(a) Transfer of Property Act (IV of 1882)‑‑‑

‑‑‑‑Ss.123 & 129‑‑‑Wealth Tax Act (XV of 1963), Preamble‑‑‑Oral gift‑‑‑Transfer of property how effected‑‑‑Contention of the Department was that oral gift had not created any title in the name of the donees on account of non‑registration of instrument of gift under S.123 of the Transfer of Property Act, 1882‑‑‑Validity‑‑‑Under the provisions of S.129 of Transfer of Property Act, 1882 the gift of immovable property made under Islamic Law was expressly excluded from registration.  

(b) Transfer of Property Act (IV of 1882)‑‑‑

‑‑‑‑Ss.123 & 129‑‑‑Wealth Tax Act (XV of 1963), Preamble‑‑‑Oral gift‑‑‑Transfer of property how effected‑‑‑Registration‑‑‑Registration of documents/written instrument in any case would not create a gift but was merely an evidence of gift and as such would not require registration as under. Islamic Law, it is essential to the validity of a gift that there should be a declaration of gift by the donor; an acceptance of the gift, express or implied, by or on behalf of the donee, and delivery of possession of the subject of the gift by the donor to the donee either actually or constructively‑‑‑If said conditions were complied with the gift was complete.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.16‑‑‑Assessment‑‑‑Oral gift‑‑‑Registration‑‑‑Property transferred by oral gift was added in the wealth of assessee‑‑‑First Appellate Authority rejected the appeal of the assessee on the ground that the oral gift did not create any title in the donees in the absence of gift's registration as the gifted shares in the property could not be alienated by the donees‑‑ Validity‑‑‑Donees had admittedly declared the income generated acquired through their share of subject property in their income‑tax returns and therefore, property for the purpose of wealth tax could not be taxed in the hands of the appellant/assessee‑‑‑Appellate Tribunal disagreed with the view that gift did not create any legal right in the property without registration‑‑‑Registration did not create the title but was only mode of confirmation of the title‑‑‑Title of the property had been transferred through oral gift which was acceptable under the law‑‑‑Appellant/assessee was to establish that the transferor of title had executed the declaration in confirmation of oral gift and the donees had accepted the gift and had confirmed having taken away the physical possession of the property and had also declared the income from that property in their income‑tax returns‑‑‑Order of First Appellate Authority was vacated and Assessing Officer was directed by the Appellate Tribunal to assess only the share owned by the assessee and exclude the share gifted to her daughter.

1987 SCMR 1403 and 1990 CLC 2027 rel.

A.K. Shamim for Applicant.

Inayatullah Kashani D.R. for Respondent,

Date of hearing: 16th May, 2002.

ORDER

JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).‑‑The applicant through this appeal has objected to the impugned order of the learned CWT(A), dated 30‑11‑1996, confirming the assessment valuation of property No.7, sector‑7/A, Islamabad at Rs.36,96,000 and thereby computing the net wealth of the appellant Rs.46,11,000 as against declared wealth of Rs.9,15,000.

2. Mr. A.K. Shamim, Advocate, learned representative for the applicant has contended that the learned CWT(A) was not justified to confirm the assessed valuation of property No.7, sector 7/A Islamabad at Rs.36.96,000 and further to confirm that the applicant is the owner of whole the property. According to the learned counsel the applicant has already gifted 2/3rd share of the property to her two daughters namely Mrs. Shahina Asad and Mrs. Usma Waheed Khan through oral gift which has been confirmed through declaration in confirmation of oral gift executed on 28th December, 1994. Learned counsel has submitted that the property has been rented out to Messrs Mitsubishi Corporation Liason Office, Islamabad through lease agreement executed on 7th December 1994. Learned counsel has placed before us the copies of lease agreement and the declaration in confirmation of oral gift. According to the learned counsel the said daughters of the applicant have also filed their respective Income Tax Returns declaring the income acquired through rent of this property for the corresponding income tax year According to the learned counsel, case of the income tax inclusion of rental income in respect of the property for the year lender consideration i.e. 95‑96 was objected before the learned CIT(A) who has directed to delete the same from the income of the applicant and to tax it in the hands of the donees, accepting the version of the applicant that the property have been gifted. Learned counsel in this respect has placed before us the order of the learned CIT(A), dated 4‑7‑1996 for the assessment year 1995‑96 in the income tax case of the present applicant. Learned counsel has further contended that the learned CWT(A) has rejected the appeal filed by the applicant on the ground that the oral lift does not create any title in the donees in the absence of gift's registration as according to him the gifted shares in the property cannot be alienated by the donees. The learned counsel has contended that it is the settled proposition of law that .the gift of immovable property made under Muslim Law is expressly excluded from operation of section 123 of the Transfer of Property Act, 1982 (mandatory registration of gift of immovable property) under section 129 specific excluding from registration to effect any rule of Muslim law, and that the gift‑deed was not compulsorily registerable and the gift can be effected even orally or under an unregistered instrument. He has in this respect placed reliance on the decision of the Hon'ble Supreme Court of Pakistan reported as 1987 SCMR 1403 and the decision of the Hon'ble Lahore High Court reported as 1990 CLC 2027. Learned counsel has prayed that the order of the learned CWT(A) may please be vacated and the Assessing Officer may please be directed to accept the return version.

3. On the other hand, Mr. Inayatullah Kashani, learned represen tative of the department is supporting the impugned orders of the officers below. He has contended that the oral gift does not create any title in the name of the donees, in the absence of the registration of gift as in this case neither the property can be alienated by the donees nor the donor can be stopped to sell property as he or she continues to be absolute owner capable of entire property despite the donation gift. He has further contended that in the present case, the lease agreement of the property executed between Messrs Mitsubishi Corporation and the appellant has been executed by the appellant herself and the alleged donees have not participated in the execution of lease agreement.

4. We have heard the learned representative of both the parties and have also perused the impugned order of the learned CWT(A), the assessment order, the case law referred by the learned counsel for the appellant the declaration of confirmation of oral gift, the lease agreement, the order of the learned CWT(A) for the assessment year 1995‑96 in the case of the appellant in the income tax matter and other relevant documents. We have found that the contention of the appellant as been accepted by the learned CWT(A) in the income‑tax matter wherein it has been directed to tax the income of the property sub-matter of this appeal in the hands of the donees. We are not convinced with the arguments of the learned D.R. that the oral gift does not create any title in the name of the donees due to mandatory registration of instrument of gift under section 123 of the Transfer of property Act, as under section 129 of the Transfer of Property Act, the gift of immovable property made under Muslim Law has been expressly excluded from registration. Sections 123 and 129 of the Transfer of Property Act for the facility of decision are reproduced hereunder:‑‑

Section 123. 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.

Section 129. Nothing in this Chapter relates to gifts of moveable property made in contemplation of death, or shall be deemed to affect any rule of Muslim Law.

We are of the view that the registration of documents written instrument in any case would not create a gift but is mere evidence of gift and as such would not in the case of Muslims require registration. As under the Muslim Law, it is essential to the validity of a gift that there should be (1) declaration of gift by the donor (2) an acceptance of the gift, express or implied, by or on behalf of the donee, and (3) delivery of possession of the subject of the gift by the donor to the donee either actually or constructively. If these conditions are complied with the gift is complete. In the present case, the respective donees have admittedly declared the income generated acquired through their share of subject property in their income‑tax returns and therefore that property for the purpose of wealth tax cannot be taxed in the hands of the appellant. We are not agreed with the findings of the officers below that the declaration of gift does not create any legal right in the property without registration. We are of the view that the registration does not create the title but is only made of confirmation of the title. The present case, the title of the property has been transferred through oral gift under the provision of Muslim personal law which is acceptable under the law and the appellant further to establish the transfer of title have executed the declaration in confirmation of oral gift and the donees has accepted the gift and have confirmed having taken away the physical possession of the property and have also declared the income from that property in their income tax returns. We therefore, in the circumstances of the case, allow the appeal filed by the assessee. The impugned order of the learned CIT(A) is therefore, vacated and the Assessing Officer is directed to assess only the share owned by the appellant and to exclude the share gifted by the appellant to her daughters.

5. The appeal filed by the assessee is allowed.

It is certified that it is a fit case for reporting as in this case the issue of gift by a Muslim has been elaborated.

C.M.A./46/Tax (Trib.) Appeal accepted.