COMMISSIONER OF INCOME TAX Vs. NOOR BANU ALLADDIN

JUDGEMENT

(1.) In this reference Begum Noorbanu Alladin is the assessee. She owned a building "Rock-land House" and a vacant land of five acres at Sanatnagar. The assessee gifted away the two properties. The Rockland House was gifted on 17-9-1963 to her daughter-in-law Sultana and two grandsons-Aziz Noor Mohd. and Asif Noor Mohammad. Three days later a memorandum was reduced to writing confirming the oral gift reduced to writing confirming the oral gift on 20-9-1963. As to the vacant land, the assessee made an oral gift on 1-4-1966 in favour of a charitable trust. Mohd. and Noor Mohammad are the trustees of the trust. The trustees were delivered the vacant land. The two confirmation deeds executed by the donor on 20-9-1963 and on 1-4-1966 were not registered under the Indian Registration Act. Begum Noorbanu Alladin died. Before the authorities of the IT Act, 1961 the legal representatives of the donor asserted that the gifts were true and were made on 17-9-1963 and 1-4-1966. The donor ceased to be the owner of the two properties. The ITO and the appellate authority did not accept the gifts as valid in law though true in fact. The appellate Tribunal accepted the gifts to be true and held that the donor no more held the two properties, therefore, she or her legal representatives cannot be in law taxed for the income of the property derived by the donees.

(2.) The assessee under her personal law was entitled to make an oral gift of two properties. She did make oral gift. The donees received the properties. In the case of Rockland House the confirmation deed was executed three days later, on 20-9-1963. The document was not compulsorily registerable. Notwithstanding the fact of non-registration, the oral gift made on 17-9-1963 is true and valid in law. The position, however, as respects the vacant land is different. The gift was made on 1-4-1966 and contemporaneously the memorandum of confirmation was drawn. The memorandum, since was not registered under the Indian Registration Act, became inadmissible in evidence. As a result or sequel of non-registration the oral gift cannot be proved for the deed is inadmissible. This position is so clear that it needs no further discussion.

(3.) The issue that arises is whether ground rent received as of fact by the trustees. Dost Mohammad and Noor Mohammad can be taxed under the Act in the hands of the legal representatives of the assessee for the donor died possessed of title of the vacant land. The donor ceased to hold the land and did not receive any income is not at all doubted. On the other hand the trustees of the donee received is also accepted. It is in this circumstance the question at issue under what classification of s. 14 of the IT Act, 1961 the property has to be computed as the income of the donee if at all such an income is to be taxed.