained. By this letter a further requested was made to the attorneys to return at an early date the two draft conveyances, which were already sent to the attorneys, for revising them. On September 19, 1956, two draft conveyances in respect of the said plots in favour of Mrs. Francisca Ferreira (which is the Christian name of Frances Ferreira) were forwarded to the estate Agent and Land Manager for revising the same. The Estate Agent and Land Manager of the Municipality by his letter dated July 4, 1957, informed the attorneys that the matter regarding the preparation of conveyances in favour of Mrs. Francisca Ferreira was taken in hand and they would be informed when they were ready. After some delay the two conveyances were actually executed on June 6, 1958. To each one of these conveyances there were three parties, namely, (1) the Municipal Corporation of Greater Bombay, (2) S. Rodrigues as confirming party and (3) Mrs. Francisca Ferreira as purchaser. Both these conveyances have been duly registered.

4. So far as the possession of the two plots Nos. 14 and 15 was concerned, the same was handed over to the assessee some time after July 16, 1941. Plot No. 14 remained vacant. Plot No. 15 was leased out to one A. P. Bhatia for a yearly rental of Rs. 7,800. Bhatia thereafter constructed a building. Flats in the said building were given over to some persons on ownership basis. There was some litigation between A.P.Bhatia and the assessee and between the assessee and the occupants subsequent to the aforesaid lease. the rent of Rs. 7,800 that was received from A.P.Bhatia was assessed to income-tax by the taxing authorities in the hands of the assessee, though it was not returned by her for the assessment year 1956-57 and thereafter. The rent receipts continued to be credited to her bank account even after the documents were executed in favour of Mrs. Francisca Ferreira by the Municipality. The amounts received as and by way of rent were said to have been utilised to meet the expenses of the litigation. There is no controversy between the parties that Mrs. francisca Ferreira, who is the daughter-in-law of the assessee, became the owner of the both the plots and after June 6, 1958.

5. In the gift-tax proceedings the Gift-tax Officer took the view that there was transfer of property by the assessee in favour of Mrs. Francisca Ferreira on June 6, 1958, as a result of which gift-tax became payable. the contention on behalf of the assessee that the gift had already taken place in May or June 1954, when the municipality had agreed to convey the lands in favour of Mrs. Francisca Ferreira was rejected.

6. In an appeal by the assessee, the Appellate Assistant Commissioner held that the gift was completed only in June, 1958, relevant to the assessment year 1959-60. While reducing the quantum of valuation made by the Gift-tax Officer he confirmed the assessment in principle. During the course of the hearing before the Appellate Assistant Commissioner an affidavit was filed by Mrs. Francisca Ferreira. In a second appeal by the assessee before the Tribunal it was contended on her behalf that she had only a right to conveyance and that that right was transferred in favour of the daughter-in-law in 1954 and that, therefore, there was no assessable gift in the year under appeal. It was also submitted on her behalf that in order to make a gift of the right to conveyance effective, there was no need for any registered document. On the other hand, on behalf of the revenue it was contended that there was no gift in the year 1954; that the gift took place only in the year 1958 when the two conveyances were executed; that in the letter dated May 10, 1954, there was nothing to show that there was a gift intended in favor of the daughter-in law and that the daughter-in-law could at best be the benamidar of the assessee till the actual conveyances were executed in her favour. It was also urged on behalf of the revenue that there was nothing to show that there was any transfer of possession or enjoyment of the gifted property by the daughter-in law after 1954. The Tribunal held that the properties were actually transferred in 1954; that the daughter-in-law was not the benamidar and that there was no assessable gift in the relevant year. So far as the question of valuation was concerned, in view of this finding it found that it was not necessary to go into the same. However, in its order it has stated that if its decision on the quantum of valuation was necessary, the Tribunal would hold that the value that it would take in the wealth-tax appeals for that year would be the value as on the date of the gift.

7. On the basis of this order of the Tribunal for the assessment year 1959-60 for which the relevant previous year ended on March 31, 1959, the following two questions are referred to us for our determination at the instance of the revenue :

'1. Whether, on the facts and in the circumstances of the case, the gifts in respect of plots Nos. 14 and 15 arose in 1954 or on June 6, 1958, when the conveyance documents were executed

2. Whether in the even of the gift being held to have been effected in 1958, was there a gift of all the rights in respect of the two plots Nos. 14 and 15 ?'

8. Mr. Joshi on behalf of the revenue submitted that if regarded be had to all the facts and circumstances on the records, it is quite clear and evident that the Tribunal was in error in taking the view that the gift actually took place in the year 1954 in favour of the daughter-in-law. His submission was that there was no transfer of property by the assessee in favour of her daughter-in-law, Mrs. Francisca Ferreira, at any time during the year 1954. Whatever correspondence was carried on during that year as regards execution of conveyances, he submitted, was in view of an enabling provision contained in one of the terms of the offer, namely, that the conveyance would be prepared either in the name of S. Rodrigues or in the name of such person or persons as may with his consent in writing be directed by him. Simply because a request was made in May, 1954, to prepare conveyances in respect of both the plots Nos. 14 and 15 in favour of Mrs. Francisca Ferreira, daughter-in-law of the assessee, there was no transfer of property, much less a gift, in that year, even though the Corporation agreed to execute such conveyances. Such a request, according to his submission, was made in view of the enabling provision contained in clause 9 of the terms and conditions and simply because a right is reserved to a purchaser to have a conveyance in respect of the plots executed in favour of his nominee, it cannot be said that by selecting a nominee for preparation of conveyance in respect of the plots executed in favour of his nominee, it cannot be said that by selecting a nominee for preparation of conveyance, a transfer of property, much less a gift, is intended to have taken place at that time. His submission was that right or interest in the two plots Nos. 14 and 15 or even the right to have a conveyance executed in favour of the daughter-in-law so as to make her the full owner and to be clothed with the full rights of an owner came into existence for the first time on June 6, 1958, when the two conveyances were executed by way of tripartite documents, namely, duly signed by (1) The Municipal Corporation of Greater Bombay, (2) S. Rodrigues as confirming party, and (3) by mrs. Francisca Ferreira as purchaser, Till these conveyances were executed, he submitted, that Mrs. Francisca Ferreira had no interest in any one of the plots or even a right to have conveyance or any right which may be available to a legal owner of any immovable property. He emphasised that in deciding the question whether a gift took place in the year 1954 or in the year 1958, regard must be had to the following circumstances, namely, who was in possession of these plots Nos. 14 and 15 prior to the execution of the conveyance; who were receiving the rents and profits, if any, derived from the property and whether, in the absence of a proper writing, as contemplated by section 130 of the Transfer of Property Act, so as to transfer and assign an actionable claim, can it be said that any right was acquired by the daughter-in-law, Mrs. Francisca Ferreira, so as to obtain a conveyance from he municipality in her own name as a matter of right in order that she may become a full owner in respect thereof and be clothed with rights of a full owner which a legal owner will have. According to his submission, until the execution of the two conveyances on June 6, 1958, Mrs. francisca Ferreira had no right whatever in any of the plots Nos. 14 and 15 and it cannot be said that prior to the execution of these conveyances she became owner of these plots or had any interest therein as a result of the gift in the year 1954. So far as question No. 2 was concerned he submitted that since the price was paid very early either in 1941 or 1942 nothing remained to be done by the purchaser except to have a conveyance in his favour. By reason of the two deeds of conveyance which were tripartite documents between the Bombay Municipal Corporation, S. Rodrigues as a confirming party and Mrs. Francisca Ferreira as a purchaser, she became a legal owner of these plots because, thereby as a purchaser, she became a legal owner of these plots because, thereby as a confirming party, s. Rodrigues requested the Municipal Corporation to transfer the two plots in her favour. It was after the execution of these two conveyances that she acquired rights as a legal owner in the two plots including the right to possession and the right to receive rents and profits, if any. He, therefore, submitted that the value of these plots which was the subject-matter of the gift in June, 1958, would be equivalent to the market value of the plots Nos., 14 and 15 as prevailing in June. 1958.

9. Mr. Dastur, on the other hand, on behalf of the assessee submitted that by reason of the request made by the attorneys in the letter dated May 10, 1954, and the acceptance thereof by the municipality as communicated by their letter dated July 27, 1954, whatever was required to be transferred to Mrs. Francisca Ferreira was complete in 1954 and if at all there was a gift it took place in that year. He urged that under a contract to purchase immovable property, neither or right in any immovable property and no writing whatsoever was necessary to transfer such a right in any immovable property and no writing whatsoever was necessary to transfer such a right in favour of the daughter-in-law, Mrs. Francisca Ferreira. He urged that the right of the assessee as then existing in the year 1954 was not an actionable claim as defined in section 3 of the Transfer of Property Act and for assignment of such a right neither the provisions of section 130 of the Transfer of Property Act were applicable nor any writing required. In the alternative, he submitted that if the right to obtain a conveyance pursuant to an agreement itself is regarded as an actionable claim then in the present case having regard to the correspondence that took place between the attorneys and the municipality in the year 1954, the provisions of section 130 of the Transfer of Property Act were fully complied with and there was an effective assignment or transfer in that year. He further submitted that the question will have to be considered whether by execution of the two conveyances on June 6, 1958, there was a gift as defined by the Gift-tax Act, 1958 (hereinafter referred to as 'the Act'). At no time prior to the execution of these conveyances the assessee was the owner of either of the two plots Nos. 14 or 15 and if the assessee was the owner of either of the two plots then by reason of the execution of the conveyances on June 6, 1958, it cannot be said that the assessee was a donor and there was a gift within the meaning of section 2(xii) of the Act. So far as question No. 2 referred to us was concerned, he submitted, that the right to convey the two plots was already transferred to Mrs. Francisca Ferreira in the year 1954 and it is only the right to possession and the right to receive rents and profits that will have to be valued if at all a gift has taken place in June 1958, by reason of the execution of the two deeds of conveyance.

10. Before we deal with the facts of the case, it will be necessary to consider the relevant provisions of the Act. Section 3 is the charging section and provides as under :

'3. Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the 1st day of April, 1958, a tax (hereinafter referred to as gift-tax) in respect of the gifts, if any, made by a person during the previous year (other than gifts made before the 1st day of April, 1957), at the rate or rates specified in the Schedule.'

11. On a plain reading of the language of the charging section it is quite apparent that the liability to pay gift-tax will only arise if there is a gift as contemplated by the Act. the word 'gift' is defined by the relevant Act as under :

'2. (xii) 'gift' means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth and includes the transfer of any property deemed to be a gift under section 4.'

'2. (xxiv) 'transfer of property' means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation or property and, without limiting the generality of the foregoing includes - ...'

12. the first contention that we have to consider in this case is whether as a result of the correspondence that was carried on in the year 1954 any transfer of property took place in that year as understood under the Act. In the present case, the contract to purchase plots Nos. 14 and 15 took place as a result of the correspondence. the offer to purchase there plots was made by S. Rodrigues by his letter dated June 18, 1941, written to the Estate Agent and Land Manager, Bombay Municipality, and it was subject to the terms and conditions that were contained in that letter. This offer made by S. Rodrigues was accepted by the Municipal Corporation on July 16, 1941. Such acceptance was communicated by the Deputy Municipal Commissioner (Improvements). The letter of acceptance is worded as under :

'I hereby accept the above offer, the sanction of the Improvements Committee to its acceptance under section 92(b) of the City of Bombay Municipal Act, 1888, having been obtained.'

13. It is common ground that along with the letter of offer and earnest amount of Rs. 3,973 was sent to the municipality and the entire balance of the price of Rs. 35,747-8-0 was paid within a short time thereafter as contemplated by the terms and conditions of the offer. After the offer was accepted by the municipality, in February, 1943, M/s Daphtary Ferreira and Divan as attorneys of Rodrigues and Dr. John Joseph Ferreira and the assessee wrote a letter, inter alia, stating that S. Rodrigues who had made the offer had acted in the matter as a nominee of Dr. John Joseph Ferreira and the assessee who had actually paid the entire consideration monies. By this letter the attorneys requested that the monies that have been paid in respect of this offer for purchase of the two plots were actually paid by Dr. John Joseph Ferreira and the assessee, and try requested that two separate conveyances be arranged for plots Nos. 14 and 15 in favour of Dr. John Joseph Ferreira and the assessee, and the draft conveyances should be sent to them for their approval. The request made by the attorneys was sanctioned by the municipality as communicated by the letter of the Estate Agent and Land Manager dated December. 1943. Due to certain disputes about the access to the two plots the actual execution of the conveyances was delayed. On May 10, 1954, the attorneys of S. Rodrigues and Dr. John Joseph Ferreira and the assessee, inter alia, informed the Estate Agent and Land Manager, Bombay Municipal Corporation, as under :

'We have now been instructed by our clients to state that they desire that both the conveyances of plots Nos. 14 and 15 be taken in the name of Frances Ferreira. No consideration is passing. We will be glad to have fresh draft conveyances from you in favour of Frances Ferreira.'

14. That suggestion of the attorneys was accepted by the municipality on July 27, 1954, and such acceptance was communicated by the Estate Agent and Land Manager by his letter of the same date, inter alia, stating that necessary sanction to the preparation of two conveyances in respect of the plots Nos. 14 and 15 in the name of Shri (sic.'Smt.') Frances Ferreira had been obtained. It is on the construction of these two letters that the real controversy between the parties has arisen, namely, whether these two letters read together amount to 'transfer of property' of whatever interest, Dr. John Joseph Ferreira and the assessee had the contract to purchase the two plots.

15. Our attention was invited by Mr. Dastur on behalf of the assessee to the effect of contract for sale as stated in section 54 of the Transfer of Property Act. That section, inter alia, lays down that 'contract of sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property'. Relying upon these provisions the argument of Mr. Dastur is that by reason of these provisions merely because there was contract to purchase plots Nos. 14 and 15 from the municipality, thereby by itself no interest in or charge upon any of the plots was created in favour of the purchaser. It is quite clear that a mere contract for purchase of immovable property by itself creates no interest in or charge upon the property. Definition of the expression 'immovable property' has been given in section 3(26) of the General Clauses Act as under :

'3. (26) 'immovable property' shall include land, benefit to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.'

16. The expression 'movable property' is defined by section 3(36) of the General Clauses Act to mean 'property of every description, except immovable property'. since as provided in section 54 of the Transfer of Property Act a contract for the sale of immovable property does not, of itself, create any interest in or charge on such property, the right of the purchaser under such contract cannot be regarded as immovable property, but the definition of the words 'movable property' in the General Clauses Act is a residuary definition and whatever is not immovable property is regarded as movable property. Thus, the right of a party, either a purchaser or a seller, under a contract to purchase an immovable property is a 'movable property'.

17. If Dr. John Joseph Ferreira and the assessee wanted to transfer or assign their interest under the contract to purchase these two plots in favour of their daughter-in-law, Mrs. Francisca Ferreira, then the question will have to be considered, what is the nature of such interest which is intended to be transferred and how can it be effected and whether such interest under a contract to purchase the two plots of land is an actionable claim shall have to be considered. 'Actionable claim' has been defined in section3 of the Transfer of Property Act to mean any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledged of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. A purchaser who has paid the whole of the price is entitled to have a conveyance executed in his or her favour. In the present case, it appears that after the full price was paid Dr. John Joseph Ferreira and the assessee were put in possession of both the plots. So far as plot No. 14 was concerned, it was kept vacant till the conveyance was executed in June, 1958. However, so far as plot No. 15 was concerned, it was agreed to be let out to one A. P. Bhatia on the annual rent of Rs. 7,800. Bhatia was already put in possession of the plot and he had constructed on ownership building with a view of sell out the flats therein. Notwithstanding the securing of possession the right to have a conveyance in respect of both the plots so that Dr. John Joseph Ferreira and the assessee may become legal owners thereof is beneficial interest in movable property because the expression 'movable property' included everything other than immovable property. Such a beneficial interest in movable property is an actionable claim as defined in section 3 of the Transfer of Property Act. So far as actionable claim is concerned, it can be transferred only in the manner provided by section 130 of the Transfer of Property Act. It, inter alia, provides that the transfer of an actionable claim whether with or without consideration shall be effected only by the execution of an instrument in writing signed by the transferor or his dully authorised agent, shall be complete and effectual upon the execution of such instrument, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer as later on provided in the section has been given or not. In view of that it is not possible for us to accept the contention of Mr. Dastur that no writing was required for transfer of whatever interest Dr. John Joseph Ferreira and the assessee had under the contract to purchase plots No. s 14 and 15 from the municipality.

18. The question then arises whether the right of Dr. John Joseph Ferreira and the assessee to have a conveyance in their favour has been assigned or transferred in favour of Mrs. Francisca Ferreira, their daughter-in-law. It is the contention of Mr. Dastur that such writing has been executed as a result of the correspondence that took place between the attorneys of the parties and the municipality in the year 1954. There are two letters relevant for the present purpose, namely, letters dated May 10, 1954, written by the attorneys to the Estate Agent and Land Manager, Bombay Municipal Corporation, and the reply from the Estate Agent and Land Manager dated July 27, 1954, whereby he informed the attorney that necessary sanction to the preparation of the two conveyances in respect of plots Nos. 14 and 15 in the name of Smt. francisca Ferreira had been obtained. It is strongly urged by Mr. Dastur that the letter dated May 10, 1954, is the execution of an instrument in writing whereby the actionable claim is transferred as contemplated by section 130 of the Transfer of Property Act. So far as that letter is concerned, there is nothing to indicate that by requesting the municipality their right to purchase any of the two plots was being transferred by Dr. John Joseph Ferreira and the assessee to Mrs. Francisca Ferreira. This letter has to be read in the context of one of the terms subject to which the offer to purchase, the two plots was made by S. Rodrigues and that is the term and condition No. 9 stated in the letter of offer. By that term the offer to purchase was made subject to the condition that the conveyance shall be prepared 'in my/our name or names or in the name of such person or persons as may with his/their consent in writing be directed by me/us'. This is a normal right which a purchase has under the usual terms of a contract. It if in exercise of this right that initially M/s. Daphtary Ferreira and Divan as the attorneys of S. Rodrigues and Dr. John Joseph Ferreira and the assessee, required the municipality to execute the conveyances in respect of both the plots in favour of Dr. John Joseph Ferreira and the assessee and as it has been made clear, the contract was entered into by S. Rodrigues had merely acted as nominee of these two persons. Thus, when by letter dated May 10, 1954, the attorneys requested the Bombay Municipal Corporation that Dr. John Joseph Ferreira and the assessee desired to have the conveyances of plots Nos. 14 and 15 made in the name of Mrs. Francisca Ferreira as a nominee in whose favour they were intending to have the conveyances. There is nothing in the language of the letter dated May 10, 1954, to indicate that by writing such a letter addressed to the municipality they or any of them were transferring their right to have the conveyances in favour of Mrs. Francisca Ferreira. If the beneficial interest of Dr. John Joseph Ferreira and/or the assessee under the contract to purchase these two plots was to be assigned or transferred in favour of Mrs. Francisca Ferreira, one would have expected an instrument in writing where by such right is assigned and it will further be coupled with transfer of possession and from and after that date the normal conduct would have been that rent in respect of plot No. 15 which was agreed to be let out to A. P. Bhatia would have been realised by Mrs. francisca Ferreira. There is no such writing signed by any of these two persons transferring the right to have a conveyance under the contract to purchase these plots from the municipality and it is not possible for us to construe the letter dated May 10, 1954, as amounting to a transfer whereby the right of these two persons to have a conveyance in their favour is being transferred in favour of Mrs. Francisca Ferreira.

19. Even apart from that, the other conduct of the parties clearly shows that by writing such letter the only request that was made to the Bombay Municipality was the one contemplated by clause 9 of the terms and conditions of the offer. If the two real purchasers intended to transfer their rights under the contract then subsisting in favour of Mrs. Francisca Ferreira one would have expected that the possession of both the plots ought to have been given Mrs. Francisca Ferreira and so far as plot No. 15 was concerned, rent thereafter ought to have been realised by her. So far as question of possession was concerned, Mr. Dastur has urged that there is a clear finding of the Tribunal to the effect that having regard to the relationship of the parties and their course of conduct there was a transfer of possession. He submitted that if the revenue wanted to challenge the correctness of this finding either as being perverse or without being based on any evidence, it should have asked for a question to be drawn on that matter. In this connection, he relied upon the decision of the Supreme Court in Commissioner of Income-tax v. Greaves Cotton and Co. Ltd. : [1968]68ITR200(SC) . The Supreme court there has laid down that it is well established that the High Court is not a court of appeal in a reference under section 66 of the Indian Income-tax Act, 1922, and it is not open to the High Court in such a reference to embark upon a re-appraisal of the evidence and to arrive at findings of fact contrary to those of the Appellate Tribunal. The High Court should confine itself to the facts as found by the Appellate Tribunal and to answer the question of law referred to it in the context of those facts. A finding of fact may be defective in law if there is no evidence to support it or if the finding is unreasonable or perverse, but it is not open to the assessee to challenge such a finding of fact unless he has applied for a reference of the specific question under section 66(1). It is for the party who applies for a reference to challenge those findings of fact first by expressly raising the question about the validity of the findings of fact, and if he has failed to do so, he not entitled to urge before the High Court that the findings of the Appellate Tribunal are vitiated for any reason.

20. In the present case, the first question that has been raised is whether, on the facts and in the circumstances of the case, the gifts in respect of plots Nos. 14 and 15 arose in 1954 or on June 6, 1958, when the conveyance documents were executed. This question is wide enough to include within its scope all the relevant facts for coming to a conclusion whether there was a gift in the year 1954 or in June, 1958. All ancillary facts in that connection are germane to this question. In the present case, one thing is very clear that so fact as plot No. 14 was concerned at the relevant time it was vacant and qua its possession no distinct circumstances may exist to indicate who was in possession thereof. So far as plot No. 15 was concerned, it was agreed to be let out to A. P. Bhatia. The said plot was actually let out to A. P. Bhatia who had constructed a building thereon and had sold the flats therein on ownership basis. The annual rent of the plot was Rs. 7,800. So far as plot No. 15 is concerned there is a clear finding of fact as regards receipt of rent in respect thereof. So far as that plot is concerned actual possession will naturally be with Bhatia who had agreed to take it on lease and had constructed a building thereon but who was in symbolic possession of that plot. The Tribunal has come to a clear finding that the rents received from the property let out to Bhatia were not enjoyed by the daughter-in-law. The receipts went into the bank account of the assessee. this continued to be the position even after the conveyances were taken in the year 1958 received from A. P. Bhatia was assessed to income-tax in the hands of the assessee though it was not returned by her for the assessment year 1956-57 and thereafter. The rent receipts continued to be credited to her bank account even after the documents were executed in favour of Mrs. Francisca Ferreira by the municipality. This finding of fact clearly shows who was the party held to be in symbolic possession of plot No. 15.

21. Reliance was, however, placed by Mr. Dastur upon the observations of the Tribunal in the order as regards the manner in which the rent was found to have been utilised. In fact, rather than dealing with the evidence and question of fact this aspect of the matter appears to have been dealt with in a haphazard manner. In the whole of the order of the Tribunal there is no reference to any piece of evidence as regards the user of the rent that was received by the assessee from and after May, 1954. It was only a contention raised on behalf of the assessee that has been considered by it. Such a contention has been answered by a mere surmise rather than by giving a clear finding. Taking advantage of the litigation that was existing between the assessee and Bhatia on the one hand and the assessee and the occupants of flats on the other, the Tribunal has observed in the order : 'The costs of litigation would have to be borne by the daughter-in-law after she became the owner of the rights under the letter dated May 10, 1954. Thereafter she was under an obligation to meet the expenses.' This is only an inference draw based upon the fact that according to Tribunal the daughter-in-law became the owner of the rights from and after May 10, 1954. As we have pointed out earlier, the letter dated May 10, 1954, is not an assignment or transfer of an actionable claim, namely, the right to receive a conveyance under the contract with the municipality and the very finding is the subject-matter of the question whether she became the owner in 1954 or in 1958. If upon appreciation of the entire material in May, 1954, or at any time during the year 1954, the daughter-in-law was not a transferee of any right qua the municipality, then such observations of the Tribunal will be utterly meaningless. Further, there is a surmise upon surmise to the effect that 'it is perhaps possible to say that every pie of the receipt had not been fully utilised by the daughter-in-law, but having regard to the relationship of the parties, when the amounts were utilised for running the family when they were all staying together, there would be the enjoyment of the daughter-in-law to the fullest extent.' On what material this surmise is based is not stated in the order at all. Actually such surmises were made with a view to come to the conclusion that the properties were actually transferred to the daughter-in-law in 1954, which finding of the Tribunal, in our opinion, as pointed out earlier is unsupportable. Thus, the aspects of the matter which are required to be considered for determination of question No. 1 referred to us have to be gone into on the facts and circumstances of the case as found by the Tribunal and the very receipt of the rents by the assessee right up to the date of the conveyances and even thereafter clearly indicates that not even symbolic possession of plot No. 15 was with the daughter-in-law.

22. Referring to the cases relied upon by Mr. Dastur we shall first refer to the decision of the Bombay High Court in the case of Chimanbhai Lalbhai v. Commissioner of Income-tax : [1958]34ITR259(Bom) . This was a case where there as a completed gift prior to the coming into force of the Act and neither the principal enunciated therein nor the findings on facts are comparable to the facts of the present case. In that case, the assessee made a gift of Rs. 5 lakhs to his son, S and of Rs. 2 lakhs to his daughter, P. on November 17, 1952, and he made the necessary entries in his account books on that date. On November 8, 1953, he instructed the joint family firm which acted as his banker and with which he had an account to debit him with the two sums and interest earned up to that date and credit the accounts of S and P with the corresponding amounts. the firm carried out the instructions and submitted a voucher which the assessee signed. Although it considered the transaction bona fide the Tribunal held that the gift was no effectuated on the grounds, (i) that there was no transfer of possession, (ii) that the assessee did not have sufficient amount in credit with the firm on November 8, 1953, and (iii) that the firm itself did not have sufficient case on that date to carry out the directions of the assessee. On a reference before the High Court it was held that it was not necessary for the assessee to have drawn the cash amounts from the banker and handed them over to his son and daughter and the gift was complete by the issue of the directions by the assessee and the firm making the transfers in its account books; that there was not enough money to the assessee's account and the firm chose to allow overdraft facilities to the assessee was not relevant and did not affect the validity of the gift; nor was it necessary that the firm should have had on the date of the transfers in its accounts sufficient funds to carry out the directions of the assessee; the transfers made in the firm's books was in accord with normal banking practice; the fact that it was a joint Hindu family that was functioning as the banker was not relevant and did not affect the validity of the transaction; the transaction being considered bona fide, the considerations which weighed with the Tribunal were irrelevant, the gift was complete and valid and the interest on the amounts transferred to S and P could not be included in the income of the assessee.

23. It is quite clear from the conclusions arrived at by the High Court that much prior to the Act coming into force there was a completed gift of Rs. 5 lakhs in favour of the son and Rs. 2 lakhs in favour of the daughter. Not only was the amount debited to the account of the assessee but both S and P were shown to be the creditors of the respective accounts in books of the joint family firm. this being a completed transaction much prior to the coming into force of the Act there was no question of validity of the gift or the completeness thereof being challenged.

24. Reliance was placed by Mr. Dastur upon the decision of Upjohn J. in Lets v. Inland Revenue Commissioner [1956] 3 All ER 588 : [1957] 32 ITR 58 . The facts of the case were as under :

On the sale in 1944 of a partnership business to a company, the senior partner became entitled by virtue of the sale agreement to have issued to him or his nominees (amount other shares) 7,342 five per cent. first preference shares in the company, credited as fully paid up. It was suggested to the senior partner that he might make a gift of these shares to his three children and on July 29, 1944, he signed a direction 'To the directors (of the company) I... hereby request and authorise you to allot to the under mentioned persons as my nominees the numbers of five per cent. first preference shares of 1 each in the capital of (the company) set opposite their respective names credited as fully paid up, which shares form part of the total number of similar shares which I am entitled to have allotted to me, or my nominees, credited as fully paid up under the provisions of' the sale agreement, and he then specified the names of his three children and divided the shares between them. The shares were allotted to the children pursuant to that direction on February 9, 1945. The senior partner died on October 10, 1949. The question arose whether the preference shares were liable to estate duty on the death of the senior partner as having been the subject of a gift made within five years before his death. It was held that in the circumstances the direction dated July 29, 1944, operated as a valid equitable assignment of the contractual right of the senior partner under the sale agreement to have issued and allotted to him or his nominees the 7,342 preference shares, and, therefore, the gift was perfected by the giving of the direction and the shares were not liable to estate duty on his death more than five years later.

25. This case was decided on its own facts bearing in mind that there was an intention to make a gift and it was pursuant to that intention that the direction to the company was given on July 29, 1958, is there any indication given by Dr. John Joseph Ferreira and/ or the assessee to the effect that they or either of them desired to make a gift of their beneficial interest in the contract to purchase the two plots with the municipality. In the case before us the direction in the letter dated May 10, 1954, has to be understood in the light of clause 9 of the terms and conditions of the offer and nowhere either prior thereto or prior to the execution of the conveyance was there any indication to suggest that a gift of anything was intended to be made in favour of the daughter-in-law.

26. Reliance was placed by Mr. Dastur upon the decision of the Supreme Court in the case of Bharat Nidhi Ltd. v. Takhatmal, : [1969]1SCR595 . This decision was relied upon by Mr. Dastur only for the purpose of showing that an equitable assignment of the actionable claim is recognised in India. We are not concerned with the question whether apart from the provisions of section 130 of the Transfer of Property Act there can be an equitable assignment of an actionable claim or not. What we have to consider is whether having regard to the correspondence between the attorneys and the municipality in the year 1954 there was an assignment, whether equitable or as contemplated by section 130 of the Transfer of Property Act. As we have pointed out earlier while discussing the facts no assignment whatsoever had taken place, when a request was made indicating the desire of Dr. John Joseph Ferreira and/or the assessee to have conveyances executed in respect of the two plots in favour of the daughter-in-law.

27. It was then urged by Mr. Dastur that by the deeds of conveyance dated June 6, 1958, there is no gift of any property in favour of the daughter-in-law. He pointed out that prior to the execution of the deeds of conveyance the assessee was not the owner of any of the two plots. Although the price of the said two plots was paid by Dr. John Joseph Ferreira and the assessee, the legal ownership thereof continued to be with the Bombay Municipal Corporation. Thus by mere execution of the deeds of conveyance both dated June 6, 1958 no property is transferred by the assessee to the daughter-in-law.

28. There are two separate deeds of conveyance in respect of plots Nos. 14 and 15 and both of them are in similar terms. To each one of the deed of conveyance there are three parties. On behalf of the Bombay Municipal Corporation they are signed by the Municipal Commissioner and the Municipal Secretary and the common seal of the Corporation has been affixed thereto. S. Rodrigues who made the offer in the year 1941 has executed the documents as a confirming party and they are also executed by the daughter-in-law, Mrs. francisca Ferreira as purchaser. Prior to the execution of these deeds of conveyance as we have pointed out earlier the only right which the purchaser had was to have a deed of conveyance executed by the municipality in his or her favour.

29. Furthermore, it should not be overlooked that as communicated by the attorneys' letter dated February 15, 1943, S. Rodrigues was merely a nominee of Dr. John Joseph Ferreira and the assessee, and the entire price was paid by them and not by S. Rodrigues. Even this position has been accepted by the municipality. Thus, as a nominee or a benamidar of Dr. John Joseph Ferreira and the assessee, S. rodrigues can be said to have joined in the conveyances as a confirming party. In the deed of conveyance there is a clear recital to the effect that the confirming party, meaning thereby S. Rodrigues, requested the Commissioner on behalf of the Corporation to convey the said land to the purchaser, i.e., Mrs. Francisca Ferreira, which the Commissioner had agreed to do as therein appearing and the very operative part of the deed shows that the Corporation at the request of the confirming party grants and conveys and the confirming party both at the request of the purchaser confirm unto the purchaser all that said land being plot No. 14. Thus, apart from any other recital in the deed of conveyance the grant made by the Corporation in favour of the purchaser at the request of the confirming party is also confirmed by S. Rodrigues at the request of the purchaser. Thus, whatever interest the purchaser had under a contract to purchase with the municipality had been transferred by S. Rodrigues as nominee or benamidar of Dr.,. John Joseph Ferreira and the assessee. Thus, it is not possible for us to accept the contention of Mr. Dastur that by the deed of conveyance the right which the purchaser has, having regard to the facts of the case, to have a conveyance was not transferred to the purchaser. Further, once under the deed of conveyance Mr. Francisca Ferreira becomes the owner of the property she will be not only entitled to secure actual possession wherever possible and where actual possession is not possible to secure symbolic possession, but also to have the right to income and profits of plot No. 15 which was agreed to be let out to A. P. Bhatia. Thus, the entire interest then subsisting in the purchaser under the contract of purchase was transferred by him to Mrs., Francisca Ferreira. There was no question of making any payment to the municipality because whatever obligations the purchaser had under the contract to purchase had already been discharged somewhere in the year 1941 and the only thing that remained to be done was to have a conveyance executed in accordance with law. Thus, the beneficial interest of the purchaser under the contract to purchase is transferred by the deed of conveyance as a result of S. Rodrigues joining therein as a confirming party, and by reason of such execution of the conveyance by the three parties there is a gift within the meaning of section 2(xii) of the Act.

30. That takes us to question No. 2 that has been referred to us for determination. That question is worded on the footing that the gift effected in the year 1958 is in respect of what property. As we have indicated earlier, in 1958 under the contract to purchase, the purchaser had a mere right to have a conveyance executed in his or her favour or in favour of the nominee so as to make the title to the property complete and the transferee, the legal owner thereof, and in order that he or she may be able to enjoy all the rights and incidents of an owner. Thus, by reason of the transfer of the right of the purchaser under the contract to purchase, Mrs. Francisca Ferreira became the legal owner of both plots Nos. 14 and 15 and was entitled to possession and income and profits thereof. The valuation of such right will be the market rate of plots Nos. 14 and 15 on the date of execution of the conveyances, namely, June 6, 1958.

31. Thus, our answers to the questions referred to us are as under :

Question No. 1 : Having regard to the facts and circumstances of the case, the gift in respect of plots Nos. 14 and 15 arose on June 6, 1958, when the conveyance documents were executed.

Questions No. 2 : The gift effected in the year 1958 was in respect of the right the purchaser had under the contract to purchase to have a conveyance in favour of the purchaser so as to make himself the full legal owner and to entitle himself to the rights of ownership such as possession, rents and profits and the value of the same is equal to the market value of the plots Nos. 14 and 15 as prevailing on June 6, 1958, being the date of execution of the conveyances.

32. The assessee shall pay the costs of the revenue.


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