Commissioner of Gift Tax, Delhi-II vs I.P. Soni

S. Ranganathan, J.—All these matters can be disposed of by a common order. The question involved in all the references 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 arises in the following circumstances. On 12th July; 1963, I.P. Soni executed a gift deed in favour of his son, 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, therefore, permitted the learned counsel for the assessee to place before us a copy of the gift deed in question. The deed shows that the donor was aged 80 years on the date of the gift. He purported 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 the property gifted on the terms and conditions incorporated in the original lease deed and the transfer was effected with the sanction of the Chief Commissioner of Delhi, the original lessor. The cost of the plot was set out at Rs. 7.750 and the market value of the land at Rs. 39,195.

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, therefore, 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 assessee. The GTO found that there 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 father and the son, that the Land & Development Officer, New Delhi, had permitted the transfer on condition that the donee would construct a second storey on the property which was already standing on the piece of land; that the house property stood in the donee''s name as per the 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 wherein 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 assessee, i.e., I.P. Soni, to his son, M.M. Soni. He completed the gift-tax assessment accordingly.

The order of the GTO was confirmed by the AAC. But, on further appeal, the assessee was successful. Before the Tribunal it was contended on behalf of the assessee that in view of the clear and unambiguous terms contained in the gift deed, it was only the plot in question that could be treated as haying been gifted and that only its value could be included in the gift-tax assessment. On the other hand, the departmental representative relied on the assessee''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 departmental contention. It observed:

We find that subsequent to the date of the said letter, the assessee filed a revised return 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, therefore, no other evidence shall be given to prove the transaction except the document itself or secondary evidence thereof when such evidence is admissible. In the instant case, the terms of the gift deed being clear and unambiguous, we are unable to accept the contention that under the document 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.

The departmental representative also relied on the terms 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 decisions in Vithoba Bava v. Hariba Bava [1869] 6 BHCR 54 and in Periakaruppan Chetti v. Arunachalam Chetti [1926] ILR 50 Mad 582; 102 IC 290, in support of their conclusion.

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?

The income tax references arise in the case of the donee, M.M. Soni. The said assessee is an individual having his main source of income by way of salary. The references relate to the assessment years 1966-67 to 1971-72. (At this stage we may mention 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 both in I.T. Rs. 133/74 & 10/76. It appears to be a mistake and the correct position appears to be that ITR 133/74 relates to the assessment years 1966-67, 1967-68 and 1969-70 and ITR 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 assessee 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 assessments on that footing. This conclusion was, however, reversed 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.

On the application of the Commissioner of income tax, the following questions have been referred for our decision:

I.T.R. No. 133/74:

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 hence the half share of the property income should be assessed in the hands of the assessee?

I.T.R. No. 10176:

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 assessee as against Rs. 6,924 actually taxed by the income tax Officer?

I.T.Rs. Nos. 139 & 139A/78:

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 assessee?

The short question that arises for consideration in all these references 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 or 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, in so far as is relevant, reads as follows:

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

The expression "attached to the earth" has been explained in the definition section-s. 3. The relevant definition is as follows:

''Attached to the earth'' means:--

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

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

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

It is, therefore, 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.

The statute 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 principle of s. 8was outlined by the Privy Council in Asghar Reza Khan v. Mahomed Mehdi Hossein Khan [1903] LR 30 IA 71; ILR 30 Cal 556, and this has also been applied in a large number of decisions including Krishna Kumari Devi v. Rajendra Bahadur Sinha Deo, AIR [1927] Oudh 240, and George Vs. South Indian Bank Ltd. and Another, . There is also a reference to the principle in the decision of the Supreme Court in Divisional Forest Officer, Himachal Pradesh and Another Vs. Shri Daut and Others, , where at p. 614, 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 owner in the land is wide enough to include the trees standing on the land.

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 cases referred to by the Tribunal the question was whether a construction put up by a member of the family on a plot belonging to a joint family should be treated as joint family property or as individual property of the person 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 ''position in the earlier Bombay case which has been followed in the Madras decision earlier referred to. Mr. Suri, learned counsel for the assessee, drew our attention to the decision of the Kerala High Court in Mammunhi Vs. Kunhibi, , 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 the 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 materials 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, which is directly answered by the provisions of s. 8 of the Transfer of Property Act.

Mr. Suri next contended that s. 8 also requires effect to be given to the intention of the parties and he contended that the conclusion of the Tribunal that in the present case the father 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 accept 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 that the terms of the gift deed are clear and unambiguous and they have purported to exclude the consideration of other circumstances surrounding the transaction upon which the department relied. The Tribunal, therefore, 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.

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 has to be expressed or implied from the terms of the document or also from the surrounding circumstances. The Tribunal proceeded only on the basis of the document. But if we scrutinise 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 date 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 date 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 impliedly states that the building situated on the land was not given to the donee. Mr. Suri invited our 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 include the rights 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 it 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 gift deed. We are, therefore, unable to say 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 provisions of s. 8 of the Transfer of Property Act in the present case.

Even if we are to focus our attention not merely to the gift deed but also to 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 but Mr. Suri told us that the contrary intention should be gathered from the conduct of the donor in continuing to live in the property and to enjoy the income therefrom 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 detract 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.

In the circumstances, we are of opinion that in the present case the deed of gift conveyed to the 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 subsequent to the date of the gift has to be assessed in the hands of the donee. The question in G.T.R. No. 1/73 is, therefore, answered in the negative and against the assessee. The question in ITR No. 133/74 is also answered in the negative and against the assessee. The same is the position in I.T.Rs. No. 139 and 139-A/78. In ITR No. 10/76 the question is slightly different and we answer 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 hands of the assessee and that the entire amount of Rs. 6,924 was rightly taxed by the ITO. The references are disposed of accordingly. The Commissioner will be entitled to his costs. Counsel''s fee Rs. 350 (one set).