2010 P T D (Trib.) 561
[Income-tax Appellate Tribunal Pakistan]
Before Jawaid Iqbal, Judicial Member and M. Liaqat Ali Khan, Accountant Member
M.A. No.68/PB of 2003, decided on 28th March, 2007.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.83 (3) & 156---Income from revocable transfer of assets, etc.---Oral gift---Possession of property---Assessee contended that since son of the assessee had been declaring the rental income from the property by filing of income tax return the same could be equated to possession of immovable property by the donee---Validity---Law contained in S.83(4) of the Income Tax Ordinance, 1979 was unambiguous and stipulated that in case of gift of immovable property, it must be registered---Claim of gift of immovable property without registration of same with the revenue authority was unfounded and there was no mistake in the order---Miscellaneous application on behalf of assessee being devoid of merit, was rejected by the Appellate Tribunal.
1987 SCMR 1907 and 1987 SCMR 1403 rel.
(b) Income Tax---
----Evasion of tax---Person was allowed to arrange his affairs in any manner to minimize the tax burden, however, such an intention and the manner to achieve the goal must not amount to design to evade tax.
(c) Income Tax---
----Oral gift---In case of gift of immovable property, its registration was mandatory otherwise the gift was not valid for the purpose of taxation under the Income Tax Law.
94 Tax 145 rel.
Abdul Rauf Rohaila for Applicant.
Yousaf Ghaffar, D.R. for Respondent.
ORDER
JAVID IQBAL, (JUDICIAL MEMBER).---Through this miscellaneous application, assessee has asked us to rectify a mistake in I.T.A. No.138(PB) of 2002 passed on 6-8-2003 by raising the following objections.
(a) That ITA No. 138(PB) of 2002 was filed before the Income Tax Appellate Tribunal, Peshawar and came up for hearing on 6-8-2003 and was dismissed.
(b) That applicant has examined the order dated 6-8-2003 and approached this Honourable Tribunal for the rectification of mistake apparent from record inter alia on the following grounds:
(i) Firstly the order and judgment dated 6-8-2003 has not appreciated the facts and law applicable to the matter, hence required to be rectified.
(ii) Secondly this Honourable Tribunal while discussing the dictum laid down by the apex Supreme Court of Pakistan in 1987 SCMR 1907, has been observed, that three ingredients for the completion of gift has to be fulfilled i.e. (i) proposal of Gift by donor, (ii) acceptance of Gift by Donee and (iii) delivery of possession of immovable property. It is abundantly established on record that the proposal of gift made by Haji Darya Khan has been accepted by the donee and factum of possession has also been approved due to the fact that the donees are filing income tax return testifying the fact that the proposal of the gift has been accepted by the donee and possession has also been handed over, to them, therefore, the gift in all respect is complete.
(iii) Thirdly the evidence available on record proposes and substantiates the fact that the gift is complete in all respect and the donees are enjoying absolute right of ownership without any interference.
(iv) Fourthly the above mistake is apparent from the record viewing the dictum and ruling laid down by the superior Courts, copies of which are attached herewith for ready reference.
It is, therefore, humbly prayed that on acceptance of this application the order and judgment dated 6-8-2003 made in ITA No.138(PB) of 2002 assessment year 1999-2000 may kindly be rectified and the appeal may accordingly be accepted.
2. Brief facts leading to this miscellaneous application are that assessee is deriving income from registered firm as well as property income. Regarding property income it was denied by the assessee with the plea that the property has been gifted to his son, however, neither any rent deed nor any evidence to this effect was produced during the assessment proceeding by the assessee before the assessing officer. Assessing officer rejected the contention of assessee and assessed the rental income of assessee from this head at Rs.11,160 besides the share income from registered firm. Being dissatisfied with the order of assessing officer assessee went in appeal before the L/C.I.T.(A), who dismissed the appeal of assessee. While on second appeal, the Tribunal, vide order in I.T.A. No.138(PB) of 2002 dated 6-8-2003 also rejected the appeal of assessee. Hence, this miscellaneous application by assessee asking us to readjudicate the issue.
3. We have considered the submissions of the parties and have perused the relevant orders. Assessee has claimed that he does not derive any income from the immovable property in question as it has been gifted to his son, and as such his son has been declaring the rental income from the said property. While adjudicated in the appeal, on behest of assessee the Tribunal vide its order in I.T.A. No.138(PB) of 2000 (assessment year 1999-2000) dated 6-8-2003 rejected the appeal of assessee by holding that assessee has failed to prove that in consequences of completion of gift, the possession of property has been delivered by the assessee (donor) to his son (donee). The relevant portion of the impugned judgment is reproduced as under:
Paras Nos. 4 and 5 of the impugned order:
4. From the arguments of the parties and from perusal of order of the lower authorities, it has been observed that assessee before the learned C.I.T.(A) pleaded that the property in question has been transferred to his sons who are declaring their income from the same property, whereas the learned C.I.T.(A) rejected the contentions of assessee due to failure of assessee to produce any documentary evidence about the transfer of property. The assessee before me has also failed to produce any evidence about the transfer of property rather he stated that the property has been gifted orally. In this regard he also referred the case law reported as 1987 SCMR 1403. In case law it has been held that for complete gift about the immovable property following three conditions must be satisfied:
(i) Proposal of Gift by donor.
(ii) Acceptance of Gift by donee.
(iii) Delivery of possession of immovable property.
Before me learned counsel has failed to show that when the proposal of gift was made by donor and when it was accepted by donee and the most important 3rd condition when the possession of immovable property was delivered to donee.
5. Being this the position of the case where appellant has failed to substantiate his contention with evidence. I uphold the findings of learned C.I.T.(A) in the consequence of which the appeal on behalf of assessee being devoid of merits is dismissed.
4. Now at the time of hearing of instant M.A. it was pleaded by the A.R. of assessee that as the son of assessee has been declaring the rental income from the property by filing of income tax return which could be equated to possession of immovable property by the donee, i.e. the son of assessee. When A.R. was confronted with the judgment of Honourable High Court it was simply stated without plausible reasons that the aforementioned judgment is not applicable to the instant matter. The relevant portion of the aforementioned judgment is reproduced as under:
"The sense 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 co-owners or co-heirs from a legitimate inheritance. For a real donor in than good. (sic) It has given rise to bogus claims. It has divided families because a greedier will always be willing to take chance through a claim of oral gift to oust 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 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 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 possessions 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 case in hand the alleged declaration to make a gift does not 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 along with 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.
The divergent position 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. Also we do not agree with the submission 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.
It is correct that a person is allowed to arrange his affairs in any manner to minimize 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 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 along with share certificate 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 llehalf. "
5. Similarly the Honourable Sindh High Court in a case reported as 94 Tax 145 has also decided the issue by holding that in case of gift of immovable property, its registration is mandatory otherwise the gift is not valid for the purpose of taxation under the Income Tax Law.
6. Besides the aforementioned judgments the law contained in section 83(4) of Income Tax Ordinance, 1979 on this particular point is much unambiguous and stipulates that in case of gift of immovable property, it must be registered. Therefore, in the light of above discussed facts, we would like to add further that not only for the reason discussed in the impugned order, but also from the above quoted judgment of Honourable Lahore High Court and the law contained in section 83(4) of the repealed Ordinance 1979, the claim of gift of immovable property without registration of it with the revenue authority is unfounded hence we see no mistake in the order of the Tribunal recorded in ITA No. 138(PB) of 2000 dated 6-8-2003, therefore, the miscellaneous application on behalf of assessee being devoid of merit is rejected.
C.M.A./170/Tax(Trib.)Application rejected.