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Commissioner of Gift-tax, Delhi-ii Vs. I.P. Soni - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberGift-tax Reference No. 1 of 1973 with Income-tax Reference Nos. 133 of 1974, 10 of 1976 and 139 and
Judge
Reported inILR1981Delhi563a; [1982]136ITR838(Delhi)
ActsTransfer of Property Act, 1882 - Sections 3 and 8
AppellantCommissioner of Gift-tax, Delhi-ii
Respondenti.P. Soni
Cases ReferredMammunhi v. Kunhibi
Excerpt:
.....a gift of a plot of land includes also the building situated thereon.; the donor executed a gift-deed on 12-7-1963 in favor of his son, the donee. by this deed, the donor conveyed and granted to his son 'all that of land--together with trees, rights and easements'. the gift-tax officer found that on the date of the gift, a house had been constructed by the donor on the plot. the short question that arose for consideration in these references was whether the gift of a plot of land on which a building has already been constructed would amount to a gift only of the plot of land or of the plot of land along with the building. answering the question against the assessed,; under section 8 of the transfer of property act, a transfer of property passes forthwith to the transferee all the..........rs. the question arise in the following circumstances. 2. on july 12, 1963, i.p.soni executed a gift deed in favor of his sons, m. m.soni. the deed of gift has not been made part of the statement of the case but it has been looked into by all the authorities and has also been interpreted by the tribunal. we, thereforee, permitted the learned counsel for the assessed to place before us a copy of the gift deed in question. the deed shown that the donor was aged 80 years on the date of the gift. he purposed to have executed the gift deed freely, voluntarily, without any valuable consideration and in contemplation of his death. by the deed he conveyed and granted to his son 'all that plot of land situated at jor bagh, plot no. 230, block no. 172, new delhi, owned and possessed by me, free.....
Judgment:

Ranganathan, J.

1. All these matters can be disposed of by a common order. The question involved in all the reference is regarding the scope of the subject-matter of a gift made by I.P. Soni, the respondent in G.T.R. 1/73, to M. M. Soni, the respondent in the I.T. Rs. The question arise in the following circumstances.

2. On July 12, 1963, I.P.Soni executed a gift deed in favor of his sons, M. M.Soni. The deed of gift has not been made part of the statement of the case but it has been looked into by all the authorities and has also been interpreted by the Tribunal. We, thereforee, permitted the learned counsel for the assessed to place before us a copy of the gift deed in question. The deed shown that the donor was aged 80 years on the date of the gift. He purposed to have executed the gift deed freely, voluntarily, without any valuable consideration and in contemplation of his death. By the deed he conveyed and granted to his son 'all that plot of land situated at Jor Bagh, Plot No. 230, Block No. 172, New Delhi, owned and possessed by me, free from encumbrances as a sole and absolute lessee, leased out to me by the Chief Commissioner, Delhi, on 3-12-1956.... together with trees, rights, easements '. The donee was to hold that property gifted on the terms and conditions incorporated in the original lease deed and the transfer was effected with the sanction of Chief Commissioner of Delhi, the original Lesser. The cost of the plot was set out at Rs. 7,750 and the market value of the land at Rs. 39,195.

3. I. P. Soni filed a gift-tax return on November 2, 1964, declaring the above gift and valuing the same at Rs. 39,195. The GTO found that as on the date of the gift, a house had been constructed on the plot of land in question by the donor with his own finances. A question, thereforee, arose as to whether the gift made on July 12, 1963, was only a gift of the plot of land and not of the superstructure as claimed by the assessed. The GTO found that these was no reservation in the gift deed retaining the ownership of the building, suggesting that it would be held by the donor or be under the joint ownership of the rather and the son, that the Land & Development Officer, New Delhi, had permitted the transfer on conditions that the donee would construct a second on the property which was already standing on the piece of land ; that the house property stood in the donee's name as per as records of the New Delhi Municipal Committee; and that the house rent of the building was being received by the donee and deposited by the tenants directly to the donee's account every month. He also found that for the assessment year '1964-65 the donor had filed a return where in he had returned the income from the house property only for a period of six months claiming that with effect from October 1, 1963, the plot as well as the house had been transferred to his son, M. M.Soni. Bearing in mind these circumstances, the GTO held that the whole of the building and the plot had been gifted by the assessed, i.e., I. P.Soni, to his son, M. M.Soni. He completed the gift-tax assessment accordingly.

4. The order of the GTO was confirmed by the AAC. But, on further appeal, the assessed was successful. Before the Tribunal it was contended on behalf of the assessed that in view of the clear and unambiguous terms contained in the first deed, it was only the plot in question that could be treated as having been gifted and that only its value could be included in the gift-tax assessment. On the other hands, the department representative relied on the assessed's subsequent conduct in filing an income-tax return showing the income from the house property only for a part of the period relevant to the assessment year 1964-65. The Tribunal found itself unable to accept the department contention. It observe :

'We find that subsequent to the date of the said letter, the assessed filed a revised returned for the assessment year under appeal and also went back on the statement made in the said letter. Further, section 91 of the Evidence Act lays down that when the terms and conditions of a contract of a grant or of any other disposition of property have been set out in writing, the document is intended to be a record of the transaction and, thereforee, no other evidence shall be given to prove the transaction except the documents itself or secondary evidence thereof when such evidence is admissible. In the instant case, the terms of the gift due being clear and unambiguous, we are unable to accept the contention that under the documents it was intended that there was to be a transfer to the donee also of the building which had been constructed on the plot by the donor prior to the date of the gift.'

5. The departmental representative also relied on the trims and conditions under which the Land & Development Officer had granted permission for the gift. But this, in the view, of the Tribunal, was of no consequence. The Tribunal referred to the decision in Vithoba Bava v. Hariba Bava [1869] 6 BHCR 54 and in Periakaruppan Chetti v. Arunachalam Chetti [1926] 50 Mad 582 ; 102 IC 290, in support of their conclusion.

6. The Commissioner of gift-tax being dissatisfied with the order of the Tribunal, a reference has been made to this court of the following question :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transfer of the plot does not automatically involve the transfer of the superstructure thereon ?'

7. The income-tax references arise in the case of the donee, M. M.Soni he said assessed is an individual having his main source of nice by way of salary. The reference relate to the assessment year 1966-67 to 1971-72. (At this stage we may mentioned that there appears to be some mistake in regard to the assessment years as set out in the printed paper books before us since assessment year 1968-69 appears be in I.T. Rs. 133/74 & 10/76. It appears to be a mistake and the correct position appears to be that I.T.R. 133/74 relates to the assessment years 1966-67, 1967-68 and 1969-70 and I.T.R. 10/76 relates to the assessment year 1968-69. The Tribunal will look into the position and will do the needful in regard to the proper assessment years). In the course of the above assessment proceedings the assessed had claimed that his father had gifted to him only the plot of land and not superstructure and he had returned one-half of the income from the property in his return for purposes of assessment. The ITO for the reasons discussed by him in the gift-tax assessment came to the conclusion that M. M. Soni was to be assessed in respect of the entire income from the property and he proceeded to complete the assessment on that footing. This conclusion was, however, revised by the AAC (who had before him the order of the Tribunal in the G.T. Appeal) and, on a further appeal by the department, by the Income-tax Appellate Tribunal.

8. On the application of the Commissioner of Income-tax, the following questions have been referred for our decision :

I.T.R. No. 133/7 :

'Whether, on the facts, and in the circumstances of the case, the Tribunal was right in holding that only the plot and not the structure was gifted and hences the half share of the property income should be assessed in the hand of the assessed ?'

I.T.R. No.10/7 :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in confirming the order of the Appellate Assistant Commissioner who held that only the plot and not the structure was gifted and hence the half share of the property income only amounting to Rs. 3,462 as against Rs. 6,924 should be brought to tax in the hands of the assessed as against Rs. 6,924 actually taxed by the Income-tax Officer ?'

I.T. Rs. Nos. 139 & 139A/7 :

'Whether, on the facts and in the circumstances of the case the Tribunal was right in holding that only the plot and not the superstructure was gifted and hence the half share of the property income should be assessed in the hands of the assessed ?'

9. The short question that arises for consideration in all these reference is as to whether the gift of a plot of land on which a building has already been constructed would amount to a gift only of a plot of land of the plot of land along with the building. This question has to be answered in the light of the provisions of the Transfer of Property Act and in particular s. 8 thereof. This section, so far as is relevant, reader as follow :

'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 includes, where the property is land, the assessment annexed thereto, the rents and profits thereof accruing after the transfer, and all things attached to the earth;.....'

10. The expression 'attached to the earth' has been explained in the definition sections 3. The relevant definition is as follow :

''Attached to the earth' mean :-

(a) rooted in the earth, as in the case of trees and shrubs;

(b) imbedded in the earth, as in the case or walls or buildings; or

(c) attached to what is so imbedded for the permanent beneficial enjoyed of that to which it is attached.'

11. It is, thereforee, clear that where a person conveys a plot of land and there is in existence a building on the plot of land, the transfer of the land would also convey to the transferee all the interest of the transferor in the building standing on the land, unless, as s. 8 directs, a different intention is either expressed or necessarily implied.

12. The statue itself being quite clear it is not necessary to refer to the several authorities which have been cited by the learned counsel for the applicant. We may, however, mention that the principal of s. 8 was outlined by the Privy Council in Asghar Reza Khan v. Mohomed Mehdi Hossein Khan [1903] LR 30 IS 71; 2nd 30 Cal 556, and this has also been applied in a large number of decision including Krishna Kumari Devi v. Rajendra Bahadur Sinha Deo, , and George v. South Indian Bank Ltd. : AIR1959Ker294 . There is also a reference to principle in the decision of the Supreme Court in Divisional Forest Officer, Sarahan Forest Division v. Daut, : [1968]2SCR112 , the effect of s. 11 of the Himachal Pradesh Abolition of Big Landed Estates and Land Reforms Act, 1954, was considered in the same manner as s. 8 of the Transfer of Property Act and it was observed that a transfer of the right, title and interest of a land owners in the land is wide enough to include the trees standing on the land.

13. We do not think that the decisions relied upon by the Tribunal have any relevance to the question regarding the effect of a transfer as in the present case. In the two sales referred to by the Tribunal the question was whether a construction put up by a member of the family on plot belonging to a joint family should be treated as joint family property or as individual property of the persons constructing it. The question was answered with reference to the principles of Hindu law by giving effect to the intention of the person constructing the property. The same is the posit on in the earlier Bombay case which has been followed in the Madras decision earlier referred to Mr. Suri, learned counsel for the assessed, drew our attention to the decision of the Kerala High Court in Mammunhi v. Kunhibi, : AIR1961Ker147 , where it is pointed out that the Indian law does not adopt the general maxim in English law that whatever is affixed to the soil belongs to the soil. The court, there, was actually concerned with the question as to whether a construction put up by a husband on a plot belonging to his wife should be treated as the property of the wife by the application of the above doctrine. Answering the question in land negative, the court held that when the husband put up a building on the land belonging to his wife knowing it to be his wife's property and there is no suggestion that this was in pursuance of any agreement or by way of gift and the construction was effected with the consent of the wife, the husband, upon divorce, was entitled to remove the material if the wife was not prepared to give compensation for the same. That decision was not concerned with the situation with which we are concerned in the present case, with is directly answered by the provisions of s. 8 of the Transfer of Property Act.

14. Mr. Suri next contended that s. 8 also required effect to be given to the intention of the parties and the contended that the conclusion of the Tribunal that in the present case the fathers intended to convey only the land and not the building was a conclusion of fact with which this court should not interfere in reference jurisdiction under the tax Acts. We are unable to accepted the contention of the learned counsel. The effect of the gift deed in the present case and the interpretation to be given to the deed of gift raise a question of law and not merely a question of fact. The Tribunal has observed in its order the terms of the gift deed are clear and unambiguous and they have purposed to exclude the consideration of other circumstances surrounding the transaction upon which the department relied. The Tribunal, thereforee, was only interpreting the deed of gift and whether the conclusion arrived at by the Tribunal is correct or not involves clearly a question of law.

15. The only question which remains for consideration is whether in the present case it can be said that a different intention is expressed or necessarily implied. It is not necessary for the purposes of this case to consider whether the different intention had to be expressed or implied from the terms of the document or also from the surrounding circumstance. The Tribunal proceed only on the basis of the document. But if we scrutinies the document we are unable to find any intention expressed in it reserving the house property which was admittedly situated on the land on the dated of the gift in the hands of the donor nor can such an intention be implied from the document merely because there is no reference to the house in the deed. It has to be kept in mind that the donor on the dated of the gift was aged 80 years and the gift was purportedly made by him in anticipation or contemplation of his death. Though for reasons (which perhaps it may not be difficult to guess) the document refers only to the plot, of land, there is nothing in the document which either expressly or implied states that the building situated on the land was not given to the donee. Mr. Suri invited out attention to the words 'together with trees, rights, easements' used in the gift deed and contended that the expression reference to the 'trees and easements' should be treated as an implied exclusion of the building. But this contention is difficult to accept. The words used by the donor are very comprehensive. The word 'rights' in the gift deed clearly means to convey to the donee all the legal incidents of his ownership of the property and, as has already been pointed out, these incidents includes the right not merely in respect of the property but also of all things attached to the earth. We are also unable to see any valid reasons on the basis of which is could be said that in the circumstances mentioned in the gift deed the donor could have thought of withholding the building from the terms of the gifts deed. We are, thereforee, unable to says that any different intention has been expressed or is necessarily to be implied from the terms of the gift deed and we are of opinion that full effect must be given to the provision of s. 8 of the Transfer of Property Act in the present case.

16. Even if we are to focus out attention not merely to the gift deed but also it the surrounding circumstances, we are unable to see any circumstances from which a contrary intention could be spelt out. The Tribunal has not considered any such circumstances by Mr. Suri told us that the contrariety intention should be gathered from the conduct of the donor in continuing to live in the property and to enjoy the income there from and in returning the income from the property for all subsequent assessment years. These circumstances clearly are not sufficient to lead to the conclusion suggested by the learned counsel. The mere residence in the property by the aged father along with the son cannot be said to attract from the terms of the gift deed. So far as the returns of income are concerned, the most eloquent piece of evidence is the return filed immediately after the gift was made, though subsequently the donor revised the return and took up a different stand. So far as the question of enjoyment of the property is concerned, there is no finding of the Tribunal that the father continued to enjoy the property. On the contrary, the ITO had clearly given a contrary finding and this has not been upset by any of the authorities.

17. In the circumstances, we are of opinion that in the present case the deed of gift conveyed to donee not merely the interest in the land in question but also the interest of the donor in the house property standing thereon on the date of the gift. Consequently, it follows that the entire income from the house property standing thereon on the date of the gift. Consequently, it follows that the entire income from the house property subsequent to the date of the gift has to be assessed in the hands of the donee.

18. The question in G.T.R. No. 1/73 is, thereforee, answered in the negative and against the assessed. The question in I.T.R. No. 133/74 is also answered in the negative and against the assessed. The same is the position in I.T.R. No. 139 and 139-A/78. In I.T.R. No. 10/76 the question is slightly different and we answered it by saying that the Tribunal was not right in holding that only a half share of the property income of Rs. 6,924 was taxable in the name of the assessed and that entire amount of Rs. 6,924 was rightly taxed by the ITO. The reference are disposed of accordingly. The Commissioner will be entitled to his conceits. Counsel's fee Rs. 350 (one set).


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