judgement:
ivil Appeal No. 526 (NT) of 1979.
From the Judgment dated 16.12.1976 of the Kerala High Court in I.T.R. No. 101 of 1974.
Dr. V. Gauri Shankar, section Rajappa and Ms. A. Subhashini for the Appellant.
Santosh N. Hegde, E.M.S. Anam and K.L. Mehta for the Respondents.
The Judgment of the Court was delivered by K. JAGANNATHA SHETTY, J.
This appeal by special leave is against the decision of the High Court of Kerala in Income Tax Reference No. 101/1974 and it raises an important issue concerning the requirements of a gift made "in contemplation of death" within the meaning of Section 5(1)(xi) of Gift Tax Act, 1958 (`The Act ').
That reference was made under Section 26(1) of the Gift Tax Act, 1958 by the Income Tax Appellate Tribunal Cochin Bench.
The Tribunal referred to the High Court two questions for its opinion, out of which we are concerned only with the first question which reads: "Whether on the facts and circumstances of the case the 850 Tribunal was right in holding that the gift of movables valued at Rs.67,578 is not a gift made in contemplation of death within the meaning of section 5(1)(xi) of ?" The facts of the case as found by the Tribunal are simple and not unusual.
Abdul Karim Mohammed a businessman in Cochin executed a document styled as "settlement will" gifting certain movables to the assessee respondent inthe shape of business assets valued by the Gift Tax Officer at Rs.67,578.
The document was executed on 4 April 1964 and at the time of execution, the donor was seriously ill.
He died of the illness after about six weeks.
In gift tax assessment proceedings the assessee claimed exemption for this gift under section 5(1)(xi) of the Act which provides that a gift shall not be charged under the in respect of a gift made by any person in contemplation of death.
The Gift Tax Officer rejected the claim of the assessee and brought the said amount to tax.
But on appeal the Appellate Assistant Commissioner held to the contrary.
He allowed the exemption sought for on the ground that the gift was in contemplation of death.
He has relied upon the circumstances under which the gift was made and the events followed thereafter to reach his conclusion.
He has described the facts and circumstances as follows: "Now I agree with Sri Karunakaran, that the absence of any reference in the deed of settlement to the illness from which the donor was suffering does not lead to the conclusion that there was no illness, or that the donor was nor apprehensive of death resulting from the same.
There is ample evidence to show that he was seriously ill at the time when he made the gift.
He was aged about 72 at the time and he was also suffering from paralysis, diabetes, hernia etc.
In fact, in view of the seriousness of the condition he could not proceed to the Sub Registrar 's office for registration of the document; on the other hand the sub registrar ws brought to his residence for the purpose of effecting the registration.
In an affidavit filed by him before the Gift Tax Officer on the 3rd August, 1969, the sub registrar has affirmed that at the time of execution of the document the settler was in sick bed and was unable to move out of the same.
He has also stated that the settler as well as his children showed anxiety and haste in the matter of registration on account of the serious nature of the illness.
At that time, according to the sub registrar the settler was in his proper sense, but soon after the execution of the deed, further complications set in and his power of speech and movements became impaired.
Dr. V.B. Mohammed who was treating him has certified that 851 on 4th June 1964 patient was unable to recognise the surroundings properly, and that his mental condition was impaired to a great degree.
On 9th June, 1964 i.e. within about six weeks from the date of the settlement he died.
In these circumstances, I am satisfied that the donor, an aged gentleman who seriously ill at the time of the settlement entertained no hope of recovery, and that it was in such a state of mind, that he made the settlement.
Hence the gifts must be taken to have been made in contemplation of death.
" The Gift Tax Officer appealed to the Tribunal against the decision of the Appellate Assistant Commissioner.
The Tribunal has affirmed the finding of the Appellate Assistant Commissioner that the donor at the time of gift was ill and expected to die shortly of his illness.
The Tribunal observed "But we are satisfied that the Appellate Assistant Commissioner was on the facts and circumstances of the case right in his conclusion that the donor, an aged gentleman, who was seriously ill at the time of the settlement entertained no hope of recovery and that it was in such a state of mind that he made the settlement.
The materials referred, relied on and discussed by the Appellate Assistant Commissioner in the appellate order are sufficient enough to lead to a reasonable conclusion that the donor was, at the time of execution of the document, ill and that he expected to die shortly of his illness." The Tribunal however, did not agree with the exemption allowed to the assessee.
It has stated that the finding recorded by the Assistant Commissioner that the donor was ill at the time of gift and he died thereafter out of the illness alone is not sufficient to hold that the gift was made in contemplation of gift death.
In order to satisfy the requirements of gift in contemplation of death there must be two other conditions to be satisfied; (i) There must be delivery of possession of the gifted movables to the donee; (ii) that a gift is entitled to take effect only in the event of the donor 's death and that if the donor recovers from the illness the property should revert back.
On the first condition the Tribunal found on facts that there was delivery of possession of the gifted movables.
On the second condition, the Tribunal observed that the gift was unconditional and it was in nature of settlement deed, pure and simple.
It was executed to settle absolutely forever the property of the donor without any condition.
It is just like any other settlement executed by a person without the contemplation of death.
It has not been expressly specified or impliedly present in the deed that the gift must revert back in the event of the donor recovering from illness.
The gifted property has to be kept as a gift in case the donor shall die of his illness has also not been satisfied in the case.
With these findings, the Tribunal allowed the appeal of the Gift Tax Officer.
852 Thereafter, at the instance of the assessee the question set out earlier was referred to the High Court for its opinion.
The High Court has answered the question in the negative and in favour of the assessee.
The High Court expressed the view that it is not necessary that there must be recital in the deed stating that the property would revert to the donor in the event of his recovery from the illness, or the donor surviving the donee.
Such a condition could be inferred from the attending circumstances of the gift.
The High Court has referred to the affidavits filed by the sub registrar who registered the document and the Doctor who treated the donor to come to the conclusion that the donor was seriously ill at the time of execution of the deed and expected to die shortly of that illness.
The factum of delivery of the gifted assets to the donee at a time when the donor was seriously sick and the donor 's death shortly thereafter were also relied upon.
It was then stated that in as much as the donor was actually sick at the time of execution of the deed and died of the same illness without recovery, after a short period, the gift in question was made in contemplation of death and therefore, entitled to exemption from tax under Section 5(1)(xi) of the Act.
The legality of the view expressed by the High Court is under challenge in this appeal.
First, we may refer to the relevant statutory provisions bearing on the question.
Section 3 of the Act is the charging section and it provides that in respect of gifts there shall be charged tax referred to as the gift tax at the rate specified in the schedule.
Section 5 provides exemption in respect of certain gifts.
Section 5 sub section (1)(xi) provides that gift tax shall not be charged under the Act in respect of gifts made by any person in contemplation of death.
Explanation (d) to sub section (2) of Section 5 states "that gifts made in contemplation of death" has the same meaning as in Section 191 of the .
Section 191 of the deals with the requirements of gifts made in contemplation of death.
It reads as follows: "191.
Property transferable by gift made in contemplation of death.
(1) A man may dispose, by gift made in contemplation of death, of any movable property which he could dispose of by will.
(2) A gift said to be made in contemplation of death where a man, who is ill and expects to die shortly his illness, 853 delivers to another the possession of any movable property to keep as a gift in case the donor shall die of that illness.
(3) Such a gift may be resumed by the giver; and shall not take effect if he recovers from the illness during which it was made; nor if e survives the person to whom it was made.
The requirements of a gift in contemplation of death as laid down by Section 191 of the are: (i) the gift must be of movable property; (ii) it must be made in contemplation of death; (iii) the donor must be ill and he expects to die shortly of the illness; (iv) possession of the property should be delivered to the donee; and (v) the gift does not take effect if the donor recovers from the illness or the donee predeceases the donor.
There is nothing new in the requirements provided under Section 191 of the Succession Act.
They are similar to the constituent elements of a valid donatio mortis causa.
The essential conditions of a donatio mortis causa may be summarised thus: "For an effectual donatio mortis causa three things must combine: firs, the gift or donation must have been made in contemplation, though not necessarily in expectation of death; secondly, there must have been delivery to the donee of the subject matter of the gift; and thirdly.
the gift must be made under such circumstances as shew that the thing is to revert to the donor in case he should recover.
This last requirement is sometimes put some what differently, and it is said that the gift must be made under circumstances shewing that it is to take effect only if the death of donor follows; it is not necessary to say which way of putting it is the better." (See Cain vs Moon, at 286).
Now, all the conditions of a valid gift in contemplation of death except perhaps the last condition prescribed under section 191 of the are found present in this case by the fact finding authorities.
The gift was made when the donor was seriously ill and apprehending his death.
The donor died within six weeks after the execution of the deed.
The possession of the property gifted has been delivered to the donee before the death.
But it is said that there is nothing to show in the document expressly or impliedly that the gift was made under such circumstances that the thing was to revert to the donor in case he should recover.
Dr. Gauri Shankar learned counsel for the Revenue contends that the gift in contemplation of death should be conditional that is, on the term that if the donor would not 854 die he should be entitled to remain complete dominion of the property, the subject matter of the gift.
There should be indications in the document to that effect without which, counsel states that the gift becomes inter vivos and absolute.
It seems to us that the recitals in the deed of gift are not conclusive to determine the nature and validity of the gift.
The party may produce evidence aliunde to prove that the donor gifted the property when he was seriously ill and contemplating his death with no hope of recovery.
These factors in conjunction with the factum of death of the donor may be sufficient to infer that the gift was made in contemplation of death.
It is implicit in such circumstances that the donee becomes the owner of the gifted property only if the donor dies of the illness and if the donor recovers from the illness, the recovery itself operates as a revocation of the gift.
It is not necessary to state that in the gift deed that the donee becomes the owner of the property only upon the death of the donor.
Nor it is necessary to specify that the gift is liable to be revoked upon the donor 's recovery from the illness.
The law acknowledges these conditions from the circumstances under which the gift is made.
Reference may be made to the following passage from Halsbury 's Laws of England (4th ed.
20 p. 41 para 67): "There is an implied condition that the gift is to be retained only in the event of death, even though the donor does not expressly say so.
The death may take place some time afterwards, or the donor may actually die from some other illness, but if the donor recovers from illness, during which the gift is made the donee has no title, and can only hold what was delivered to him in trust for the donor." Jerman on Wills (8th ed.
1 p. 46 47) also lends light on this aspect: "The conditional nature of the gift need not be expressed: It is implied in the absence of evidence to the contrary.
And even if the transaction is such as would in the case of a gift inter vivos confers a complete legal title, if the circumstances authorise the supposition that the gift was made in contemplation of death, mortis causa is presumed.
It is immaterial that the donor in that dies from some disorder not contemplated by him at the time he made the gift.
" Similar is the statement of law in Williams on "Executors and 855 Administrators" (14 ed.
p. 315): "542.
Conditional on death: "The gift must be conditioned to take effect only on the death of the donor.
But it is not essential that the donor should expressly attach this condition to the gift; for if a gift is made during the donor 's last illness and in contemplation of death, the law infers the condition that the donee is to hold the donation only in case the donor dies.
" The principles in the Corpus Juris Secundum (vol. 38 p. 782) are not quite different: ".
A gift causa mortis differs from a gift inter vivos in that it is made in view of expected or impending death, as appears infra $$ 75,78.
The vital distinction between a gift inter vivos and a gift causa mortis is that the former is irrevocable, while the latter may be revoked at any time before the donor 's death, and may be defeated by the recovery or survival of the donor.
More fully, a gift causa mortis is liable to revocation by the donor and does not pass an irrevocable title until the death of the donor, while a gift inter vivos vests an irrevocable title on delivery; in the case of a gift inter vivos the title is not only transferred and vested in the donee at once, but the gift is immediately completed and is absolute and irrevocable, while in the case of a gift causa mortis the transfer is subject to be defeated by the happening of any one of the conditions implied by the law.
" It is further stated (at p. 917 para 110): "A gift causa mortis is revoked by the recovery of the donor, from the particular illness, or his survival of the peril, which existed at the time of the gift and in contemplation of which the gift was made.
The recovery of the donor from the particular illness, or his survival of the peril, which existed at the time of the gift and in contemplation of which the gift was made will of itself operate as a revocation of the gift.
" 856 In the light of these principles and in view of the findings recorded by the Tribunal about the serious sickness of the donor and his state of mind at the time of making the gift in question, it can be reasonably concluded that the gift was not absolute and irrevocable.
On the contrary, it will be legitimate to infer that the gift was in contemplation of death.
Any other view in this case would be inappropriate.
No account in this regard would be complete unless it is held that marz ul maut gift with which we are concerned is also entitled to exemption from gift tax under Section 5(1)(xi) of the Act.
Counsel for the Revenue argues that the exemption provided under Section 5(1)(xi) of the Act is not available to the assessee since Section 191 of the is not applicable to marz ul maut gift.
We do not find much substance in this submission.
The exemption to gift in contemplation of death is provided under Section 5(1)(xi) of the Act and not under Section 191 of the .
Section 191 furnishes only the meaning or requirements of gift in contemplation of death.
If a gift in contemplation of death is recognised by the personal law of parties satisfying the conditions contemplated under Section 191 of the , it cannot be denied exemption under Section 5(1)(xi) of the act even assuming that Section 191 as such will not be applicable to the parties.
Under Mohammedan Law gift made during marz ul maut (death bed illness) is subject to very strict scrutiny for its validity.
Marz ul maut is a malady which induces an apprehension of death in the person suffering from it and which eventually results in his death.
There are three tests laid down to determine whether illness is to be regarded as marz ul maut.
They are: (1) Proximate danger of death so that there is a preponderance of Khauf or apprehension that at the given time death must be more probable than life.
(2) There must be some degree of subjective apprehension of death in the mind of the sick person.
(3) There must be external indicia chief among which would be the inability to attend to ordinary avocations.
(See: Rashid Karmalli and Anr.
vs sherbanoo, The gift made during marz ul maut is subject to all other conditions necessary for the validity of a hiba or gift, including delivery of possession by the donor to the donee.
(See: Mulla 's Mohammedan Law pp.
109, 111 Section 135 & 136).
Syed Ameer Ali in his book on "Mohammedan Law" throws some more light on the principles of `gift of the sick '.
It is stated: "In the chapter in the "Fatawai Alamgiri" dealing with "the gift of the sick" the principles are set forth at some length.
In the first place it is stated from the Asal that neither a gift nor a sadakah by a mariz a person suffering from 857 marz ul maut of which the definition is given later on is effective without possession: and if possession is taken, it is valid inrespect of a third.
If the donor were to die before delivery (taslim) the whole disposition would be invalid.
It is, therefore, necessary to understand that a gift by a mariz is a contract and not a wasiat, and the right of disposition is restricted to a third on account of the right of the heirs which attaches to the property of the mariz.
And as it is an act of bounty it is effective so far only as the law allows and that is a third.
And being a contractual disposition it is subject to the conditions relating to gifts, among them the taking of possession by the donee before the death f the donor." (Vol.
14th ed.
1985 p. 59 60).
From these principles of Mohammedan Law it will be clear that the gift made in marz ul maut could be regarded as gift made in contemplation of death since it has all the requisites prescribed under Section 191 of the .
The only limitation under Mohammedan Law is that the disposition is restricted to a third on account of the right of the heirs.
Marz ul maut gift cannot therefore take effect beyond a third of the estate of the donor after payment of funeral expenses and debt unless heirs give their consent after the death of the donor, to the excess taking effect.
Whether there is any such consent given in this case by his heirs is the subject matter of enquiry to be made by the Tribunal.
It may be stated that the second question refered to the High Court relates to the validity of the gift beyond a third of the estates of the donor.
On that question the High Court has not expressed any view and it has directed the Tribunal to consider that issue afresh.
We, therefore, refrain from expressing any views on that matter.
From the foregoing discussion, the view taken by the High Court is correct and it does not call for interference.
We accordingly dismiss the appeal with costs.
N.P.V. Appeal dismissed.

summary/full:
Gift to certain movable assets was made to the respondent assessee by a Muslim businessman, when he was seriously ill, and died of the illness after six weeks of the execution of the document.
In gift tax assessment proceedings, the assessee claimed exemption for this gift under Section 5(1)(xi) of the Gift Tax Act, 1958, on the ground that the gift was made in contemplation of death.
The Gift Tax Officer rejected the claim.
But, on appeal, the Appellate Assistant Commissioner allowed the exemption relying on the circumstances under which the gift was made and the events followed thereafter and the evidence of the Sub Registrar, who was brought to residence for effecting registration, and the doctor, who was treating the donor.
On appeal by the Gift Tax Officer, the Tribunal affirmed the finding of the Appellate Assistant Commissioner regarding the donor 's illness but did not allow the exemption on the ground that, though there was delivery of possession of the gifted movables, the gift was unconditional and absolute, since it had not been specifically expressed or impliedly present in the deed that the gift must revert back in the event of the donor recovering from illness and that the gifted property had to be kept as a gift in case the donor died of his illness.
However, on a reference made at the instance of the assessee for opinion, the High Court held that such a condition need not be mentioned in the deed and 847 it could be inferred from the attending circumstances of the gift, and since the donor was actually sick at the time of execution of the deed and died of the same illness without recovery, after a short period, the gift in question was made in contemplation of death and therefore, entitled to exemption from tax under Section 5(1)(xi) of the Act.
In the appeal before this Court, on behalf of the Department it was contended that the gift in contemplation of death should be conditional, and in the absence of indications in the document to the effect that if the donor did not die, he should be entitled to remain in complete domination of the gifted property, the gift would become inter vivos and absolute, and that the exemption under Section 5(1)(xi) of the Gift Tax Act was not available to the assessee, since Section 191 of the Indian Succession Act was not applicable to marz ul maut gift.
Dismissing the appeal by the Department, this Court HELD: 1.1 Explanation (d) to sub section (2) of Section 5 of the Gift Tax Act, 1958 states that a gift made in contemplation of death has the same meaning as in Section 191 of the .
The requirements of a gift in contemplation of death as laid down by Section 191 are: (i) the gift must be of movable property; (ii) it must be made in contemplation of death; (iii) the donor must be ill and he expects to die shortly of the illness; (iv) possession of the property should be delivered to the done; and (v) the gift does not effect if the donor recovers from the illness or the donee predeceases the donor.
These requirements are similar to the constituent elements of a valid donatio martis causa.
[853C E] Cain vs Moon, @ 286, referred to. 1.2.
In the instant case, all the conditions prescribed, except perhaps the last one are found present by the fact finding authorities.
[853G] 1.3.
The recitals in the deed of gift are not conclusive to determine the nature and validity of the gift.
The party may produce evidence aliunde to prove that the donor gifted the property when he was seriously ill and contemplating his death with no hope of recovery.
These factors in conjunction with the factum of death of the donor may be sufficient to infer that the gift was made in contemplation of death.
It is implicit in such circumstances that the donee becomes the owner of the gifted property only if the donor dies of the illness and if the donor recovers from the illness, the recovery itself operates as a revocation of the gift.
[854B C] 848 1.4 It is not necessary to state in the gift deed that donee becomes owner of the property only upon the death of the donor.
Nor it is necessary to specify that the gift is liable to be revoked upon the donor 's recovery from the illness.
The law acknowledges these conditions from the circumstances under which the gift is made.
[854C D] Halsbury 's Laws of England, 4th Edn.
20 p. 41 para 67; Jerman on Wills, 8th Edn.
Vol, 1 p. 46 47; Williams on "Executors and Administrators", 14th Edn.
p. 315, and Corpus Juris Secundum, vol.
38 p. 782 and p. 917 para 110, referred to.
1.5 In the light of this and in view of the findings recorded by the Tribunal about the serious sickness of the donor and his state of mind at the time of making the gift in question, it can be reasonably concluded that the gift was not absolute and irrevocable.
On the contrary, it would be legitimate to infer that the gift was in contemplation of death.
any other view would be inappropriate.
[856A B] 2.1 Marz ul maut is also entitled to exemption from gift tax under Section 5(1)(xi) of the Gift Tax Act, 1958.
[856B] 2.2 The exemption to gift in contemplation of death is provided under Section 5(1)(xi) of the Gift Tax Act, and not under Section 191 of the , Section 191 furnishes only the meaning or requirements of gift in contemplation of death.
It a gift in contemplation of death is recognised by the personal law of parties satisfying the conditions contemplated under Section 191 of the , cannot be denied exemption under Section 5(1)(xi) of the Act, Even assuming that Section 191 as such will not be applicable to the parties.
[856C D] 2.3 Under Mohammedan Law gift made during marz ul maut (death bed illness) is subject to very strict scrutiny and subject to all other conditions necessary for the validity of a hiba or gift, including delivery of possession of the donor to the donee.
[856D] Mulla 's Mohammedan Law, pp. 111 Sections 135 & 136, referred to.
2.4 Marz ul maut is a malady which induces an apprehension of death inthe person suffering from it and which eventually results in his death.
There are three tests laid down to determine whether illness is to be regarded as marz ul maut.
They are; (i) Proximate danger of death 849 so that there is preponderance of khauf or apprehension that at the given time death must be more probable than life.
(2) There must be some degree of subjective apprehension of death in the mind of the sick person.
(3) There must be external indicia chief among which would be the inability to attend to ordinary avocations.
[856E F] Rashid Karmalli and anr.
vs Sherbanoo, [1907] 31 ILR Bombay 2641, referred to.
2.5 Therefore, under the Principles of Mohammedan Law, the gift made in marz ul maut could be regarded as gift made in contemplation of death, since it has all the requisites prescribed under Section 191 of the .
The only limitation is that the disposition is restricted to a third on account of the right of the heirs.
[857C D] Syed Ameer Ali: Mohammedan Law, Vol. 1, 4th Edn.
1985 p. 59 60, referred to.


judgement:
Special Leave Petition (Civil) No. 5383 of 1990.
From the Judgment and Order dated 9.3.1990 of the Bombay High Court in Appeal No. 231 of 1990 in W.P. No. 3016 of 1989.
747 K.K. Venugopal, G.L. Sanghi, Sudhir Shah and P.N. Misra for the Petitioners.
K.K. Singhavi, N.B. Shetye, D.N. Mishra and A.S. Bhasme for the Respondents.
The Judgment of the Court was delivered by KASLIWAL, J.
This petition under Article 136 the Constitution of India is directed against the order of Bombay High Court dated 9th March, 1990.
Facts necessary and shorn of details are given as under.
Pratibha Cooperative Housing Society Ltd. (hereinafter referred to as `the Housing Society ') made some unauthorised constructions in a 36 storeyed building in a posh and important locality of the city of Bombay.
The Bombay Municipal Corporation issued a showcause notice dated 7th August, 1984 calling upon the Housing Society to showcause within 7 days as to why the upper right floors of the building should not be demolished so as to limit the development to the permissible Floor Space Index (F.S.I.).
In the notice it was gained by the Housing Society and that the construction work had already reached 36 floors and that on the basis of the actual area of the building, the upper eight floors were beyond the permissible F.S.I. limit and as such were required to be removed.
The Housing Society submitted a reply to the showcause notice by their letter 13th August, 1984.
The Administrator of the Bombay Municipal Corporation made an order on 21st September, 1984 requiring the Housing Society to demolish 24,000 sq.
on the eight upper floors of the building on the basis of 3000 Sq.
on each floor.
The Housing Society made a representation but the same was dismissed by the Administrator by order dated 31st October, 1984.
An appeal submitted by the Housing Society was also dismissed by the State Government on 7th October, 1985.
The Housing Society then filed a writ petition No. 4500 of 1985 in the High Court.
A Division Bench of the High Court dismissed the writ petition on 28th October, 1985.
However, the High Court while dismissing the writ petition also observed as under: "It would, however, be fair and just in the circumstances of the case to give a choice to the society to reduce the construction up to permissible limit or whatever other method they can think of.
It is of course for the society to come 748 forward with a proposal in that behalf.
We therefore direct that in case the society comes with any such alternative proposal within the four corners of the rules and regulations within one month from today the Municipality may consider.
" The case of the Housing Society is that in pursuance to the said order it submitted application to the Municipal Corporation giving several alternative proposals on 21st November, 1985.
It may be noted at this stage that the Housing Society had preferred a special leave petition No. 17351 of 1985 before this Court against the judgment of the High Court dated 28th October, 1985 and the said special leave petition was dismissed by this Court on 17th january, 1986.
Further allegation of the Housing Society was that it submitted another proposal to the Municipal Corporation on 17th February, 1986 and thereafter wrote to the Municipal Council on 14th August, 1986 to consider their alternative proposals.
A similar letter was also written to the Chief Minister of Maharashtra.
On 29th August, 1986 the Municipal Commissioner fixed up a meeting for hearing the alternative proposals of the Housing Society.
It has been alleged that in the said meeting the Housing Society had put forward its case in support of the new proposals and the Municipal commissioner had thereafter informed the Housing Society that he would consider the said proposals and take decision.
However, no decision was taken till the filing of the present special leave petition before this Court.
it has been further alleged that on 27th December, 1988 the Housing Society wrote a letter to the Municipal Commissioner to consider the alternative proposals mainly of vertical demolition of the building instead of demolishing the eight upper floors.
It had been alleged that a meeting took place between the architects of the Housing Society as well as the officers of the Municipal Corporation in January, 1989 wherein the officers of the Corporation agreed that instead of demolishing eight upper floors, demolition can be made vertically so as to bring the entire construction within the permissible F.S.I.
It has been further alleged that immediately thereafter the Housing Society was informed that henceforth it should contact the Municipal Commissioner directly and not any officers of the Corporation.
It has been further alleged that the Corporation without considering the proposals of the Housing Society entrusted the work of demolition of the upper eight floors of the building to a company.
In these circumstances the Housing Society filed writ petition No. 3016 of 1989 in the High Court.
Learned Single Judge dismissed the writ petition by order dated 19th December, 1989 and the appeal preferred against the said order was dismissed by the Division Bench of the High 749 Court by order dated 9th March, 1990.
In view of the fact that the main grievance of the Housing Society was that its alternative proposal of demolishing the building vertically instead of eight upper floors was not considered on merits by the Corporation, a serious effort was made by this Court to get the feasibility of such proposal examined by the Corporation.
Orders in this regard were passed by this Court on several occasions but ultimately no agreeable solution could fructify.
The proposal was got examined at the highest level by the Municipal Corporation and ultimately the Commissioner rejected the proposal on 13th November, 1990 and submitted a detailed report in writing for the perusal of this Court.
In the above report it has been stated that in pursuance to the order of this Court dated 22nd October, 1990, the proposals submitted by the Housing Society on 27th October, 1990 and 29th October, 1990 in supersession of all alternative proposals, to demolish vertically one bedroom and servant quarters on all the floors to bring the building in tune with the F.S.I. was considered but on the grounds stated in the report the proposal submitted by the Housing Society cannot be approved.
In the circumstances mentioned above on the request of learned counsel for both the parties to decide the case on merits, we heard the arguments in detail on 23.4.1991.
Thereafter, in order to clarify some points we directed the Chief Engineer cum Architect and the Municipal Commissioner to remain present on the next date namely, 1.5.1991 and to keep the record of the case also ready for our perusal.
We have heard learned counsel for the parties at great length and have thoroughly perused the record.
It may be noted that the Housing Society had made illegal constructions in violation of F.S.I. to the extent of more than 24,000 sq.
and as such an order for demolition or eight floors was passed by the Administrator, Municipal Council as back as 21st September, 1984.
The writ petition filed against the said order was dismissed by the High Court on 28th October, 1985 and special leave petition against the said order of the High Court was also dismissed by this Court.
The High Court in its order dated 28th October, 1985 had granted an indulgence to the Housing Society for submitting an alternative proposal within the four corners of the rules and regulations within one month and the municipality to consider the same.
The proposal was submitted on 21st November, 1985 but in the said proposal there was no mention of any vertical demolition of the building.
The proposal with regard to the demolition vertically of one 750 bedroom and servant quarters on all the floors was submitted for the first time on 27th December, 1988.
During the pendency of the special leave petition before this Court, this proposal was got examined by the Municipal corporation.
The Municipal commissioner submitted a report on 13th November, 1990 giving detailed reasons for rejecting such proposal.
It is well settled that the High Court under Article 226 of the Constitution is not an Appellate Court on the administrative decisions taken by the authorities.
It cannot be said that the decision taken by the Municipal Commissioner suffers from any want of jurisdiction or is violative of any law or rules.
The proposal submitted by the Housing Society was got examined by the architects and engineers and thereafter the order was passed by the Municipal Commissioner.
It cannot be said that the action of the Municipal Corporation is tainted with mala fides.
It was submitted by the learned counsel for the Corporation that the Corporation has entrusted the matter for investigation by the CBI and suitable action is being processed against the guilty officers of the Corporation with whose connivance these illegal constructions were made by the Housing Society.
It is an admitted position that six floors have been completely demolished and a part of seventh floor has also been demolished.
It was pointed out by Mr. K.K. Sighvi, learned counsel for the Corporation that the tendency of raising unlawful constructions by the builders in violation of the rules and regulations of the Corporation was rampant in the city of Bombay and the Municipal Corporation with its limited sources was finding it difficult to curb such activities.
We are also of the view that the tendency of raising unlawful constructions and unauthorised encroachments is increasing in the entire country and such activities are required to be dealt with by firm hands.
Such unlawful constructions are against public interest and hazardous to the safety of occupiers and residents of multistoreyed buildings.
The violation of F.S.I. in the present case was not a minor one but was to an extent of more than 24,000 sq.
Such unlawful construction was made by the Housing Society in clear and flagrant violation and disregard of F.S.I. and the order for demolition of eight floors had attained finality right upto this Court.
The order for demolition of eight floors has been substantially carried out and we find no justification to interfere in the order passed by the High Court as well as in the order passed by the Municipal Commissioner dated 13th November, 1990.
In the result we find no force in the petition and the same is dismissed with no order as to costs.
Before parting with the case we would like to observe that this case should be a pointer to all the 751 builders that making of unauthorised constructions never pays and is against the interest of the society at large.
The rules, regulations and bylaws and made by the Corporations or development authorities taking in view the larger public interest of the society and it is the bounden duty of the Citizens to obey and follow such rules which are made for their own benefits.
S.B. Petition dismissed.

dataset_name: IN-Abs

summary/full:
The appellant Co operative Housing Society Ltd. made some unauthorised constructions in a 36 storeyed building.
The Bombay Municipal Corporation issued a show cause notice calling upon the society to show cause as to why the upper eight floors of the building should not be demolished so as to limit the development to the permissible Floor Space Index (F.S.I.) since the additional Floor Space Index to the extent of 2773 sq.
was gained by the appellant.
The appellants submitted a reply to the show cause notice.
The Administrator of the Municipal Corporation made an order on 21st Septmber, 1984 requiring the appellant to demolish 24,000 sq.
on the eight upper floors of the building on the basis of 3000 sq.
on each floor.
The Administrator as well as the State Government dismissed the representation and appeal by the appellant.
So the appellant filed a writ petition in the High Court which also dismissed with the observation that the appellant be given a choice to reduce the construction upto permissible limit by any alternative proposal within the four corners of the rules and regulations within one month from 28th October 1985 the Municipality may consider.
The appellant made application to the Municipal Corporation giving several alternative proposals on 21st November 1985.
But it also preferred a special leave petition before this court against the High Court Judgment.
The special leave petition leave petition was dismissed on January 17, 1986.
The appellants alleged that they submitted another proposal to the Municipal Corporation on 17th February, 1986 and a meeting for hearing alternative proposals was fixed up by the Municipal commissioner and put forward its case in support of the new proposals and the Municipal Commissioner said he would consider the proposals and take decision.
On 27th December 1988 the appellant wrote a letter to the Municipal Commissioner to consider the alternative proposal i.e. of 746 vertical demolition of the building instead of demolishing the eight upper floors.
In January, 1989 the officers of the corporation agreed that demolition can be made vertically so as to bring the entire construction within the permissible Floor Space Index where as the work of demolition of upper eight floors of the building were entrusted to a company by the Municipal Commissioner.
So the appellant again filed a writ in the High Court.
It was dismissed by the Single Judge as well as by the Division Bench dated 5th March, 1990.
The appellants came by Special Leave Petition in this Court; The main grievance of the appellant being that vertical demolition proposal was not considered.
Inspite of orders of this Court in this regard to the Municipal Corporation no agreeable solution could fructify.
The proposal was examined by the Municipal Commissioner but rejected on 13th November, 1990 and submitted the detailed report to this Court.
Dismissing the petition the Court HELD: The appellant had made illegal constructions in violation of Floor Space Index to the extent of more than 24000 sq.
The decision taken by the Municipal Commissioner does not suffer from any want of jurisdiction nor is violative of any law or rules.
It is well settled that the High Court under Article 226 of the Constitution is not an appellate Court on the administrative decision taken by the authorities.
Since the tendency of raising unlawful constructions and unauthorised encroachments is increasing in the entire country and such activities are required to be dealt with by firm hands.
Such unlawful constructions are against public interest and hazardous to the safety of occupiers and residents of the multistoreyed buildings.
[749F, 750B, E F] This case should be a pointer to all the builders that making of unauthorised construction never pays and is against the interest of the society at large.
The rules, regulations and by laws are made by the corporations or development authorities taking in view the larger public interest of the society and it is the bounden duty of the citizens of obey and follow such rules which are made for their own benefits.
[750H 715B]


judgement:
ivil Appeal Nos. 657 of 1979 & 2117 21 of 1977.
From the Judgment and Order dated 20.1.1978 & 6.5.1976 of Allahabad High Court in Income Tax Rule No. 502/74 and Income Tax Reference No. 827 of 1973.
S.B.L. Srivastava, Manoj Swarup and Lalita Kohli for the Appellants.
J. Ram Murthy, K.P. Bhatnagar and Ms. A. Subhashini for the Respondent.
The Judgment of the Court was delivered by K. JAGANNATHA SHETTY, J.
The common question which arises for decision in these appeals by special leave is whether the interest paid on a debit balance of Rs. 1,75,310 taken over by the assessee firm from the erstwhile Hindu Undivided Family (HUF), would be an allowable deduction under Section 36(1) (iii) of the Income Tax Act, 1922.
922 The partners of the firm were members of the HUF which carried on business at Varanasi in the name of M/s Badal Ram Laxmi Narain.
The family had no capital of its own and had been running business with the help of borrowed money.
On 20 October 1951, there was partial partition in the family.
As a result whereof the business of the family was partitioned between the members of the family.
The members formed themselves into partnership and continued the same business.
On the date of partition, there was a debit balance of Rs. 1,75,310 in the capital account of the family.
This debit balance was transferred in equal proportion to the personal accounts of the three partners of the firm.
The newly formed firm took over the business assets as well as liabilities of the HUF.
The question arose as to whether the interest paid by the firm on the said debit balance was an allowable deduction in the computation of its income? One of the contentions urged for the firm was that the debit balance was taken over by the firm in consideration of the goodwill of the business.
The Appellate Assistant Commissioner had held that the HUF business had no goodwill.
The Tribunal did not agree with the Appellate Assistant Commissioner.
It has observed that the business of the HUF was of a very long standing and the previous years returns and assessment of income prior to the date of partition indicated that the HUF had flourishing business.
Since the running business was taken over by the assessee with the debit balance, the Tribunal expressed the view that the firm could be deemed to have taken the liability of Rs. 1,75,310 in consideration of the sale of goodwill and the interest paid thereon was an allowable deduction.
The following question of law was referred to the High Court.
"Whether on the facts and in the circumstances of the case, the assessee was entitled to the deduction of interest on a debit balance of Rs.1,75,310 taken over from the erstwhile Hindu Undivided Family?" The High Court examined the facts of the case to find out whether there was any sale of the goodwill.
It observed that the goodwill of the HUF business was never sold or purchased.
Had there been any such transaction, appropriate entries in the books of account of the HUF would have been made.
The HUF should have credited the amount in its account in respect of the price paid for the goodwill and since there was no such entries, there could not be any inference that the firm has taken over the liability of Rs. 1,75,310 for the sale of goodwill.
The High Court also has observed that the partners of the 923 firm were bound to take over the liability of HUF because, the liability was that of the family of which they were members and on partition every member became liable to discharge the debt according to his share.
Clause (iii) of Section 36(1) applies only where capital has been borrowed for the purposes of the business or profession.
The amount of interest paid on the borrowed capital is an allowable deduction.
It is not in dispute and indeed cannot be disputed that if the goodwill is purchased out of the borrowed capital, the interest paid on the borrowed capital is an allowable deduction.
The Tribunal has correlated the debit balance to the purchase of goodwill since the firm has taken over the running business.
The High Court has held that there was no sale of goodwill by the HUF to the firm in view of the absence of related entries in the books of account of HUF.
The conclusion of the High Court seems to be as much an inference as that of the Tribunal on the same set of facts and circumstances.
It is important to point out that there was only a partial partition in the family, particularly with regard to HUF business.
It was not necessary for the firm to have taken over the debit balance of the HUF since the HUF had other properties.
The conclusion of the Tribunal that the firm has taken over the debit balance of Rs.1,75,310 in consideration of the sale of the goodwill, in the premises, stands to reason.
Indeed, it seems to be neither unreasonable or unwarranted, nor arbitrary or unjust.
The High Court ought not to interfere with such conclusion even if another view is possible.
The second reason given by the High Court is also not acceptable.
we are concerned with the rights of the assessee and not the liability of the individual members of the HUF.
The claim of the assessee for allowable deduction of the interest paid cannot be defeated by the existence of personal liability of the members of the HUF.
That is wholly beside the point.
We are therefore, unable to sustain the order of the High Court.
In the result, the appeal are allowed and the decision of the High Court is set aside.
The question referred to the High Court in each case is answered in favour of the assessee and against the revenue.
The assessee shall be entitled to one set of costs in this Court.
N.P.V. Appeals allowed.

summary/full:
The partners of the assays firm were members of a HUF, which was carrying on business with borrowed capital.
Consequent on partial partition in the family and partition of the family business, the members formed the assays firm.
There was a debit balance in the capital account of the family which was transferred to the personal accounts of the partners of the firm.
The firm, which continued the family business and took over the business assets and the liabilities of the HUF, claimed that the interest paid on the debit balance was an allowable deduction in the computation of income since it had taken over the debit balance in consideration of the goodwill of the business.
The Appellate Assistant Commissioner held that the HUF business had no goodwill.
On appeal, the Tribunal held that the HUF had a very long standing and flourishing business, and hence the firm could be deemed to have taken over the liability in consideration of the sale of goodwill and the interest paid thereon was an allowable deduction.
On a reference made by the Tribunal the High Court held that the goodwill of the HUF business was never sold or purchased, and that the partners of the firm were bound to take over the HUF 's liability, since it was that of the family of which they were members, and became liable to discharge their share of the debt.
Allowing the appeals preferred by the assessee, this Court HELD: 1.1 Clause (iii) of Section 36(1) of the Income Tax Act, 1922 applies only where capital has been borrowed for the purposes of the business or profession.
The amount of interest paid on the borrowed capital is an allowable deduction.
It cannot be disputed that if the goodwill is purchased out of the borrowed capital, the interest paid on the borrowed capital is an allowable deduction.
[923B] 921 1.2 In the instant case, there was only a partial partition in the family, particularly with regard to HUF business and it was not necessary for the firm to have taken over the debit balance of the HUF, since the HUF had other properties.
[923D] 1.3 The Tribunal has correlated the debit balance to the purchase of goodwill since the firm had taken over the business.
The High Court has held that there was no sale of goodwill by the HUF to the firm in view of the absence of related entries in the books of account of HUF.
The conclusion of the High Court is as much an inference as that the Tribunal on the same set of facts and circumstances.
The Tribunal was right in holding that the firm had taken over the debit balance in consideration of the sale of the goodwill and this conclusion is neither unreasonable or unwarranted, nor arbitrary or unjust.
The High Court ought not to interfere with such conclusion even if another view is possible.
Besides, the relevant point to be considered is the rights of the assessee and not the liability of the individual members of the HUF.
The claim of the assessee for allowable deduction of the interest paid cannot be defeated by the existence of personal liability of the members of HUF.
[923C, E, F]