MUHAMMAD HANIF MONNOO VS COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE
2001 P T D 1162
[Lahore High Court]
Before Nasim Sikandar and Jawad S. Khawaja, JJ
Mian MUHAMMAD HANIF MONNOO
Versus
COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE
P.T.R. Nos. 50 to 53 of 1988, heard on 05/10/2000.
Income Tax Ordinance (XXXI of 1979)----
----S. 83(3) [before amendment]---Transfer of property in shares by way of oral gift without a right to receive dividend---Declaration of intention to gift by the donor was not supported from the record---Mere delivery of share certificates could not in any manner defeat the provisions of law nor could make the donor an agent of the donees to receive dividend on their behalf-- Property in shares having not changed hands it remained the property of donor---Revenue, in circumstances, was right in refusing to accept the donees as owners of the shares and not to permit the receiver of income of the said shares to pass the incidence of tax on the basis of some arrangement which was never accepted as such by the person, natural or legal, distributing the income---When an assessee received the dividend the law assumed completion of one transaction of distribution and subsequent transfer of share or, the manner in which the said money was expended was not at all the concern of Revenue---Requirements of gift, in circumstances, were not established as a fact and even if it was so, the assessee could not be accepted to have divested himself of the ownership, in absence of any act done in furtherance of the completion of the gift, which never took off in absence of a creation of an intervening document which was an application for transfer of shares made either on behalf of the donor or the donees---Principles.
In the given circumstances property in the shares never changed hands.
There is no doubt that a declaration by the donor, acceptance of gift by the donee and delivery of possession of subject-matter of gift completes it in Islamic Law. The declaration, however, needs to be an irrevocable pronouncement to completely part with the ownership rights and of their incidents. Any declaration which is not supported by evidence that donor wanted to transfer the property absolutely, is hardly of any significance. Correspondingly the acceptance of gift by the donee needs to be supported by evidence that the gift was accepted to become owner of the property or the transferee of all kinds of rights earlier vested in the donor. An oral gift cannot be allowed to be used as a vehicle to defeat the present or future rights of the third parties or to manipulate the status of ownership in order to avoid a fiscal or other similar obligations towards the State or any individual. What goes between the donor and the donee remains their personal matter as long a transaction does not throw its shadow on the rights of third parties or the provisions of any law including fiscal laws. The moment an oral gift touches the rights of a third party or affects a claim of the State functionaries both the giver and the taker shall be required to establish the vesting of rights through most superior kind of evidence. In the present age exercise of ownership rights in every kind of property is not expected without the involvement of a document to witness the nature and extent of such rights or a judgment of a Court recognizing such rights in rem or in personum. A donee will not be in a position to enjoy the attributes of ownership without the execution of an intervening document by whatever name called. Since these days all the record of the transfer of properties (particularly immovable) is meticulously maintained and in fact it is one of the important duties of the State to regulate such transactions, the alleged declaration of oral gift and its acceptance by the donee is the weakest type of evidence to be relied upon. Particularly when the alleged gift affects the rights of an individual or the national coffer.
The scene of human living from small villages inhabited by a tribe has moved to cosmopolitan cities where even next door neighbours remain strangers except for a reason to interact. A liberal interpretation of the requirements of gift has done more harm than good. It has given rise to bogus claims. It has divided families because a greedier member will always be willing to take chance through a claim of oral gift to oust co-owners or co-heirs from a legitimate inheritance. For a real donor in these days nothing is more easy to express his wish in writing and to get it registered with the official or semi-official agencies entrusted with the job. Unlike old times, the deed-writers, writing facilities and witnesses are so much in abundance that a claim of oral transfer must immediately give rise to an eyebrow. It is not that transactions registered with the concerned agencies are not disputed and are accepted as sacrosanct. It is only that the documented transactions are open and public. An oral gift has the semblance of a conspiracy. Like all other clandestine arrangements, it smacks of turbidity and treachery. The registration of a gift makes the intention to gift and transfer both open as well as public. When both these elements are available the element of honesty will come in as a natural corollary. The transfer of possession as one of the ingredients of gift, in fact, represents and manifests openness of the transaction and a notice to all and sundry. However, since transfer of possession is possible in a number of manners and for a number of purposes, it is necessary that such transfer has the support of record manifesting openly that it is with the object and for the purpose of change of ownership.
In the present case the alleged declaration to make a gift does not find support either from the record or from events which followed. Although the donees never refused to accept the alleged gift, the fact remains that the contention qua delivery of signed blank transfer deeds alongwith shares was never established before the Revenue. All along it was only said as a claim but was never supported by production of the alleged blank transfer deeds either by the donor or by the donees. The intention to make the gift also appears motivated inasmuch as till today neither of the parties the donor or the donees has made an application for transfer of shares to the company. The dividend till today is continuously being received by the assessee. His claim to pass on the proportionate dividend to the donees may very well be correct but such a claim is not at all acceptable in income-tax laws. The transaction of distribution. The subsequent transfer or the manner in which that money was expended is not at all the concern of the revenue.
The divergent positions taken up as defence by the assessee do not inspire confidence. The provisions of section 83(3) of the Income Tax Ordinance, 1979 are very clear and ~ were properly invoked to check the intention of the assessee to have the best of both. To remain a shareholder of certain percentage which gave him a particular position in the company and at the same time to reduce his liability towards the Revenue even for the changed income bracket cannot flow together. The aforesaid provisions of section 83(3) of the Ordinance, 1979 do not indirectly frustrate the general principles of gift under the Islamic Law. Since the system provides a complete mechanism for declaration of a particular provision of law as opposed to Injunctions of Islam no contention of the kind can be entertained till the time such provision of law is declared to be against the Injunctions of Islam. Till that declaration, statutory provisions are fully enforceable.
In the present case the completion of gift was never an issue.. The Revenue in the light of the aforesaid provisions of the Ordinance had concluded that the property in the assets transferred remaining with the assessee he was liable to pay tax upon income accruing from them. In other words the liability to pay tax retrained fixed on the transferor if he could not establish that the transfer of assets happened for consideration. The main qualification being that assets remained the property of the transferor. If the contention of the assessee that according to the general principles of Islamic Law of gift property stood transferred to the donees is accepted then how could the receipt of income from that property by the assessee be explained, It cannot be said that although the property in the shares stood transferred to the donees yet the income from property remained vested in the assessee. These are clearly opposite pleas, the acceptance of one will certainly destroy the other. The issue concerns more the tax liability rather than the transfer of property in the shares in favour of the donees. The Revenue cannot and should not go beyond the picture as emerges from the admitted facts which are proved on record. It is that the assessee is receiving dividend as owner of certain number of shares. The end destination of the income not being the worry of the Revenue, the assessee cannot avoid his liability on the basis that certain oral arrangements were made between him and his family members. A transfer of property in' shares without a right to receive dividend may well be a choice of the donees, yet the Revenue will rightly refuse to accept them as owners of the shares nor will it permit the receiver of income to pass the incidence of tax on the basis of some arrangement which was never accepted as such by the person, natural or legal, distributing income.
It is correct that a person is allowed to arrange his affairs in any manner to minimise the tax burden. However, such an intention and the manner to achieve the goal must not amount to a design to evade tax. In the case of the assessee the alleged gift never took place. His intention to part with the property in gift never crystallized and their ownership continued to remain vested in him. He enjoyed the position and prestige of being a shareholder of a certain percentage. His desire to share the tax burden with his family could not be accepted by the Revenue in the manner it was sought to be achieved. The declaration of intention to gift having never been supported from record, mere delivery of blank share transfer deed alongwith share certificates could not, in any manner, defeat the provisions of law nor these could make the donor an agent of the donees to receive dividend on their behalf.
In the present case the requirements of gift were not established as a fact. Secondly, even if it was so, the assessee could not be accepted to have divested himself of the ownership in absence of any act done in furtherance of the completion of the gift which never took off in absence of a creation of an intervening document which in this case was an application for transfer of shares made either on behalf of the donor or the donees.
The assessee having failed to establish the said gift as a legal transaction, answer to the questions was in the affirmative.
L.I.C of India v. Escorts Ltd. AIR 1986 SC 1370; Vasudev Ramchandra Shelat v. Pranlal Jayanand Thaker and others AIR 1974 SC 1728; Sheila Devi Chamria v. Tara Chand Saraogi and others AIR 1986 Com. Cas. 735; V.B. Rangara v. V.B. Gopalakrishnan and others (1992) 73 Com. Cas. 201; Rai Bahadur Mohan Singh Oberoi v. Commissioner of Income-tax, West Bengal AIR 1973 SC 651; A.M.P. Arunachalam v. A.R. Krishnamurthy, and others (1979) 49 Com. Eas. 662 and Maulvi Abdullah and others v. Abdul Aziz and others 1987 SCMR 1403 ref.
Nauman Akram Raja for Petitioner.
Muhammad Ilyas Khan for Respondent.
Date of hearing: 5th October, 2000.
JUDGMENT
NASIM SIKANDAR, J.---This judgment will dispose of P.T.R. Nos. 50/88, 51/88, 52/88 and 53/1988.
2. On an application under section 136(2) of the Income Tax Ordinance, 1979 by the assessee an individual deriving income from salary and dividend etc. following question of law has been framed for consideration and reply:--
"Whether, on the facts and in the circumstances of the case the learned Tribunal was right in holding that transfer of shares by way of gift in favour of the donees was not complete and, therefore, dividend from gifted shares continued to be assessable in the hands of the assessee?"
3. The original assessments in respect of the assessee were completed for the years, 1980-81, 1981-82 and 1982-83 under self-assessment scheme. For the year 1983-84, however, a regular assessment was completed under section 62 of the Income Tax Ordinance, 1979. In all these returns the assessee disclosed dividend income from M/s Rafhan Maize Products Ltd. respectively at Rs. 52,405, Rs. 41,265 Rs. 4,39,721 and Rs. 2,14,080. It was accordingly accepted by the Revenue. However, it appears that during the assessment proceedings in. the year, 1983-84 the Assessing Officer came to know that the assessee had received much larger sums as dividend from the said Company. Therefore, he proceeded to re-open the three assessments for the years, 1980-81 to 1982-83 after serving the assessee with a show-cause notice.
4. In reply it was pleaded that the assessee gifted 1200 shares each to his wife and sons and 600 shares each to his two daughters. The first three gifts were said to have taken place on 5-7-1975 while the last gift of 600 shares was made in favour of his minor daughter on 4-4-1977. The mode of gift was stated to be the delivery of share certificates alongwith blank transfer deeds duly signed by the donor, the assessee. It was explained that these shares were half of the total shares inherited by him from his late father Mian Muhammad Shafi, who died in 1956. Accordingly it was stated that after having been gifted the shares the donees were entitled to receive the dividend from Company. It was further claimed that at the time of gift a return under the Gift Tax Act was also filed and the Gift Tax Act levied thereupon was duly paid to the Revenue. It was admitted that these shares were not transferred formally (in fact till today) in view of certain restrictions placed upon them by Articles 24, 31 and 121 of the Articles of Association of the Company. However, according to the assessee, the handing over of blank transfer deeds duly signed by him alongwith original share certificates completed the gift for all intents and purposes to make the donees their new owners and to divest him of his ownership in them.
5. The Assessing Officer as well as the first appellate authority however, did not agree with the assessee. Resultantly the total amount of dividend received by the assessee in his own name from the said Company but allegedly shared with the said donees his wife son and two daughters was assessed in his hands. The Revenue also refused to accept the contention that dividend proportionate to the shares held by the donees having already been assessed in their hands, it could not again be assessed in the hands of the assessee. In other words the argument with regard to double taxation of dividend was also turned down. While doing so the Revenue referred to sub -clause (3) of section 83 of the Income Tax Ordinance, 1979 which at the relevant time provided as under:--
"All income arising by virtue of a transfer, whether revocable or not and whether effected before or after the commencement of this Ordinance shall, where the assets remain the property of the transferor be chargeable to tax as the income of the transferor and shall be included in his total income." (Emphasis provided)
6. The assessee also failed before the learned Tribunal which adopted the view that in absence of transfer of shares in the register of the Company in favour of the donees, the alleged gift was not complete and, therefore, the assessee continued to be an owner of the alleged transferred shares. According to the learned Tribunal, blank transfer forms did not amount to the transfer of possession which was one of the three ingredients of a valid gift alongwith offer and acceptance of gift. It was also noted that in the statement attached with the return for the year, 1980-81 after the re-opening of the assessment the break-up of gifted shares was given for the first time. Also that in earlier returns no such bifurcation was made while the assessee had all along been alleging that the gift had taken place as far back as the year, 1976. The Tribunal again noted that even at the time when the matter was placed before them no transfer of shares had taken place nor the donees had been registered as transferees in the registers of the company. By referring to certain cases from Indian jurisdiction, the Tribunal expressed the view that transfer of shares by a share-holder could not take effect without sanction of the company and that unless the donor had completely divested himself of the ownership .the transfer of shares could not be said to have taken place.
7. The Tribunal also refused to make a reference of the two proposed questions of law which were placed before them. By way of its order, dated 6-1-1988 the learned Members of the Tribunal expressed the view that the questions as proposed did not arise from their order.
8. These two questions were earlier placed before us. However, we have taken up the aforesaid portion inasmuch as it clinches the matter. Also the facts assumed in the two questions cannot be said to have been found by the Tribunal.
9. Heard. The learned counsel for the petitioner vehemently contends that under Islamic Law even in cases of immovable properties no deed in writing is required to effect a gift much less to say of gift of movable property which was completed with the delivery of shares and the blank transfer deeds. It is repeated that on delivery of shares the donees became full owners and, therefore, all income accruing thereafter was liable to, be assessed in their hands only. In support of his submissions that despite non-transfer of shares in the books of the company, the donees had become their owners, leaned counsel relies upon in re: L.I.C of India v. Escorts Ltd. (AIR 1986 SC 1370), Re: Vesudav Ramchandra Shelat v. Pranlal Jayanand Thaker and others (AIR 1974 SC 1728), and re: Sheila Devi Chamria v. Tara Chand Saraogi and others (AIR 1986 Company-cases 735). Also refers to re: V.B. Rangara v. V.B. Gopalakrishnan and others (1992) 73 Company cases 201), re: Rai Bahadur Mohan Singh Oberoi v. Commissioner of Income Tax West Bengal (AIR 1973 SC 651) and re: A.M.P. Arunachalam v. A.R. Krishnamurthy and others (1979) 49 Company cases 662). Learned counsel lastly relies upon re: Maulvi Abdullah and others v. Abdul Aziz and others (1987 SCMR 1403) to contend that the three ingredients of declaration by the donor, acceptance by the donee and delivery of possession being available in this case the gift was complete irrespective of absence of any deed in writing be it for the purpose of gift or the transfer of ownership in registers of the company.
10. Learned counsel for the Revenue, however, supports the findings earlier made by the Tribunal. It is pointed out that the petitioner has been inconsistent in his pleas. In the first instance it was claimed that transfer of shares could not take place due to certain restrictions contemplated in the articles of association of the Company while at present it is being alleged that the articles contained no specific prohibition against gift of shares by a share holder to his family members. Learned counsel states that if their earlier stance was correct then the gift was bad for the reason of its being against articles of association as the donee could not become a transferee in the books of the company. Their present stance, according to the learned counsel, is also superfluous because there is absolutely no explanation as to why despite passing of a number of years the alleged donees or the donor never made a request for transfer of shares in the books of the Company. Mr. Muhammad Ilyas Khan, Advocate/Legal Advisor, also refers to the fact that admittedly till today the assessee is being shown an owner of the alleged transferred shares in the registers of the Company. Also contends that till date the assessee, the alleged donor continues to receive the dividend even in respect of the shares alleged to have been gifted to his family members.
11. After hearing the learned counsel for the parties we are persuaded to agree that in the given circumstances property in the shares never changed hands. Learned counsel for the petitioner has placed a lot of stress on the Islamic law of gift to claim that even in cases of gift of immovable properties no right or involvement of a document was required much less to say of 8 immovable property. However, the matter is not that simple as is being portrayed by him. There is no doubt that a declaration by the donor, acceptance of gift by the donee and delivery of possession of subject-matter of gift completes it in Islamic Law. The declaration, however, needs to be an irrevocable pronouncement to completely part with the ownership rights and of their incidents. Any declaration which is not supported by evidence that donor wanted .to transfer the property absolutely is hardly of any significance., Correspondingly the acceptance of gift by the donee needs to be supported by evidence that the gift was accepted to become owner of the property or the transferee of all kinds of rights earlier vested in the donor. An oral gift cannot be allowed to be used as a vehicle to defeat the present or future rights of the third parties or to manipulate the status of ownership in order to avoid a fiscal or other similar obligations towards the State or any individual. What goes between the donor and the donee remains their personal matter as long a transaction does not throw its shadow on the rights of third parties or the provisions of any law including fiscal laws. The moment an oral gift touches the rights of a third party or affects a claim of the State functionaries both the giver and the taker shall be required to establish the vesting of rights through most superior kind of evidence. The judgments relied upon in this regard only declare that an oral gift is possible. In the present age exercise of ownership rights in every kind of property is not expected without the involvement of a document to witness the nature and extent of such rights or a judgment of a Court recognizing such rights in rem or in personum. A donee will not be in a position to enjoy the attributes of ownership without the execution of an intervening document by whatever name called. Since these days all the record of the transfer of properties (particularly immovable) is meticulously maintained and in fact it is one of the important duties of the State to regulate such transactions, the alleged declaration of oral gift and its acceptance by the donee is the weakest type of evidence to be relied upon. Particularly, as said earlier, when the alleged gift affects the rights of an individual or the national coffer.
12. The scence of human living from small villages inhabited by a tribe has moved to cosmopolitan cities where even next door neighbours remain strangers except for a reason to interact. A liberal interpretation of the requirements of gift has done more harm than good. It has given rise to bogus claims. It has divided families because a greedier member will always be willing to take chance through a claim of oral gift to oust co-owners or co-heirs from a legitimate inheritance. For a real donor in these days nothing is more easy to express his wish- in writing and to get it registered with the official or semi-official agencies entrusted with the job. Unlike old times, the deed-writers, writing facilities and witnesses are so much in abundance that claim of oral transfer must immediately give rise to an eye-brow: It is not that transactions registered with the concerned agencies are not disputed and are accepted as sacrosanct. It is only that the documented transactions are open and public. An oral gift has the semblance of a conspirary. Like all other clandestine arrangements, it smacks of turbidity and treachery. The 1 registration of a gift makes the intention to gift and transfer both open as I well as public. When both these elements are available the element of honesty will come in as a natural corollary. The transfer of possession as one of the ingredients of gift in fact represents and manifests openness of the transaction and a notice to all and sundry. However, since transfer of possession is possible in a number of manners and for a number of purposes, it is necessary that such transfer has the support of record manifesting openly' that it is with the object and for the purpose of change of ownership.
13. In the case in hand the alleged declaration to make a gift does not find support either from the record or from events which followed. Although the donees never refused to accept the alleged gift, the fact remains that the contention qua delivery of signed blank transfer deeds alongwith shares was never established before the Revenue. All along it was only said as a claim but was never supported by production of the alleged blank transfer deeds either by the donor or by the donees. The intention to make the gift also appears motivated inasmuch as till today neither of the parties, the donor or the donees has made an application for transfer of shares to the company. The dividend till today is continuously being received by the assessee. His claim to pass on the proportionate dividend to the donees may very well be correct but such a claim is not at all acceptable in income tax laws. The moment an assessee receives the dividend the law assumes completion of one transaction of distribution. The subsequent transfer or the manner in which that money was expended is not at all the concern of the Revenue.
14. The divergent positions take up as defence by the assessee do not inspire confidence. The provisions of section 83(3) of the Income Tax Ordinance, 1979 are very clear and were properly invoked to check the intention of the assessed to have the best of both. To remain a shareholder of certain percentage which gave him a particular position in the company and at the same time to reduce his liability towards the Revenue even for the changed income bracket cannot flow together. Also we do not agree with the submissions made at the bar for the assessee that the aforesaid provisions of section 83(3) of the Ordinance, 1979 indirectly frustrate the general principles of gift under the Islamic Law. Since the system provides a complete mechanism for declaration of a particular provision of law as opposed to injunctions of Islam no contention of the kind can be entertained till the time such provision of law is declared to be against the injunctions of law. Till that declaration, statutory provisions are fully enforceable.
15. Coming to the aforesaid cases from Indian Jurisdiction relied upon by the learned counsel for the petitioner, we find most of them to be clearly distinguishable. In re: A.M.P. Arunachalam (Supra) the Madras High Court expressed the view that transfer of shares was independent of registration under Companies Act. In that case the holder of shares which were pledged with a third party sold them and the question arose if the title m the pledged shares transferred from seller to the buyer. According to their Lordships as shares could be transferred by issuing a document whereby the seller asserted his rights to the goods and authorised the buyer to receive the good represented thereby, even from third party, would operate as a valid delivery of goods notwithstanding the non-co-operation of the person in physical possession of the goods. The reported judgment of the Calcutta High Court in re: Rai Bahadur Mohan Singh Oberoi (Supra) revolves around the contested claims of the benamt ownership of shares. The judgment of the Supreme Court of India in re: V.B. Rangara (Supra) reiterates the settled legal position that a restriction on transfer not specified in articles is neither binding on the company nor the shareholders. The case of Sheila Devi Chamria (Supra) also does not held the petitioner. In that case it was held although the donee will-not be regarded as shareholder by the company until the transfer was recorded in the books, none-the-less, in the eyes of law, it was the donee who was the owner of the shares and the gift became complete by the delivery of shares certificates alongwith blank transfer deeds.
It will be seen that in the present case the completion of gift was never an issue.-The Revenue in the light of the aforesaid provisions of the Ordinance had concluded that the property in the assets transferred remaining with the assessee he was liable to pay tax upon income accruing from them. In other words the liability to pay tax remained fixed on the transferor if he could not establish that the transfer of assets happened for consideration. The main qualification being that assets remain the property of the transferor. If we accept the contention of the learned counsel that according to general principles of Islamic Law of gift property stood transferred to the donees then how could the receipt of income that property by the assessee be explained. It cannot be said that although the property in the shares stood transferred to the donees yet the income from, property remained vested in the assessee. These are clearly opposite pleas, the acceptance of one will certainly destroy the other. The issue in hand concerns more the tax liability rather than the transfer of property in the shares in favour of the donees. The Revenue cannot and should not go beyond the picture as emerges from the admitted facts which are proved on record. It is that the, petitioner, the assessee is receiving dividend as owner of certain number of shares. The end destination of the income not being the worry of the Revenue, the assessee- petitioner cannot avoid its liability on the basis that certain oral arrangement were made between him and his family members. A transfer of property in shares without a right to receive dividend may well be a choice of the donees, yet the Revenue will rightly refuse to accept them as owners of the shares nor will it permit the receiver of income to pass the incidence of tax on the basis of some arrangement which was never accepted as such by the person, natural or legal, distributing income.
15. In re: Life Insurance Corporation of India (Supra) the ratio settled runs counter to the contentions put forth at the bar. A Full Bench of the Supreme Court of India while interpreting section 111 of the Indian Companies Act (No. 1 of 1956) held that a share was transferable; while transfer might be effected between transferor and the transferee from the date of transfer, the transfer was completed and the transferee became a shareholder in the true and full sense of the term with all the rights of shareholder only when the transfer was registered in the Companies' register. According to their Lordships on transfer though the transferee became owner of beneficial interest yet legal title continued with the transferor until transfer was registered in the books of the Company. The provisions of law invoked by the Revenue, it will be seen, place stress upon the fact that where transferred assets remained the property of the transferor all income arising therefrom shall be included in his total income. Even if the claim of gift is accepted as such still the assessee continued to be a legal owner of the shares which remained his property and, therefore, there was no question of his refusing payment of tax on the dividend received as owner thereof. The other judgment of the Supreme Court of India re: Vasudav Ramchandra Shelat (Supra) is also of no help to the present assessee. In. that case the assessee an individual gifted a number of shares through a registered gift-deed by identifying their number. Also he undertook to get the name of the donee put on to the register of the Companies concerned. The gift-deed was delivered together with the share certificates to the donee. Subsequently blank transfer forms duly signed by him were also handed over to the donee. Their Lordships found that donation of the right to get share certificates made out in the name of the donee became irrevocable by registration as well as by delivery as remarked earlier this case too is of no help to the assessee.
16. It is correct that a person is allowed to arrange his affairs in any manner to minimise the tax burden. However, such an intention and the manner to achieve the goal must not amount to a design to evade tax. In the case of the assessee the alleged gift never took place. His intention to part with the property in gift never crystallized and their ownership continued to remain vested in him. He enjoyed the position and prestige, of being a "shareholder of a certain percentage. His desire to share the tax burden with his family could not be accepted by the Revenue in the manner it was sought to be achieved. The declaration of intention to gift having never been supported from record, mere delivery of blank share transfer deed alongwith share certificates could not in any manner defeat the provisions of law nor these could make the donor an agent of the donees to receive dividend or their behalf.
17. We have also taken note of a proviso added to subsection (4) of section 83 of the Income Tax Ordinance, 1979 through Finance Ordinance 2000 (Ordinance, No. XXI of 2000) which seeks to block any possible way out for the kind of arrangements before us. It reads as under:--
"Provided that where a transferor fails to produce evidence of transfer of an asset by way of its registration or mutation in the relevant record, income arising from such asset shall be chargeable to tax as the income of the transferor and shall be included in his total income."
18. In our considered view, therefore, the requirements of gift were not established as a fact. Secondly, even if it was so, the assessee could not be accepted to have divested himself of the ownership in absence of any act done in furtherance of the completion of the gift which never took of in absence of a creation of an intervening document which in this case was an application for transfer of shares made either on behalf of the donor or the donees.
19. The assessee having failed to establish the said gift as a legal transaction, our answer to the aforesaid questions is in the affirmative.
M.B.A./M-474/L Reference answered.