ABDULRAHIMANKUTTY Vs. CIT

JUDGEMENT

(1.) The assessee is the proprietor of a cloth shop at Calicut called "Cannanore Shop" and has a son P. T. Abdul Sathar, aged 23, who left school in 1949. The son had no previous business experience when another cloth shop was on March 11, 1949, opened under the name and style "New Stores" at Cannanore.

(2.) The statement of the case shows that the day-to-day management of the new concern was carried on by Abdul Sathar, who had also signed the cash bills, counter foils and the other documents in the course thereof. Moreover, the shop was registered with the Sales Tax Department showing him to be the sole proprietor. Therefore, for all apparent purposes the son was the owner of the shop, and the question is whether the son acted as the trustee for the father because the amount of Rs. 10,075/- had come from the father. Had the aforesaid sum been shown to be still the property of the father, or the business begun with its aid to be of the father, to be controlled by the father there would be justification for treating the son as the trustee or benamidar. There is no such evidence, and the amount was given either as loan or as gift. Neither the assessee nor the Department treats the amount to be loan ; and therefore, the giving was intended to be either absolutely or in trust. In the latter case, the son would still be the ostensible owner and, therefore, the father would even then be taking the risk. Had the intention been to guard himself and the son against inexperience, one would expect the son being appointed as servant, rather than as ostensible owner. The assessee would in either of the aforesaid cases be taking risk, and the absence of later direction of the business by the father indicates that money was, after it was parted with, not meant to be still of the father. The assessee's case is that it was gifted and it is well known that a gift under Mohammedan Law becomes effective by a declaration by the donor, acceptance by the donee, and by delivery of possession from the donor to the donee. Now, in the accounts of the business belonging to the son the entry is made of the particular sum being of the son, which the father says that he had earlier given to the son; and we do not know, in those circumstances, what further be required under the personal law of the parties to establish valid gift. The subsequent conduct of the father would certainly be indication of the amount not having been donated, but it is clear that during the two years of the management of the New Shop the control and disposal of the business been by the son alone. The taxing authority has assumed that in order to constitute gift, there must be documentary evidence; and undoubtedly documentary evidence would make the position secure, but the subsequent conduct of the donor would equally support the. case of the gift. The enjoyment of the property got with its aid, the control, the direction by the donee, would furnish sufficient indication of the money having been absolutely gifted to the son, and such is the position in this reference.

(3.) The law of benami has been the subject of various decisions, and we respectfully agree with the observations in R. K. Murthi v. Commissioner of Income Tax (42 1. T. R. 379) where Ramachandra Aiyer J. has clarified the law by stating that source of purchase money is not always decisive of the real ownership of the property, and payment of consideration for the purchase of property by one person would invest him with the beneficial interest only if there is no proof of an intention on his part to pay it for the benefit of the person, in whose name the property was purchased. That this rule extends to business as well, that be started with the aid of funds from another, is borne out by Gopinath Agarwal v. Commissioner of Income Tax (28 1. T. R. 753 at p. 76p) where Bhargava J. dealing with the case of money that had been given for starting a partnership business, has observed as follows;