1994 (1) TMI 48 - HC - Income Tax

Summary

Issues: Assessment of income from a gift, whether the gift was void or voidable, ratification of the transaction by a minor coparcener, reasonableness of estimating income, interest calculation method, questions of law raised before the Appellate Tribunal.

In this case, the assessee, a Hindu undivided family, made a gift of Rs. 1,00,000 to his nephew, which was deemed void by the Income Tax Officer based on previous appellate orders. The Tribunal found the gift to be ab initio void, following Supreme Court decisions. The Tribunal also rejected the contention of ratification by a minor coparcener as an afterthought. The Tribunal directed the assessment of actual interest earned by the donee as income to the assessee, rather than a notional income. The Tribunal's decision was based on the fact that the gift being void, the donee was accountable to the donor for income derived from the amount. The Tribunal also found that the issue of recoverability of the gifted amount was not raised before them. The High Court upheld the Tribunal's decision, stating that once a gift is void, the donee acts as a trustee and is liable for income derived from the amount, leading to the assessment of actual interest earned. The Court found that the questions raised by the assessee did not hold merit as they were not relevant to the Tribunal's order. The Court affirmed the Tribunal's decision on interest calculation and ruled in favor of the Revenue, concluding that the answers to the questions raised by the assessee were in the affirmative against them.