1981 (8) TMI 51 - HC - Income Tax

Summary

Issues Involved:
1. Scope of the subject-matter of the gift made by I.P. Soni to M. M. Soni.
2. Whether the transfer of the plot automatically involves the transfer of the superstructure thereon.
3. Assessment of income from the property in the hands of the donee.

Issue-Wise Detailed Analysis:

1. Scope of the Subject-Matter of the Gift:
On July 12, 1963, I.P. Soni executed a gift deed in favor of his son, M. M. Soni, conveying a plot of land situated at Jor Bagh, New Delhi. The deed was executed freely, voluntarily, without any valuable consideration, and in contemplation of his death. The GTO found that a house had been constructed on the plot by the donor with his own finances. The question arose whether the gift included only the plot of land or also the superstructure. The GTO concluded that the entire property, including the building, was gifted, and completed the gift-tax assessment accordingly. The AAC confirmed the GTO's order, but the Tribunal, on further appeal, held that only the plot was gifted based on the clear and unambiguous terms of the gift deed.

2. Transfer of the Plot and Superstructure:
The central question was whether the gift of a plot of land with a building constructed on it would amount to a gift of only the plot or both the plot and the building. The court referred to Section 8 of the Transfer of Property Act, which states that unless a different intention is expressed or necessarily implied, the transfer of property includes all interests the transferor is capable of passing. The court noted that the expression "attached to the earth" includes buildings. Therefore, the transfer of land would also convey the building unless a different intention is expressed or implied. The court found no such intention in the gift deed, which did not reserve the house property for the donor. The court rejected the Tribunal's reliance on irrelevant decisions and emphasized that the deed's clear terms should be interpreted as conveying both the land and the building.

3. Assessment of Income from the Property:
The income-tax references arose in the case of the donee, M. M. Soni, for the assessment years 1966-67 to 1971-72. The assessee claimed that only the plot was gifted, and he returned one-half of the property income for assessment. The ITO assessed the entire income from the property in the hands of the assessee, a conclusion later reversed by the AAC and the Tribunal. The court held that the deed of gift conveyed not only the land but also the building, meaning the entire income from the property should be assessed in the hands of the donee. Consequently, the court answered the questions in the negative and against the assessee, affirming that the entire property income was rightly taxed by the ITO.

Conclusion:
The court concluded that the deed of gift conveyed both the plot and the building to the donee. Therefore, the entire income from the property subsequent to the date of the gift should be assessed in the hands of the donee. The references were disposed of accordingly, with the Commissioner entitled to costs.