G.K. Govinda Bhat, C.J.
1. Income-tax Appellate Tribunal, Bangalore Bench has stated a case and referred the following question of law for the opinion of this Court :
'Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there was no sale by the deed dated 8-2-1968 and hence the assessee was liable to capital gains tax on the assets transferred to him under the deed, with reference to the cost of acquisition to the settlor ?'
2. On 13-10-1962 the late Cyprian Joachim D'Souza executed a will under which he left certain movable and immovable properties appointing his son-in-law Mr. Edwin D'Souza to be the sole executor of the will. Under the will the executor was directed to discharge all debts of the testator, pay Rs. 20,000/- towards charity and out of the residue to pay one-third to one of his sons, the assessee W. M. P. D'Souza, one-third to the assessee's brother Clifford and the remaining one-third to be divided equally amongst the three daughters of the testator.
3. The executor obtained probate of the Will from the District Court, South Kanara and administered the estate for some time. On 8-2-1968 before the administration was completed, he transferred the entire remaining assessees to the assessee. The assessee undertook to discharge the debts to the extent of Rs. 1,05,000/- due to various creditors mentioned in the list of liabilities annexed to the deed of transfer, which is Annexure-B, to pay Rs. 5,000/- to each of the three daughters of the testator and Rs. 15,000/- to the assessee's brother Clifford P. D.'Souza. On 30-7-1968 and 1-8-1968 the assessee, who is a transferee under the deed aforesaid, transferred two items of properties conveyed to him under the document dated 8-2-1968 for a consideration of Rs. 78,000/-.
4. For the assessment year 1969-70 the assessee submitted a return showing a sum of Rs. 1,840/- as capital gains that arose from the two sales effected by him. The Income-tax Officer assessed the difference in the market value between the two items of properties between 1-1-1954 and the respective dates of sale and assessee the cost of acquisition of the two items of properties must be with reference to the testator and if that is done the relevant date is 1-1-1954. The Income-tax Appellate Asstt. Comm. held that there was no transfer by the deed dated 8-2-1968 in favour of the assessee as the executor was not competent to transfer the estate. On second Appeal the Income-tax Appellate Tribunal held that the executor was competent to transfer the estate which had vested in him by virtue of the Will and the probate obtained by him, but the said transfer dies not amount to a sale of property and, therefore, the cost of acquisition must be computed with reference to the testator and if that is the relevant consideration, the cost of acquisition has to be computed with reference to the date 1-1-1954. On the reasoning the Tribunal upheld the computation of capital gains made by the Income-tax Officer. At the instance of the assessee the Tribunal has stated a case and referred the above question for opinion of this Court.
5. It is common ground before us that the executor by the deed dated 8-2-1968 has transferred the estate to the assessee, who was one of the beneficiaries under the Will of his father. In order to answer the second part of the question referred, it is not sufficient if the Tribunal records a finding that the deed dated 8-2-1968 is not ownership in exchange of a price paid or promised or part paid and part promised, vide section 54 of the Transfer of Property Act, 1882. A mortgage is one mode of Transfer of Property Act, A mortgage is one mode of transfer of property, vide section 58 of the Transfer of Property Act. A lease is a transfer of a right to enjoy immovable property, vide Section 105 of the Transfer of Property Act. Gift is the transfer of movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee, vide section 122 of the Transfer of Property Act. The creation of a trust also involves transfer of ownership of property, vide section 3 read with section 4 of the Indian Trust Act, 1882. Once the Tribunal holds that it is a transfer of property, it has necessarily to decide as to what is the character of the transfer, whether it is a sale, a trust, or gift, etc. That the assessee is liable to pay capital gains tax is admitted by him. But the quantum of the capital gains depends on the nature or character of the transfer effected by the executor in favour of the assessee by the deed dated 8-2-1968. Since the tribunal has to record a finding as to the true nature of the transfer, and in its absence it is not possible for us to answer the second part of the question, and no purpose will be served by answering the first part of the question we decline to answer the question as now referred. The Tribunal has to hear the parties and record a finding as to the true nature of character of the transfer evidenced by the deed dated 8-2-1968. At that stage the Tribunal has also to decide as to what is the relevant date for the purpose of fixing the cost of acquisition of the two properties. It has to consider as to whether the cost of acquisition should be with reference to the date 8-2-1968 irrespective of the character of the deed.
6. It is ordered accordingly. Parties to bear their own costs.