JAGDISH SAHAI J. - Originally at the instance of Messrs. Abdul Hai Azimullah, who is the assessee in the present case and have been hereinafter called as such, a statement of the case was submitted to this court and the following question of law was referred under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) :
'Whether, on the facts and circumstances of the case, the income of Rs. 2,550 derived as rent from the shops on the lands belonging to the other parties was a revenue receipt assessable to income-tax ?'
The assessee had prayed for some other questions also being referred to this court but his application to that extent was rejected by the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal). Subsequent to the reference being made by the Tribunal, an application purporting to be under section 66(2) and 66(4) of the Act was made in this court. That application came up before a Bench of this court which on the 24th of March, 1959, allowed the same and directed the Tribunal to submit a further statement of the case and to refer the following additional question of law to this court for its opinion :
'Whether there was any material for the finding that the house alleged to have been gifted by the assessee to his wife was still the property belonging to him so that the income from that property was liable to be assessed as the income of the assessee ?'
The Tribunal in deference to the order of this court has now submitted a further statement of the case and has referred the question of law mentioned above to this court. We have, therefore, before us two questions of law to answer. Before we come to state the facts as given in the two statements of the case, we consider it proper to dispose of a preliminary objection which has been raised by Mr. Gopal Behari, the learned counsel for the income-tax department before us.
Placing reliance upon Kamlapat Motilal v. Commissioner of Income-tax it was contended by the learned counsel that this court had, in the circumstances of the case, no jurisdiction to have exercised powers under clause (4) of section 66 of the Act in calling for a further statement of the case and a question of law. The submission of Mr. Gopal Behari, again placing reliance on the decision of the Supreme Court mentioned above, is that the proper section under which the order dated the 24th of March, 1959, could be passed by this court was section 66(2) of the Act. To supplement the submission, Mr. Gopal Behari had added that an application under section 66(2) of the Act could be made only within six months of the date of the refusal made under section 66(1) of the Act by the Tribunal and inasmuch as the application giving rise to the order dated the 24th of March, 1959, was moved after the period of six months had expired, this court had no jurisdiction to call for a further statement of the case and to ask for an additional question of law being referred to this court.
We are carefully perused the application dated the 12th of July, 1958, as also the order passed on it, i.e., one dated the 24th of March, 1959. The application purports to be, as we have already mentioned above, both under section 66(2) and section 66(4) of the Act. In the order dated the 24th of March, 1959, this court has not anywhere said that it was purporting to exercise powers under section 66(4) and not section 66(2) of the Act. Consequently, there is no material on the basis of which Mr. Gopal Beharis submission could be sustained. The preliminary objection can be considered only if it is found as a matter of fact that the order dated the 24th of March, 1959, was passed under section 66(4) and not under section 66(2) of the Act. Even if we, for the purposes of argument, assume that this order was passed under section 66(2) of the Act, and for that reason hold that the period of limitation applicable would have been six months, Mr. Gopal Behari would still have to show that even though the question of limitation can be waived, it was not so waived in the present case. It appears that at the time when the application dated the 12th of July, 1958, was heard and the order dated the 24th of March, 1959, was passed, Mr. Gopal Behari did not raise any objection with regard to limitation. There is no reason, therefore, not to suppose that the same was waived. It was contended that if an order passed by a court is without jurisdiction, it is a nullity in the eye of law and can be ignored. The proposition that an order without jurisdiction is a nullity is undisputable. But the question that arises for consideration is whether in the present case it can be said that the order passed by this court on the 24th of March, 1959, was an order without jurisdiction. It is only in cases of patent want of jurisdiction that the orders can be deemed to be a nullity. If the order was passed under section 66(2) of the Act, it cannot be said that it was passed without jurisdiction. If the learned counsel for the income-tax department did not raise a plea of limitation, he has himself to thank. Even if the plea of limitation had been raised and repelled, the order of this court dated the 24th of March, 1959, would not be without jurisdiction. Assuming that there was no application under section 5 of the Limitation Act, which applies to applications under section 66(2) of the Act, and assuming further that this court ignored the question of limitation in its order dated the 24th of March, 1959, the order cannot be held to be a nullity. At best, it would be an order passed with jurisdiction but passed erroneously. It is trite that orders passed with jurisdiction but erroneously are not a nullity and, consequently, we are unable to accept the preliminary objection of the learned counsel that it is open to us to disregard the order of this court dated the 24th March, 1959, and to treat the proceedings before the Tribunal thereafter, as those without jurisdiction and further not to take notice either of the further statement of the case of the additional question of law submitted by the Tribunal to this court under the order of this court dated the 24th of March, 1959. In any case, the statement of the case originally submitted by the Tribunal was before this court. The subsequent reference has been made in connection with the proceedings started by means of the application dated the 12th of July, 1958. The proceedings then started have not yet ended and the same proceedings still continue. It is not possible for this court to ignore an earlier order passed by it in the one dated the 24th of March, 1959, which has now become final. Consequently, we have overruled the preliminary objection of the learned counsel.
Coming to the merits of the case, we would like to give the relevant facts as mentioned in the statement of the case. The assessee is an individual and derived income from house property business and other sources. For the assessment years 1952-53, 1953-54 and 1954-55 assessments were made by the Income-tax Officer under section 23(3) of the Act. In all these assessment the Income-tax Officer included a sum of Rs. 2,550 as income from other sources being rent of certain shops let our by the assessee on rent. The shops came in the possession of the assessee by virtue of a registered agreement dated the 2nd of January, 1947. The parties to that agreement are the assessee and one Junglee Koiri. A piece of land is situated in Village Sarao, district Azamgarh, which belonged to Junglee Koiri. This piece of land Junglee Koiri had mortgaged to a third party. By means of the agreement dated the 2nd of January, 1947, it was agreed between Junglee Koiri and the assessee that the latter would pay up the earlier mortgage amounting to about Rs. 1,400 and construct shops on the land by spending Rs. 1,000. The shops were to continue in the possession of the assessee for a period of ten years who could either put them to his own use or rent them out. After the expiry of ten years, the shops were, under the agreement to revert to Junglee Koiri or his successors free from all encumbrances. One of the clauses in the agreement was to the effect that if a sum of more than Rs. 1,000 was required to construct the shops, it would be provided by the assessee and for this additional payment the period of the enjoyment of the shops by the assessee would be extended in terms of an agreement to be made between the parties. It is found in the statement of the case that the assessee spent a larger amount than Rs. 1,000 with the result that another agreement was entered into between the parties on the 8th of January, 1948, by which the period for which the assessee was to remain in possession was extended to another ten years, i.e., in all twenty years. Another agreement dated the 19th of June, 1947, was entered into by the five sons of the assessee and the mutawallis of a mosque known as Garhewali Masjid. This agreement was also similar to the two agreements mentioned above. By virtue of this agreement the mutawallis of the mosque were to construct three shops on a piece of land belonging to the mosque for which a sum of Rs. 8,000 was to be provided by the sons of the assessee. It was stipulated that the shops would be mortgaged for a period of eight years in favour of the five sons of the assessee who were free either to use the shops themselves or to rent them out. This period of eight years was extended by twelve years under the agreement dated the 31st of May, 1948, against a sum of Rs. 4,000 paid by the five sons of the assessee to the mutawallis of the mosque. The total income of rent from the shops constructed on the land of Janglee Koiri as also on the land of the mosque came to Rs. 2,550 every year. The Income-tax Officer subjected this to income-tax under the head 'income from other sources'. The stand taken by the assessee was that the four agreements mentioned above were in the nature of usufructuary or self-liquidating mortgages (Dastabex Rahan Patodhan) and that the income which the assessee received from these shops was not in the nature of revenue receipt but a return of the capital which the assessee had advanced as loan to Junglee Koiri and the mutawallis of the mosque. This submission did not find favour with the Income-tax Officer, who, as already mentioned above, included the sum of Rs. 2,550 in computing the total income of the assessee. The Income-tax Officer also included a sum of Rs. 750 in the income of the assessee as rent from a house in the occupation of Mau Calendering Company and did not accept the case set up by the assessee that, though that house originally belonged to him, he had in lieu of dower, which was a sum of Rs. 3,000, transferred it to his wife in the year 1937, who, thereafter, became the owner of the same. The assessees case was that he was going on pilgrimage to Mecca and, consequently, discharged the liability of the dower debt to his wife by means of the transfer, not having ready cash to pay the dower amount. The assessee filed three appeals one in respect of each assessment year before the Appellate Assistant Commissioner under section 30 of the Act. The two submissions that were made before the Income-tax Officer regarding the inclusion of Rs. 2,550 and Rs. 750 as income from the shops and the house respectively were reiterated before the Appellate Assistant Commissioner also but without success. Thereafter, the assessee filed three appeals (one in respect of each assessment year) before the Tribunal where also these two submissions made before the Income-tax Officer and the Appellate Assistant Commissioner were passed. Those submissions did not find favour with the Tribunal who dismissed the appeals. Thereafter, an application under section 66(1) of the Act was made before the Tribunal, which on 13th December, 1957, submitted a statement of the case and referred one question of law already mentioned above, but rejected the application with regard to the second question of law, which it later on referred to this court under the directions of this court dated the 24th of March, 1959.
We will first answer question No. 1. We have carefully perused the agreements dated the 2nd of January, 1947, and the 8th of January, 1948, which relate to the shops standing on the hand belonging to Junglee Koiri. These documents have been made annexures to the statement of the case submitted by the Tribunal. In the agreement dated the 2nd January, 1947, it is stated by Junglee as follows :
'I, the first party, have mortgaged the aforesaid compound for consideration of Rs. 1,100 in favour of Mohd. Ayub and others, r/o Town Mau Nath Bhanjan by a deed dated and registered on December 21, 1943. The total dues of which up to this day inclusive of the principal sum and the interest comes to Rs. 1,400. ... the responsibility for the payment of which lies on the first party (Junglee). I, the first party, have still no money so that repaying the same to the creditor aforesaid and thereby redeeming the compound aforesaid may construct the shops according to my wishes and be benefited. I, the first party, have made the second party (the assessee) agree to this proposal that he would repay the money of the said creditor and would convert the said compound into shops by spending Rs. 1,000... and would keep his possession over the said shops as the mortgagee for consideration of Rs. 2,500. .. for ten years. On the expiry of the period of ten years the second party shall have no concern with the said shops. And the said shops shall come into the possession of the 1st partly free of all encumbrances and debts. This transaction appears to be of great benefit and profit yielding for the first party. Therefore, we the first party and the second party.... bind ourselves with the terms and conditions given below :
1. That, I, the first party, transfer the compound bounded be below by an usufructuary mortgage in favour of the second party for consideration of Rs. 2,500. .. for ten years and promise that if some more amount will be spent in connection with the construction, then that amount too shall be obtained from the second party on a promissory note or on a registered document by me and I shall make the second party in possession of the said shops as the mortgagee after completing the shops and making them fit for use within the year, that is, by December, 1947. And for the additional dues I shall execute another deed of agreement extending thereby the period of mortgage by mutual settlement.
2. I, the second party, hereby promise that I will pay up the total demand of the previous mortgagee inclusive of the principal sum and the interest within the month, and I shall spend rupees one thousand on the construction of the said shops and if more amount will be needed, I shall spend that also according to the settlement by getting the period extended. And I will keep possession over the said shops as the mortgagee till the expiry of the period. I, the second party, shall have no concern with the said shops and the entire mortgage money shall be liquidated and paid up.'
This agreement clearly shows that the transaction that the parties entered into were in the nature of a self-liquidating or a self-effacing mortgage. In other words, there was to be no annual return on the capital but the capital itself was to be appropriated within a period of ten years by use on the part of this assessee. The agreement dated the 8th of January, 1948, is also similar in terms. We have carefully examined the agreement dated the 19th of June, 1947, executed by the five sons of the assessee and the mutawallis of the mosque. The relevant portions of that agreement read as follows :
'Whereas the barren land bounded as below situated in village Sarahu, pergana Mau Nath Bhanjan, district Azamgarh, is dedicated to the mosque aforesaid, we, the promisors, the mutwallian of the aforesaid mosque, since the land is barren, it is of no use to the aforesaid mosque, since the land is barren, it is of no use to the aforesaid mosque. We, mutwallian, are of the opinion that if on the barren land bounded as below shops be constructed, it will amply provide for the repair of the aforesaid mosque, the pay of the Mawazzin and Imam for the light. Therefore, we, mutwallian, having received the sum of Rs. 8,000 before the Sub-Registrar from M/s. Azimullah, Salimullah, Shafiullah, Salamullah and Azmatullah, sons of Haji Abdul Hai Saheb alive... make agreements and reduce it to writing that on the barren land bounded as below we will get three shops constructed which shall be deemed to have been mortgaged for eight years with possession in favour of the persons mentioned above. The mortgagees may either occupy the mortgaged shops themselves or let them to any tenants on their own behalf...'
In similar terms is the agreement dated the 31st of May, 1948. These agreements are also of the nature of a self-liquidating mortgage. The Tribunal, the Appellate Assistant Commissioner and the Income-tax Officer treated them as lease agreements. The Tribunal in this connection observed as follows :
'The test whether particular document is a mortgage or a lease is not what the parties call it but is whether it fulfils the statutory requirements which the legislature has laid down. The documents can be considered to be mortgage only if they fulfil the requirements of section 58 of the Transfer of Property Act. The most important requisite of usufructuary mortgage is that some interest in immovable property must be passed to the transferee by virtue of the deed and, secondly, the mortgagee should be liable for accounting. Both these important requisites of a usufructuary mortgage are missing in the deeds under consideration. Firstly, there has been no transfer of any interest and, secondly, these deeds do not east either on the executants or the transferors or on the transferees any liability for maintaining any proper accounts for the alleged loans, expenses of construction of shops and the gradual redemption of the loans step by step. Thirdly, there is no provision for any other safeguards, if the transferee does not construct the shops and, lastly, there is no guarantee of the mortgagee for the realisation of their money in case they are dispossessed of their land or of the shops that they were to build.'
We are unable to agree with the Tribunal. In our judgment the deeds evidenced are self-liquidating mortgages and were not deeds of lease. We, therefore, answer the first question in the negative and against the department.
With regard to the second question, the findings of the Tribunal are that there was in fact no gift in favour of the assessees wife as alleged by the assessee and that in any case the gift being without consideration, such a transaction could not be excepted from the scope of section 16 of the Act. We are unable to agree with the Tribunal on this point. It is a mistake to say that there was no consideration for the alleged transfer of the house by the assessee to his wife. The assessee had to meet the liability of the dower debt which was Rs. 3,000 and the house was transferred in lieu of that debt. Consequently, it cannot be said that the transaction was without consideration. However, one of the circumstances relied upon by the Tribunal against the assessee is that in the municipal records the name of the assessee and not that of his wife stands against the house in dispute. To the same effect is the finding of the Appellate Assistant Commissioner and, admittedly, no ground was taken in the memorandum of appeal preferred before the Tribunal that the Appellate Assistant Commissioner had wrongly held that the houses stood in the name of the assessee and not his wife in the municipal records. It is true that the assessee in his application under section 35 of the Act stated that Mau Nath Bhanjan was not a municipality during the relevant period. That application, however, was made after the decision by the Tribunal. Besides, it is not mentioned in that application that even in the records of the town area of Mau Nath Bhanjan, the house stands in the name of the assessee. It also appears that in some years, subsequent to the alleged date of transfer, the assessee himself has shown the income from the house to be his. A gift without a simultaneous transfer of possession is not valid. Consequently, the Tribunal, in our opinion, is right in holding that the house belonged to the assessee and not to his wife.
We, therefore, answer the second question in the affirmative and against the assessee.
In the result, the first question is answered in the negative and in favour of the assessee and the second question in the affirmative and against the assessee. In the circumstances of the case, we direct the parties to bear their own costs. The fee of the learned counsel for the parties is assessed at a figure of Rs. 200 each.
First question answered in the negative and the second in the affirmative.