1984 (8) TMI 11 - HC - Income Tax

Summary

Issues: Validity of oral gifts, taxability of income from gifted properties, applicability of Income-tax Act.

The judgment delivered by the High Court of Andhra Pradesh involved the validity of oral gifts made by an assessee, the taxability of income from the gifted properties, and the application of the Income-tax Act, 1961. The assessee, Begum Noor Banu Alladin, gifted a building named "Rockland House" and vacant land to her daughter-in-law and grandsons, and a charitable trust, respectively. The gifts were made orally and confirmed through memorandums, which were not registered under the Indian Registration Act, 1908. The Income-tax authorities initially did not accept the validity of the gifts. However, the Appellate Tribunal ruled in favor of the gifts, stating that the donor no longer held the properties, hence not liable for tax on the income derived by the donees.

Regarding the validity of the oral gifts, the court held that while the oral gift of Rockland House was valid, the oral gift of the vacant land was not provable due to the non-registration of the confirmation memorandum. The court emphasized that the donees had received the properties, and the lack of registration did not invalidate the oral gifts.

The main issue was the taxability of the income from the gifted properties. The Revenue argued that the donor was still liable for taxes on the income from the vacant land under section 14 of the Income-tax Act. The Revenue relied on previous court cases such as Pushpa Devi v. CIT and Madhav Prasad Jatia v. CIT to support their stance. However, the court rejected the Revenue's contention, emphasizing that once the wealth goes out of the hands of the assessee, the income derived from it cannot be taxed in the hands of the assessee.

The court also referred to various court cases, including CIT v. A. Raman and Co. and CIT v. Prafulla Kumar Mallick, to support the principle that a person is taxed only on the profits actually received. The court highlighted that the Income-tax Act has specific provisions for income from houses, but the case in question involved income from vacant land, which was not covered under those provisions.

In conclusion, the court held that the income from Rockland House and the ground rent from the vacant land could not be taxed in the hands of the assessee as she no longer held the properties. The judgment favored the assessee, and no costs were awarded.