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Issues: Whether the assessee was entitled to deduction under section 54F of the Income-tax Act, 1961, in view of the Revenue's objection that she owned more than one residential house on the date of transfer of the original asset and that the alleged oral gifts of two properties were not valid.
Analysis: The assessee, a Muslim, asserted that two residential properties had been gifted away by oral Hiba before the transfer of the vacant site. Under Mohammedan law, a valid gift of immovable property requires declaration by the donor, acceptance by the donee, and delivery of possession. Section 129 of the Transfer of Property Act, 1882 preserves Mohammedan law and therefore the requirement of a registered instrument under section 123 of the Transfer of Property Act, 1882 does not invalidate such a gift. The affidavits and surrounding circumstances supported the conclusion that the gifts had been made and accepted, with possession delivered constructively. Once those properties were excluded from the assessee's ownership, she was left with only one residential house for the purpose of the proviso to section 54F(1).
Conclusion: The oral gifts were held valid, the assessee was not treated as owner of the two gifted houses, and the restriction in the proviso to section 54F was held inapplicable. The deduction under section 54F was therefore allowable.
Ratio Decidendi: An oral Hiba by a Muslim donor is valid if declaration, acceptance, and delivery of possession are established, and such a gift is protected by section 129 of the Transfer of Property Act, 1882 notwithstanding section 123 of that Act.
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