1977 (11) TMI 61 - HC - Income Tax

Muslim husband's property transfer to wife for dower debt not gift but sale

The court held that the transfer of immovable property by a Muslim husband to his wife in lieu of dower debt was not a valid gift but a sale, requiring a ... House Property, Income Tax Proceedings, Res Judicata Not Applicable Issues Involved:1. Validity of oral gift of immovable property by a Muslim husband to his wife in lieu of dower debt.2. Applicability of the principle of res judicata in tax assessment proceedings.3. Inclusion of income from the house property in the total income of the assessee.Issue-wise Detailed Analysis:1. Validity of Oral Gift of Immovable Property by a Muslim Husband to His Wife in Lieu of Dower Debt:The primary legal question was whether the income from the house property transferred by the assessee to his wife in lieu of dower debt should be included in the total income of the assessee. The court examined whether such a transfer constituted a valid gift (hiba) or a sale.The court referred to previous decisions, particularly Mohammad Usman Khan v. Amir Mian, AIR 1949 Pat 237, which held that an oral gift of immovable property worth more than Rs. 100 by a Muslim in favor of his wife in lieu of dower debt does not pass valid title unless effected by a registered instrument, as it is considered a sale under Section 54 of the Transfer of Property Act. The court noted that the concept of hiba-bil-iwaz (gift for consideration) in India is treated as a sale and requires registration if the property value exceeds Rs. 100.The court also discussed the earlier decision in Tax Case No. 10 of 1968, which had ruled in favor of the assessee by considering the transaction as a valid gift. However, it was observed that the earlier decision did not consider the contrary view in Mohammad Usman Khan's case and thus was not correctly decided.The court concluded that the transfer of the house in lieu of dower debt was not a true hiba-bil-iwaz but a sale, and hence, required a registered instrument for validity. Since no such registered document was presented, the transfer was invalid, and the income from the house property was assessable in the hands of the assessee.2. Applicability of the Principle of Res Judicata in Tax Assessment Proceedings:The assessee argued that the principle of res judicata should apply, as the earlier decision in Tax Case No. 10 of 1968 had already determined the nature of the transaction as a gift. The court examined this argument in light of the Supreme Court decision in New Jehangir Vakil Mills Co. Ltd. v. Commissioner of Income-tax [1963] 49 ITR 137 (SC), which held that the doctrine of res judicata does not apply to taxation cases due to the recurring nature of tax assessments.The court also referred to the decision in Commissioner of Income-tax v. Brijlal Lohia and Mahabir Prasad Khemka [1972] 84 ITR 273 (SC), which reiterated that previous decisions on tax assessments do not operate as res judicata in subsequent years. The court concluded that the earlier decision in Tax Case No. 10 of 1968 did not preclude re-examination of the issue in the current case.3. Inclusion of Income from the House Property in the Total Income of the Assessee:Given the invalidity of the transfer of the house property, the court held that the income from the house property should be included in the total income of the assessee for the relevant assessment year. The court noted that the transfer was not effected by a registered instrument, thus failing to meet the legal requirements for a valid sale or gift under the Transfer of Property Act.The court also addressed the argument regarding Section 16(3)(a)(iii) of the Income-tax Act, which includes income from assets transferred to a spouse without adequate consideration in the total income of the transferor. However, since this issue was not raised before the income-tax authorities and did not arise from the Tribunal's order, the court refrained from delving into it.Conclusion:The court answered the referred question in favor of the department and against the assessee, holding that the income from the house property should be included in the total income of the assessee. The court emphasized that the earlier decision in Tax Case No. 10 of 1968 was incorrectly decided and reaffirmed the principles laid down in Mohammad Usman Khan's case, AIR 1949 Pat 237. The court made no order as to costs.