TMI Blog1982 (1) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry would not be sufficient to amount to a gift. Nevertheless, in view of the fact that the assessee had filed a voluntary return of gift, the GTO passed an order of assessment to gift-tax based on valuation on March 31, 1973. On the basis that he had made a gift of Rs. 25,000 to his minor son as on March 29, 1969, the assessee excluded the said sum of Rs. 25,000 from his wealth-tax returns for the year 1969-70. The WTO came to the conclusion that mere book entries in the capital account of the assessee as well as the account of the minor son would not constitute a valid gift. There was no valid gift, as on the date of the gift the books of the assessee only disclosed a cash balance of Rs. 1,097.19. Consequently, he included the said sum of Rs. 25,000 in the total wealth of the assessee and completed the assessment accordingly. For the years 1970-71, 1971-72 and 1972-73 also the WTO included the sum of Rs. 25,000 in the total wealth of the assessee. Further, the WTO also included the interest accrued on the said sum of Rs. 25,000 in the total wealth of the assessee for the respective years which were Rs. 4,500, Rs. 9,000 and Rs. 13,500 respectively. The assessee filed Wealth-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stress upon the fact that in terms of the credit entry to the extent of Rs. 25,000 in the name of the minor son, there was a debit entry in the capital account of the assessee. The fact that on the date of gift only a sum of Rs. 1,097-19 was available as cash balance in the accounts of the assessee would not in any manner render the gift invalid. For the purpose of a valid gift it was not necessary that actual cash of Rs. 25,000 should have been handed over to the minor son by the assessee. The learned counsel further emphasised the fact that every year the interest had been credited to the account of the minor son and that the minor son had withdrawn the same for his own expenses. In these circumstances, the learned counsel argued that the gift of Rs. 25,000 was perfectly valid and that the assessee was entitled to have the same excluded from the computation of his net wealth for the relative assessment years. Mr. Jayaraman, the learned standing counsel for the Revenue, contended that so long as the books of the assessee did not disclose that there was sufficient cash balance as on March 29, 1969, the assessee could not have made a valid gift of Rs. 25,000 at all. Consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gift may be completed by some overt act by the donor indicating a clear intention on his part to transfer possession and to divest himself of all control over the subject of the gift. As observed by West J. in Shaik Ibhram v. Shaik Suleman [1884] ILR 9 Bom 146, 150, 151 : " ...when a person is present on the premises proposed to be delivered to him, a declaration of the person previously possessed puts him into possession ... without any physical departure or formal entry." In Abdul Razak v. Zainab Bi [1933] 63 Mad LJ 887 ; AIR 1933 Mad 86, a Mohamedan lady executed a deed of gift, in favour of her son, of a house in which she and her son were both living. The son continued to live with her in the house after the execution of the deed. The deed recited that possession was given to the son and the son paid municipal taxes after the execution of the deed. It was held that the gift was complete although there was no physical departure or formal entry. In Ibrahim Bivi v. K. M. M. Pakkir Mohideen Rowther, AIR 1970 Mad 17, paternal grandmother gifted property to the defendant by a deed of settlement but the property was not delivered to the donee. The settlor and the settlee lived to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the interest payments were therefore, allowable. .The claim was disallowed by the Tribunal which held that the gifts were invalid as there was no delivery of possession. The matter came up before this court on a reference at the instance of the assessee. Srinivasan J., speaking for the Bench, observed as follows (pp. 399, 400): " The short question then is whether in the circumstances of the present case, the gifts can be regarded as valid. It seems to us that there can be no hard and fast rule and that the nature of the subject-matter of the gift must govern the decision. Whether actual possession can or cannot be given to the donee must in any instant case depend upon the nature of the subject-matter of the gift. It is true that the principle of the Mohammadan law requires that in order to make a good gift, there should be delivery of possession. But the question is, possession of what ? In Mulla's Mohammadan Law, at p. 137, the learned author observes: 'If a donor does not transfer to the donee, so far as he can, all the possession which he can transfer, the gift is not a good one.... The donor must so far as it is Possible for him, transfer to the donee that which he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible for the assessee to deliver physically any part of the subject-matter of the gift. As we have pointed out, if he had set out to do so, the only solution would have been to have liquidated the firm, convert its assets into cash and thereafter to distribute the assets. We are exceedingly loath to believe that the validity of the gifts having regard to the nature of the subject-matter of the gift should be made to depend upon such an impractical course." The learned judges followed an earlier decision in P.A.C. Ratnaswamy Nadar Sons v. CIT [1962] 46 ITR 1148 (Mad), wherein it was stated thus (p. 1153): "It is implicit in a credit entry in favour of the donee in the account books of the donor that the amount standing to such credit has been gifted to the donee and has been invested with the donor. Though the entry as such may not conclusively establish a real and effective gift it is evidence in support of the gift, and that evidence, taken along with the other evidence that may be available can establish a gift if the requirements of law are fully satisfied." A similar situation arose for consideration before Srinivasan and Venkatadri JJ. in A. M. Abdul Rahaman Rowther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the part of the donor, would be sufficient. In the present case also, we have noticed that after making the necessary entries, a partnership document was executed. In that document, the assessee expressly admitted that of the capital of the partnership, the two daughters were entitled to Rs. 25,000 each. Here was accordingly a statement made by the assessee against his own interest, which is entitled, in our opinion, to more weight than what the Department has chosen to give to it. It is further stated that following the formation of this partnership, the partnership was registered with the Registrar of Firms, and the formation of the firm was also notified to the banks. From these incidents we cannot but reach the conclusion that the gifts were validly made, and that the partnership, unless anything can be shown to the contrary, was a genuine one." In Qhamarunnissa Begum v. Fathima Begum, AIR 1968 Mad 367, in a suit for partition of the estate of one Haji Mohamed Azamutullah Badsha Sahib the question arose whether certain amounts standing in the name of the 6th defendant and minor defendants Nos. 9 to 11 really belonged to the estate of the deceased or belonged to defendant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (3) delivery of such possession of the subject of the gift by the donor to the donees as the subject of the gift is susceptible of. Learned counsel for the appellant draws our attention to a decision in Mohomed Hussein v. Aishabai, AIR 1935 Bom 84, and submits on the authority of the decision that mere book entries in respect of money which is the subject-matter of gift is not sufficient to support the gift. It is contended that there must be evidence to show that the donor relinquished his control over the money and divested himself completely of his beneficial interest therein so that he could not have operated on the sum if be wanted to do so. Learned counsel points out that for valid gift under Mohamedan law there must not only be a declaration by the donor of his intention to make the gift, but the subject of the gift must be accepted on behalf of the donee. From the resume of facts stated above, it is clear that this is not a case of gift by mere book entries only. There are clear and unequivocal declarations by the deceased of his having divested himself of all interest in the funds and of his intention of vesting of the funds in the donees. There can be no doubt that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the cash balance as on the date of the gift was only Rs. 1,097.19. As pointed out by Srinivasan J. in E. S. Hajee Abdul Kareem and Son v. CIT [1963] 50 ITR 396 (Mad), it is not necessary that there should be cash balance to the extent of the amount covered by the gift. The very fact that the assessee had debited himself and credited his minor son to the extent of R s. 25,000 would clearly show that from that date onwards the assessee considered himself to be a debtor to the minor son in the sum of Rs. 25,000. Further it must be deemed that the assessee had gifted a slice of the assets to the extent of Rs. 25,000 in respect of his business to his minor son. If it was made obligatory that a sum of Rs. 25,000 should be banded over in cash only, then it would be for the assessee to convert the entire business into cash and then to hand over Rs. 25,000 to his minor son. To borrow the language of Srinivasan J. in E. S. Hajee Abdul Kareem and Son v. CIT [1963] 50 ITR 396, we are exceedingly loath to believe that the validity of the gifts, having regard to the nature of the subject matter of the gift, should be made to depend upon such an impractical course. In this case, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of the firm sufficient to cover the amount of the gift on the date it is made is not a necessary condition to the validity of the gift. The adequacy of a cash balance in the books of the firm on the relevant date is of no moment when the financial resources of the firm are sufficient and the amount in the donor's account is large enough to cover the amount gifted by him. " We are, therefore, of the opinion that the decisions cited by the learned standing counsel are of little assistance to him so far as this case is concerned. The principles enunciated by this court in E. S. Hajee Abdul Kareem and Son v. CIT [1963] 50 ITR 396 and A.M. Abdul Rahaman Rowther Co. v. CIT [1965] 56 ITR 556, are directly attracted to the facts of this case. We, therefore, hold that on the facts of this case there has been valid gift of Rs. 25,000 by the assessee in favour of his minor son as on March 28, 1969. Consequently, neither the sum of Rs. 25,000 nor the interest that accrued in the subsequent years would be includible in the net wealth of the assessee as on the respective valuation dates, viz., 31st March, 1969, 31st March, 1970, 31st March, 1971, and 31st March, 1972. We, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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