New Law Reports
(1978) Vol. 80 N.LR.
1973 Present: Samarakoon, C.J., Weeraratne, J. and Sharvananda, J.DE SILVA, Appellant and COMMISSIONER GENERAL OFINLAND REVENUE, Respondent.
S. C. 1/76 B.R.A 364
Adverse possession – Clear and unequivocal evidence – Possession hostile to real owner -Property of mother enjoyed by son – Permissive possession.
A person who bases his title in adverse possession must show by clear and unequivocalevidence that his possession was hostile to the real owner and amounted to a denial of his title tothe property claimed.
Where property belonging to the mother is held by the son the presumption will be that it ispermissive possession which is not in denial of the title of the mother and is consequently notadverse to her.
Continued appropriation of the income and payment of taxes will not be sufficient to convertpermissive occupation into adverse possession unless such conduct unequivocally manifestsdenial of the permitter’s title.
Case stated for the opinion of the Court under the provisions of section 102Inland Revenue Act No. 4 of 1963.
S. Ambalavaner with K. I. de Silva, Miss P. Wimalasuriya and J. J.Rajakaruna for the appellant.
G. P. S. de Silva, Deputy Solicitor General for the respondent.
Cur. adv. vult.
January 25, 1978. Sharvananda, J.
This is a case stated for the opinion of this Court under the provisions ofsection 102 of the Inland Revenue Act No. 4 of 1963, on an application bythe executrix of the estate of the late Mrs. Ranasinghe.
S HA RV/VN A ND A, J. – De Silva it Commissioner of Inland Revenue
The late Mrs. Ranasinghe was entitled to the entirety of Dewatawattaestate in the district of Negombo. This estate, in extent 206A OR 25P, isdepicted in Plan No. 34/31 of 30/11/31 made by the Surveyor Croos Dabreraand consists of lots 1 to 14 therein. By deed of gift No. 4875 dated 18.9.52,Mrs. Ranasinghe gifted to her son K. A. B. Ranasinghe lots 1 to 11, in extent158A 2R 28P, out of the entire corpus of the said Dewatawatta estate. Thelots so gifted are contiguous to each other and bounded, inter alia, on theeast by lot 12 in the said Plan. The schedule to the said deed of gift makes itquite clear that the donor intended to convey and did convey by that deed thedefined and divided portion of 158A 2R 28P out of the total extent of 206AOR 25P. It is to be noted that there was no division on the ground separatingthe lots that were gifted, from the lots that were retained by the donor.
Subsequently, by deed of gift No. 2587 dated 12.8.65, the deceasedMrs. Ranasinghe gifted the outstanding lots 12, 13 and 14 of Dewatawattaestate also to her son K. A. B. Ranasinghe. It appears that from the time ofthe earlier gift, i.e. 18.9.52, the donee K. A. B. Ranasinghe was in possessionof the entire Dewatawatta estate, including the portion that was not gifted tohim by his mother, and appropriated the income of the entire estate and madea return of the full amount as his income to the Department of InlandRevenue and paid income tax thereon. He also paid acreage taxes on theentire estate to the local authorities and returned the market value of thewhole estate as part of his wealth for wealth tax and land tax purposes andpaid the taxes due thereon. It is not disputed that the income, wealth and landtaxes for the years from 1951 to 1965 in respect of the entirety ofDematawatta estate had been paid by K. A. B. Ranasinghe. On the basis ofthese facts, it is claimed that K. A. B. Ranasinghe had by 1965 prescribed tothe said lots 12, 13 and 14 and did not in law require any conveyance fromhis mother to confirm his ownership of the said lots.
The question that has to be determined, on this reference, is whether thedeceased mother, in fact, was left with any title to the balance portion ofDewatawatta estate to convey by deed No. 2587 of 22.8.65, or had her title,prior to the disposition, been extinguished by the alleged prescriptivepossession of K. A. B. Ranasinghe, the donee. If she had, she became liableto pay gift tax in terms of section 39 of the Inland Revenue Act No. 4 of1963 and consequently income tax from the capital gains arising therefrom.If the donor had ceased to be the owner and had no title to convey by deedNo. 2587, she gifted nothing and there was in fact no donation to entail gifttax. It is fundamental to the concept of donation that the donee must beenriched and the donor corresponding impoverished.
The prime facie liability to gift tax that the deed of gift attracted wasresisted by the donor on the extraordinary ground that the donee had alreadyprescribed to and was the owner of the property sought to be conveyed by
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deed No. 2587 and that the deed was merely executed to give ‘paper’ title toprescriptive title. According to her, “there is no question of a gift by the merewriting of a deed as it was a recognition of the actual position that existedfrom 1951 onwards”. In her affidavit dated 15.10.69, the assessee Mrs.Ranasinghe stated that “the deed of gift No. 4875 of 18.9.52 was executed byme in the belief that the entirety of Dewatawatta was being gifted to my son
K.A. B. Ranasinghe. Thereafter it transpired that a portion of Dewatawattaestate, consisting of lots 12, 13 and 14, has not been included … In order toregularise the existing position brought into effect since 1952, and in orderthat the title to the entirety should vest in K. A. B. Ranasinghe, I executedthe deed of gift No. 2587 of 1965 whereby that portion of Dewatawattaestate consisting of lots 12, 13 and 14 were gifted to K. A. B. Ranasinghe.”According to her, the non-inclusion of the lots 12, 13 and 14 in the earlierdeed of 1952 had taken place inadvertently and that omission was a bonafide mistake. This version is in the teeth of the unequivocal provisions of thedeed of gift No. 4875 of 1952 and is clearly untenable, and Counsel for theassessee prudently abandoned this line of argument before the Assessor andrelied entirely on the submission that at the time deed No. 2587 of 1965 wasexecuted, the donor had lost dominium of that portion of Dematawatta estateconsisting of lots 12, 13 and 14 and that the donee had become entitledthereto and that the deed was merely written to quiet the donee in hispossession.
The relevant deed No. 2587 is, ex facie, a pure and simple deed of gift.The recital in the deed states that “the donor is under and by virtue of deedNo. 2942 dated 31st March, 1939, the owner and proprietor of or otherwisewell and sufficiently entitled to the land and premises fully and particularlydescribed in the schedule (viz. lots 12, 13 and 14 containing in extent 47A1R 36P in Plan No. 34/31 from and out of the land called Dewatawattaestate)”. By the operative clause in this deed, the donor conveyed andtransferred unto the donee as a gift inter vivos absolutely and irrevocably thesaid land and premises. The habendum clause provides that the donee is “tohave and to hold the land and premises hereby gifted . . . and every partthereof’. By another clause in the said deed, the donor covenanted with anddeclared to the donee that she had good right and full power to gift and ■assign the said land and premises and that she would always warrant anddefend title. The deed records that the donee K. A. B. Ranasinghe manifestedhis acceptance of the donation by signing the deed. The property that wasgifted was valued at Rs. 83,081/- and the ad valorem stamp duty ofRs.1,335/- was paid upon the instrument.
Section 129 of the Inland Revenue Act defines ‘gift’ as “a transfer by oneperson to another” of any existing movable or immovable property madevoluntarily and without consideration in money or money’s worth, and‘transfer of property’ as “any disposition, conveyance, assignment,settlement, delivery, payment or other alienation of property”.
SHARVANANDA, I. – De Silva v. Commissioner of Inland Revenue
The transaction embodied in deed No. 2587 has, ex facie, all the indiciaand ingredients of a gift as defined above. The donor, stating that she isentitled to the property, conveys the property valued at Rs. 83,081/- to thedonee without any monetary consideration and the donee, acknowledgingsuch title in the donor, thankfully accepts the said donation: The deed is notmerely an evidentiary record of a gift, but in law brings a transfer ordisposition in favour of the donee into existence. A donation is a species ofcontract, and acceptance by the donee is essential to the constitution of avalid donation. The donation vests immediately in the donee upon hisacceptance thereof, and ownership of the subject-matter of the donationpasses from the donor to the donee. Thus, on the son K. A. B. Ranasingheaccepting the donation, ownership in the lots 12,13 and 14 of Dematawattaestate changed hands. The donation was made on the basis of the ownershipexisting in the donor. The deed militates against the contention of the partiesthereto that its execution was an unnecessary exercise and served no purposein law.
However, since section 101(9) of the Inland Revenue Act bars theapplication of the provisions of the Evidence Ordinance relating to theadmissibility of evidence at the hearing of the appeal to the Board of Review,the exclusionary rules prescribed by sections 91 and 92 of the EvidenceOrdinance do not stand in the way of the appellant’s contention that thewords in the deed do not mean what they say.
On the facts admitted by the Assessor, the donee claims that he hasprescribed to the property by virtue of his possession from 1952 of lots 12,13 and 14 along with the lots 1 to 11 that were conveyed to him by deedNo. 4875. Mr. Ambalavarner contended that since the donee had paidincome, wealth and land taxes from 1952 to 1965 and had appropriated theincome from the said lots 12, 13 and 14 for the period of 1952 to 1965, thedonee must be presumed to have been in adverse possession of the said lotsand acquired prescriptive title thereto and that the execution of the documentNo. 2587 of 1965 did not in any way derogate from the prescriptive title thatthe donee had already acquired and that the execution of the instrument hadno effect on the prescriptive title so acquired.
The principle of law is well established that a person who bases his title inadverse possession must show by clear and unequivocal evidence that hispossession was hostile to the real owner and amounted to a denial of his titleto the property claimed. In order to constitute adverse possession, thepossession must be in denial of the title of the true owner. The acts of theperson in possession should be irreconcilable with the rights of the trueowner; the person in possession must claim to be so as of right as against thetrue owner. Where there is no hostility to or denial of the title of the true
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owner, there can be no adverse possession. In deciding whether the allegedacts of the person constitute adverse possession, regard must be had to theanimus of the person doing those acts, and this must be ascertained from thefacts and circumstances of each case and the relationship of the parties.Possession which may be presumed to be adverse in the case of a strangermay not attract such a presumption, in the case of persons standing in certainsocial or legal relationships. The presumption represents the most likelyinference that may be drawn in the context of the relationship of the parties.The Court will always attribute possession to a lawful title where that ispossible. Where the possession may be either lawful or unlawful, it must beassumed, in the absence of evidence, that the possession is lawful. Thus,where property belonging to the mother is held by the son, the presumptionwill be that the enjoyment of the son was on behalf of and with thepermission of the mother. Such permissive possession is not in denial of thetitle of the mother and is consequently not adverse to her. It will not enablethe possession to acquire title by adverse possession. Where possessioncommenced with permission, it will be presumed to so continue until andunless something adverse occurred about it. The onus is on the licencee toshow when and how the possession became adverse. Continuedappropriation of the income and payment of taxes will not be sufficient toconvert permissive possession into adverse possession, unless such conductunequivocally manifests denial of the permitter’s title. In order to dischargesuch onus, there must be clear and affirmative evidence of the change in thecharacter of possession. The evidence must point to the time ofcommencement of adverse possession. Where the parties were not at armslength, strong evidence of a positive character is necessary to establish thechange of character.
The donee K.A.B. Ranasinghe is the eldest son of the lateMrs. Ranasinghe. He was living with his mother at Katana till the end of1952. According to him, he had been in possession of the entire estate from1951. In the circumstances, his possession of the estate in 1951 must havecommenced with the mother’s permission. A very fair inference that can bedrawn is that, having been given lots 1 to 12 of the estate in 1952, hecontinued to be in possession of the other lots, viz. lots 12, 13 and 14, also inpursuance of the original permission granted by her and not in hostility toher. The status quo thus continued. From the provisions of the deed of giftNo. 4875 of 1952, it is quite clear that the mother, for her own reasons, didnot part with and did not intend to part with title to the lots 12, 13 and 14. Inthat context, it is inconceivable that she would have countenanced anyassertion by him of title to those lots. There is no evidence that the sonovertly claimed those lots as against her. In the circumstances, continuedpossession of lots, 12, 13 and 14 by the son subsequent to the donation oflots 1 to 11, could not have been in denial of the title of his mother, butstemmed from the permission granted to him in 1951. It is not a case ofwhere one enters into possession of a property belonging to another claiming
SH ARYAN AND A, J. – De Silva v. Commissioner of Inland Revenue
it to be his own and denying the title of the true owner. The mere fact that heappropriated the income and paid the relevant taxes does not lead to theirresistible conclusion that he held the property as his own and denied thetitle of his mother. There is no evidence of any hostility between the son andmother. The son paid the taxes since he had the benefit of the income. It issaid that the mother did not include the aforesaid lots 12, 13 and 14 in herwealth tax returns from 1958 onwards. That circumstance does not conduceto the extinguishment of her title to the lots in issue. In my view, there is nofoundation whatever for the plea that the donee had acquired prescriptivetitle to the lots 12,13 and 14.
Though appellant’s Counsel contended that the mother granted the deedfor better manifestation of the title that the son had already acquired byprescription, it is significant that the deed does not purport to have beenexecuted for better manifestation of title and does not support any suchclaim. The appellant further sought to explain the execution of deed No.2587 by invoking in his support the principle enunciated by Garvin S. P. J. inSilva v. de Zoyza.1 “What the 2nd defendant did was to take a step with aview to gathering into his hands the legal title from persons who on the factsproved in this case were under a legal obligation to vest in him the title to theland of which he was in possession and claimed to be in possession as ofright. It was not an act done in acknowledgment of any right in them oreither of them to the possession of this land, but an assertion of his right tobe clothed with the legal title as well.” To be entitled to the benefit of thisprinciple which was applied appropriately in Lucia Perera v. Martin Perera1and Ranhamy v. Appuhamy,2 possession of the party prescribing must havebeen possession as of right and the person who held the legal title shouldhave been under a legal obligation to vest in the other party the title to theland of which that party was in possession. It cannot be said, on the facts ofthe present case, that the donee ever claimed to be in possession as of right,or that the donor was under legal obligation to convey any title to K. A. B.Ranasinghe and hence the basis for the application of the above principle islacking.
We affirm the determination of the Board of Review and answer thequestion of law on which the opinion of this Court is sought against theassessee. In our view, the deed No. 2587 executed by the assessee representsa gift of lots 12, 13 and 14 to K. A. B. Ranasinghe and the assessee is liableto gift tax on the value of those lots and is also liable to pay income tax(capital gains) arising from the change of ownership in those lots. Theassessee shall pay Rs. 525/- as cost of this reference to the Commissioner ofInland Revenue.
Samarakoon, C.J. -1 agree.
WEERARATNE, J. -1 agree.
, Determination of Board of Review upheld.
'(1931) 32 N.L.R. 199 at 204.
’(1945) 46 N.L.R. 279.