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Mrs. Oumma Habiba Vs. Commissioner of Income-tax and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 600 to 603/75 and 605 to 608/75 (Reference Nos. 423 to 426/75 and 423 (?) to 431 of 19
Judge
Reported in[1980]124ITR153(Mad)
ActsIncome Tax Act, 1961 - Sections 64; Wealth Tax Act, 1957 - Sections 4(1)
AppellantMrs. Oumma Habiba
RespondentCommissioner of Income-tax and anr.
Appellant AdvocateK. Srinivasan, Adv.
Respondent AdvocateA.N. Rangaswami and ;Nalini Chidambaram, Advs.
Excerpt:
direct taxation - income - section 1075 of french civil code, section 64 of income-tax act, 1961 and section 4 (1) of wealth tax act, 1957 - whether tribunal right in holding that transaction evidenced by document was transfer without consideration and income arising from properties transferred included in computation of total income of assessee under section 64 (iv) - assessee governed by french civil law -appellants have made donation inter vivos in favour of minor daughter according to section 1075 of french civil code - minor daughter had no antecedent title before execution of partition - appellant transferred properties to minor daughter without consideration and income arising from out of properties transferred rightly included in computation of total income of appellant. - .....1963, the assessee and her husband transferred the properties to their children. one of them is a minor daughter by name miss nourby. the income arising from the properties transferred to the minor daughter of the assessee was included in the computation of the total income of the assessee by invoking section 64(iv) of the i.t. act, 1961. the assessee objected to the same and, against the order of the ito, an appeal was preferred to the aac contending, (1) that the nationals of pondicherry are to be governed either by the personal law or by the french civil code and the assessee, though a muslim, could adopt the french civil code and be governed by it; and (2) that the document dated september 21, 1963, is not a gift but a transfer of property due to the descendants and the assessee and.....
Judgment:

M.M. Ismail, C.J.

1. T. C. Nos. 600 to 603 of 1975 relate to income-tax, while T.C. Nos. 605 to 608 of 1975 relate to wealth-tax, in respect of assessment years 1964-65 to 1967-68.

2. The assessee in these cases is a French national residing in Pondicherry. By a document dated September 21, 1963, the assessee and her husband transferred the properties to their children. One of them is a minor daughter by name Miss Nourby. The income arising from the properties transferred to the minor daughter of the assessee was included in the computation of the total income of the assessee by invoking Section 64(iv) of the I.T. Act, 1961. The assessee objected to the same and, against the order of the ITO, an appeal was preferred to the AAC contending, (1) that the nationals of Pondicherry are to be governed either by the personal law or by the French Civil Code and the assessee, though a Muslim, could adopt the French Civil Code and be governed by it; and (2) that the document dated September 21, 1963, is not a gift but a transfer of property due to the descendants and the assessee and her husband had disposed of the properties by accelerating the partition and there was actually no gift and hence there was no transfer of assets so as to invoke Section 64(iv). On the first contention, the AAC held that the assessee, without renouncing her personal law, cannot claim to be governed by the French Civil Code. On the second contention, he held that the minor daughter was only a donee and she had no pre-existing right in the property at the time of partition and as there was a transfer of assets to her minor daughter without adequate consideration, Section 64(iv) had been rightly invoked. The assessee took the matter further by way of appeal to the Income-tax Appellate Tribunal. The Tribunal posed two points for its determination, namely, (1) whether the assessee and the partition deed dated September 21, 1963, are governed by Section 1075 of the French Civil Code and (2) if so, whether under the document dated September 21, 1963, there is no transfer involved by the assessee to her minor daughter and Section 64(iv) is not applicable By its order datedNovember 2, 1974, the Tribunal held that the assessee was competent to opt to be governed by the French Civil Law without renouncing her personal law. As far as the second point is concerned the Tribunal held that there was absolutely nothing to show that the minor daughter had any antecedent right in the properties prior to the date of partition, namely, September 21, 1963, that therefore, the transaction constituted only a gift and that consequently since the properties were transferred without adequate consideration, the income arising therefrom was rightly included in the income of the assessee under Section 64(iv) of the I.T. Act, 1961. On an application made by the assessee under Section 256(1) of the I.T. Act, 1961, the Tribunal has 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 holding that the transaction evidenced by document dated September 21, 1963, is a transfer without consideration and the income arising from properties transferred can be included in the computation of the total income of the assessee under Section 64(iv) of the Income-tax Act for the assessment years 1964-65 to 1967-68 ?'

3. The Tribunal has extracted Section 1075 of the French Civil Code in its order which reads as follows :

'The father, the mother and the other ascendants may distribute and partition their property between their children and descendants.'

4. It is stated that there is afoot-note to that section providing:

'When the partition is by instrument inter vivos it must be made in accordance with the requirements of a gift and it must be accepted.'

5. The Tribunal has also extracted Section 1076 of the French Civil Code, which provides;

'Partition made by instruments inter vivos must comply with the formalities, conditions and rules laid down for donation inter vivos and partition made by donation inter vivos must only include things which the donor then possesses.'

6. It is clear from the language of these two sections that the properties which are the subject-matter of partition and distribution must be the properties belonging to the father, the mother and the other ascendants and not the properties in which their children, or descendants had any interest. It is not in dispute that the document executed by the assessee in the present case recites that the parties have made the donation inter vivos according to Section 1075 of the French Civil Code. It is pertinent to note that the document itself uses the word 'donation' and also states that the donation is being made under Section 1075 of the French Civil Code. After extracting the two sections referred to above, the Tribunal has proceeded to state in paragraphs 12 and 13 of its order as follows:

'12. It is clear that these sections provide that the so-called partition deed must be in accordance with the requirements of a gift deed and must comply with the formalities, conditions and rules laid down for donation inter vivos and must only include things which the donor possesses at the time of execution of the document. The section characterises the person effecting the partition as donor...

13. From the above analysis the so-called anticipated partition is nothing but a donation of the properties by the appellant and her husband in favour of the minor daughter. There is nothing to indicate that the minor daughter had any antecedent title or pre-existing right before the execution of the partition deed by the appellant and her husband. Since the minor had no vested right or antecedent title to the properties and since there is conveyance or conferment of a new title in favour of the minor by the appellant under the deed dated September 21, 1963, we have no hesitation in holding that the appellant has transferred properties to her minor daughter without consideration and the income arising from out of such properties has been rightly included in the computation of the total income of the appellant.'

7. Having regard to the language of Sections 1075 and 1076 of the French Civil Code, it is clear that the Tribunal is right in the conclusion which it reached. Before the Tribunal, the only argument that was advanced on behalf of the assessee was that the moment the assessee decided to act under Sections 1075 of the French Civil Code, the assessee had recognised the right of her minor daughter to her share, which she would be entitled on her death, and such a recognition conferred an antecedent title in favour of the minor daughter. We have no hesitation in agreeing with the Tribunal that the said submission had no substance whatever, because it went directly against the letter and spirit of Sections 1075 and 1076 of the French Civil Code to which we have already drawn attention.

8. Under these circumstances, we are of the opinion that the conclusion of the Tribunal is correct and accordingly we answer the question referred to this court in the affirmative and against the assessee. The department will be entitled to its costs in T.C. Nos. 600 to 603 of 1975 one set. Counsel's fee Rs. 500 (Rupees five hundred only).

9. With regard to T.C. Nos. 605 to 608 of 1975, as we have pointed out already, they relate to wealth-tax and are concerned with the assessment years 1964-65 to 1967-68. In the orders relating to the assessment of wealth-tax, the Tribunal has simply followed its order relating to income-tax which has been the subject-matter of reference in T.C. Nos. 600 to 603 of 1975. As we have answered the question referred to this court relating to income-tax in the affirmative and against the assessee, the question involved in these references, T.C. Nos. 605 to 608 of 1975, namely:

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transaction evidenced by document dated September 21, 1963, is a transfer without consideration in favour of the applicant's minor daughter and the properties so transferred can be included in the computation of the total wealth of the applicant under Section 4(1)(a)(ii) of the Wealth-tax Act for the assessment years 1964-65 to 1967-68?'

is also answered in the affirmative and against the assessee. There will be no order as to costs in these references.


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