1. This is an income-tax reference wider Section 256(1)of, the Income-tax Act, wherein the following question of law has beenreferred to this court for its opinion : . ..
'Whether, on the facts and in the circumstances of the. case, the Tribunal was justified in law in holding that no valid gift of outhouses of the building named as 'Deep Shikha' was made, by the assessee to his wife in terms of the G.T. Act, 1958?''
2. The assessee is the owner of a building known as 'Deep Shikha' situated in C-Scheme, Jaipur. It has certain outhouses attached to it, The assessee claims to have gifted the said outhouses to his wife on September 30, 1966. A declaration in writing was made on October 10, 1966, duly signed by both the assessee as well as his wife, the donee, but the same was not got registered by the assessee with the Sub-Registrar (the declaration is dated July 10, 1966, but that is only a typographical mistake). The water receipts, electric receipts and bills are in the name of Smt. Premlata, donee, the wife of the assessee. Smt. Premlata has let out the building (said outhouses) to the Appellate Assistant Commissionerof Income-tax, A range, Jaipur, at Rs. 800 per month with effect from June 1, 1967. The repairs and alterations are also being done by Smt, Premlata, donee, and Smt. Premlata Nawalkha was assessed to wealth-tax on the value of outhouses. Since September 30, 1966, Smt. Premlata is in possession of the property, exercising her rights as owner and also receiving rent, whereas the rental income from these houses was assessed in the hands of the assessee in view of Section 64 of the Income-tax Act treating it as transfer by the assessee to his spouse.
3. On the basis of the aforesaid facts, it was argued by the assessee before the Gift-tax Officer, vide his letters dated September 22, 1969, and December 22, 1969, that for the purposes of the Gift-tax Act, the gift was valid even though the declaration dated October 10, 1966, was not registered as required by Section 17 of the Registration Act and Section 123 of the Transfer of Property Act and reliance was placed on G.V. Krishna Rao v. First Addl. GTO : 70ITR812(AP) . The Gift-tax Officer did not accept the contention of the assessee and, therefore, held that there was no valid gift. The assessee being dissatisfied with the aforesaid order of the Gift-tax Officer appealed to the Appellate Assistant Commissioner, who also did not agree with the contention of the assessee and in his opinion a gift of immovable property not executed through a registered deed was void in the eye of law and dismissed the appeal. The assessee then appealed to the Tribunal and urged that the aforesaid gift was a valid gift for the purpose of the Gift-tax Act, even though it may not be operative for the purpose of the Transfer of Property Act and placed reliance on G.V. Krishna Rao's case : 70ITR812(AP) .
4. On behalf of the respondent, it was pointed out that G.V. KrishnaRao's case : 70ITR812(AP) has been overruled by the SupremeCourt in Goli Eswariah v. CGT : 76ITR675(SC) and reliance was placedan Smt. Laxmibai Narayana Rao Nerlekar v. CGT : 65ITR19(KAR) .The Tribunal relied on Laxmibai's case and held that there would be nogift of immovable property under the general law without the deed ofgift having been registered in accordance with Section 17 of the IndianRegistration Act and that Smt. Premlata did not get the legal title in thesaid property as the transfer was not in accordance with Section 17 of theIndian Registration Act read with Section 123 of the Transfer of PropertyAct and, therefore, there was no valid gift.
5. The assessee moved the Tribunal under Section 256(1) of the Income-tax Act for making a reference and the learned Tribunal while disposing of that application has found that the question, of law mentioned above does arise out of the order of the Tribunal and, therefore, the same has been referred to this court for its opinion.
6. Heard learned counsel for the assessee as well as learned counsel for the Revenue and we have also looked into the statement of the case and the annexures submitted therewith. The Gift-tax Act is a self-contained code in itself. The Legislature in its wisdom has adopted, various definitions from different Acts, but not with regard to the word 'gift', e.g., Section 2, Sub-section (vii),.( for the word ' company ' they have said 'company means a company as denned in Section 3 of the Companies Act and includes......' Similarly, in Section 2(xi), 'firm' has the same meaning as assigned to it in the Indian Partnership Act. In Section 2(xyib), ' legal representative' has the meaning assigned to it in Clause (11) of Section 2 of the Civil Procedure Code. Similarly, in Section 2(xvii), 'partner' has the meaning assigned to it in the Indian Partnership Act and includes.........
7. Section 2(xx) defines ' previous year ' in relation to any assessment year......under the Income-tax Act, whereas 'gift' has been defined underSection 2(xii) as under:
''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............'
8. The word 'transfer' has not been denned, but 'transfer of property' has been denned as Under :
'(xxiv) 'transfer of property' means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes......'
9. Thus, it is obvious that the Legislature did not adopt the definition of gift from the Transfer of Property Act as has been done in other cases mentioned above. From the above, it is clear that gift under Section 2(xii) includes certain transfers detailed in Section 4(1) and (2) of the Gift-tax Act also. Many acts and transactions which shall not amount to gifts under the Transfer of Property Act shall amount to gift under the Gift-tax Act. The concept of gift under the Gift-tax Act is much wider. Gift-tax Act includes many transactions and acts in its net though ordinarily they may not be necessarily covered within the definition of gift given in the Transfer of Property Act. 'Gift' has been defined under the Transfer of Property Act, in Section 122, which reads as under :
'122. Gift defined.--'Gift' is the transfer of certain existing 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.
Acceptance when to be made.--Such acceptance must be. made during the lifetime of the donor and while he is still capable of giving.If the donee dies before acceptance, the gift is void.'
10. Whereas, Section 123 of the Transfer of Property Act provides that for the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. The meaning of the word 'registered' as occurring in the Transfer of Property Act has been taken to be under Section 3 (interpretation clause). 'Registered' means registered in any part of the territories to which this Act extends under the law for the time being in force regulating the registration of documents. Whereas, 'Transfer of property' has been defined by Section 5 of the Transfer of Property Act, which reads as under :
' 5. Transfer of properly defined,--In the following sections ' transferof property ' means an act by which a living person conveys property,in present or in future, to one or more other living persons, or to himself,or to himself and one or more other living persons ; and ' to transfer property ' is to perform such act.
In this section ' living person ' includes a company or association, or body of individuals, whether incorporated or not but nothing herein contained shall affect any law for the time being in force .relating to transfer of property to or by companies, associations or bodies of individuals.'
11. Thus, we find that the definitions of gift and transfer of property under the Transfer of Property Act and the Gift-tax Act are quite different and the Gift-tax Act has not incorporated or borrowed the definition of these two phrases from the Transfer of Property Act. A gift which may be imperfect, invalid or void under the Transfer of Property Act may be a valid gift for the purposes of the Gift-tax Act if it falls within the definition of the word 'gift' given in the Gift-tax Act.
12. Section 4 of the Gift-tax Act is a deeming provision which includescertain transfers as gifts for the purposes of the Gift-tax Act and runs asunder:
'4. Gifts to include certain transfers.--(1) For the purposes of thisAct-
(a) where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at thedate of the transfer exceeds the value of the consideration shall be deemedto be a gift made by the transferor :
Provided that nothing contained in this clause shall apply in any ease where the property is transferred to the Government or where the value of the consideration for the transfer is determined or approved by the Central Government or the Reserve Bank of India ;
(b) where property is transferred for a consideration which having regard to the circumstances of the case, has not passed or is not intended to pass either in full or in part from the transferee to the transferor, the amount of the consideration which has not passed or is not intended to pass shall be deemed to be a gift made by the transferor ;
(c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment;
(d) where a person absolutely entitled to property causes or hascaused the same to be vested in whatever manner in himself and any otherperson jointly without adequate consideration and such other person makesan appropriation from or out of the said property, the amount of theappropriation used for the benefit of the person making the appropriationor for the benefit of any other person shall be deemed to be a gift made inhis favour by the person who causes or has caused the property to be sovested;
(e) where a person who has an interest in property as a tenant for a term or for life or a remainderman surrenders or relinquishes his interest in the property or otherwise allows his interest to be terminated without consideration or for a consideration which is not adequate, the value of the interest so surrendered, relinquished or allowed to be terminated or, as the case may be, the amount by which such value exceeds the consideration received, shall be deemed to be a gift made by such person.
(2) Where, in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family (such property being hereafter in this subsection referred to as the converted property), then, notwithstanding anything contained in any other provision of this Apt or, any other law for the time being in force, for the purpose of computation of the taxable gifts made by the individual, the individual shall be deemed to have made a gift of so much of the converted property as the members of the Hindu undivided family other than such individual would be entitled to, if a partition of the converted property had taken place immediately after such conversion.'
13. Therefore, we see that the definition of gift is much more wider, exhaustive and extensive in the Gift-tax Act. It will include several transactions like easement or if inadequate price is paid or as given in Section 4 above. It is not necessary that one can become owner of a property only by registered instrument, for, as we see in a case of adverse possession that one becomes the owner without any registered document and as we have seen the facts of the present case, that Smt. Premlata was delivered the actual physical possession of the said property on September 30, 1966, and since then she is exercising her rights as an owner without any interruption or objection. She has given the outhouses on rent, been receiving the rent, making repairs, alterations and has got water and electric connections in her name and it cannot be said that the action of the assessee is not bona fide because the rental income is still being assessed in the hands of the assessee under Section 64 of the Income-tax Act and Smt. Premlata is paying wealth-tax on the value of the said buildings.
14. Learned counsel for the assessee has placed reliance on G. V. Krishna Rao's case : 70ITR812(AP) , wherein their Lordships of the Andhra Pradesh High Court have referred to the decision of the Mysore High Court in Laxmibai's case : 65ITR19(KAR) , which has been relied on before us by the learned counsel for the Revenue and they have expressed that they are unable to agree with the view of the Mysore High Court. They have relied on CGT v. Satyanamyanamurthy : 56ITR353(AP) and held that since late Shri Shrinivasa Rao by his declaration contained in the affidavit was diminishing his rights to property and increasing the rights of others within the meaning of Section 2(xxiv)(d) and, therefore, it would fall within the meaning of gift as defined in Section 2(xii) and Section 4 of the Act and rejected the contention that the conversion of self-acquired property into joint family property being a transfer within the meaning of Section 2(xxiv) and Section 4 should be duly stamped and registered and held that there is no warrant for the importation of considerations arising from the definition of gift or transfer in the Transfer of Property Act. The definitions of gift and transfer in the Gift-tax Act are exhaustive.
15. Learned counsel for the Revenue has submitted that since Satyanarayanamurthy's case : 56ITR353(AP) on which reliance was placed in Krishna Rao's case : 70ITR812(AP) has been overruled, Krishna Rao's case : 70ITR812(AP) is also not good law.
16. In Krishna Rao v. First Addl. GTO : 70ITR812(AP) , the Andhra Pradesh High Court was considering a case wherein a Hindu made a declaration treating his self-acquired property as the property of Hindu undivided family consisting of himself and his four sons and later on effected a partition of the said property and also gifted certain properties to his daughters.
17. He filed a gift-tax return showing the property gifted to daughters only. The Gift-tax Officer taxed the entire property gifted by him to his four sons less his 1/5th share. It was held by the Andhra Pradesh High Court that the partition of a Hindu undivided family does not involve transfer of any property or right to or interest therein, but only adjustment of proprietary rights into specific shares. It further held that throwing of self-acquired property into joint family property amounts to transfer of property and does not cease to be a 'transaction' within the meaning of Section 2(xxiv)(d) of the Gift-tax Act simply because it is unilateral in nature, and further for this purpose placed reliance on Satyanarayanamurthy's case : 56ITR353(AP) which was overruled by the Supreme Court in Goli Easwariah v. CGT : 76ITR675(SC) and they have dissented from the decision of the Mysore High Court in Laxmibai Narayana Rao Nerlekar v. CGT : 65ITR19(KAR) . Their Lordships of the Andhra Pradesh High Court further held that there is no provision in the Gift-tax Act like Section 123 of the Transfer of Property Act requiring an instrument of gift of immovable property to be registered and attested by at least two witnesses. Considerations arising from the definition of gift in the Transfer of Property Act must not be imported while construing the provisions of the Gift-tax Act and this proposition of the Andhra Pradesh High Court has not been dealt with by the Supreme Court in Goli Easwariah v. CGT : 76ITR675(SC) and, therefore, so far as the last proposition of the Andhra Pradesh High Court is concerned, it still survives. The Hon'ble Supreme Court in Goli Easwariah's case : 76ITR675(SC) (headnote) has held as follows:
'The unilateral declaration of a Hindu coparcener, whereby he throws his self-acquired property into the common stock of joint family property, does not amount to a transfer so as to attract the provisions of the Gift-tax Act, 1958.
A Hindu undivided family is not a creature of contract. The doctrine of throwing into the common stock inevitably postulates that the owner of separate property is a coparcener who has an interest in the coparcenary property and desires to blend his separate property with the coparcenary property. The separate property of the coparcener ceases to be separate property and acquires the characteristics of joint family or ancestral property not by any physical mixing with the ancestral property but by his own volition and intention and by his waiving and surrendering his separate rights in it as separate property. The act by which the coparcener throws his separate property into the common stock is a unilateral act. There is no question of either the family rejecting or accepting it. In such a case there is no donor or donee. He makes no gift under Chapter VII of the Transfer of Property Act.
The 'transaction entered into' by one person with another, contemplated by Clause (d) of Section 2(xxlv) of the Gift-tax Act, 1958, cannot apply to a unilateral act. The act must be one to which two or more persons are parties. The declaration by a coparcener whereby he impresses the character of joint family property on his self-acquired property does not fall within Clause (d) of Section 2(xxiv).
The word 'disposition' is not a term of law. It has no precise meaning. Its meaning has to be gathered from the context in which it is used. In the context in which it is used in Section 2(xxiv), it cannot mean ' to dispose of'. In that sub-section, it is used along with the words ' conveyance; assignment, settlement, delivery, payment or other alienation of property'. Hence, it is clear from the context that the word ' disposition' therein refers to a bilateral or a multilateral act. It does not refer to a unilateral act.'
18. We have gone through the judgment of the Supreme Court carefully. Nowhere their Lordships of the Supreme Court have made any observation whatsoever with regard to the last proposition of the Andhra Pradesh High Court.
19. Laxmibai Narayana Rao Nerlekar v. CGT : 65ITR19(KAR) has also held that the act of throwing self-acquired property of the assessee into the common hotchpot of the Hindu undivided family of which he was the karta, with the intention of abandoning his rights in that property and then dividing it unequally between his wife and sons did not amount to a gift within the meaning of the term 'gift' as denned in the Gift-tax Act. The Gift-tax Act includes certain transfers with inadequate or pretended consideration within the definition of 'gift', whereas under the general law, the existence of consideration, however inadequate, removes a transfer from the category of gifts. The gift-tax creates this fiction and no more. The Mysore High Court has also not dealt with the last proposition of the Andhra Pradesh High Court in Krishna Rao's case : 70ITR812(AP) . The Supreme Court in CGT v. N.S. Getti Chettiar : 82ITR599(SC) has also held that the partition did not effect any transfer as generally understood in law and did not, therefore, fall within the definition of 'gift' in Section 2(xii) of the Act and it also could not be considered to be a disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property within the meaning of those words in Section 2(xxiv) of the Act.
20. In the present case, we are not concerned with partition, but we are dealing with the gift made by the assessee to his wife, which has been recorded in the declaration dated October 10, 1966, and in the above authority also, their Lordships of the Supreme Court have not dealt withthe last proposition of the Andhra Pradesh High Court in Krishna Rao's case : 70ITR812(AP) .
21. In the result, we arc inclined to hold that on the facts and in the circumstances of the present case, the Tribunal was not justified in law in holding that no valid gift of out-houses of the building named 'Deep Shikha' was made by the assessee to his wife in terms of the Gift-tax Act, 1958.
22. The reference is thus answered in the negative, in favour of the assessee and against the Revenue.