9911796707
TMI Blog2012 (8) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. 3. The facts relating to the issue are stated in brief. The assessee is engaged in the business of retail trade in textiles under the trade name M/s. Seemati. During the course of assessment proceedings, the Assessing Officer noticed that there was considerable increase in the capital of the assessee. On further analysis, it was noticed that the assessee has received a sum of Rs. 75 lakhs as gift from his maternal uncle named Shri V. Thiruvenkitam. The Assessing Officer noticed that the assessee has received this gift by way of book entry, i.e., by crediting his capital account and debiting the business account of donor M/s. Veeriah Reddiar (Dist.), i.e. the proprietary concern of the donor. Prior to passing the gift entry, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. Rajesh Kumar, M/s. Veeriah Reddiar, Alleppey. In fact it was the desire of me and my late wife, T. Seethalakshmi that we provide some help to my nephew to come up in business that prompted me to make the gift. I am a regular assessee in your files with PAN ACHPR 9611D amd the personal account reflected in my statements filed with the return of income is after debiting this sum of Rs. 75 lakhs". 5. Now the question that arises is whether the provisions of sec. 41(1) of the Act, which reads as under, are attracted to the impugned transactions: "41(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and utilised the proceeds thereof for making payment to M/s. Veeriah Reddiar, the net effect of which would be reduction of the outstanding balance in that account. Accordingly, the Ld. AR submitted that the book entry passed by the assessee has also had the very same effect and hence a different view could not have been taken by the tax authorities. He further submitted that the book entry passed by the assessee should be considered as "constructive receipt of gift" and "constructive payment of outstanding liability". Accordingly, he contended that the provisions of sec. 41(1) of the Act would not apply to the impugned transaction, as there is no cessation or remission of liability. 8. It is well settled proposition of law that the taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of remission or cessation thereof. In the instant case, the tax authorities have treated the transaction of gift as "remission of trading liability". Though the assessee disputes that the reduction of sundry creditor's balance would not fall in the category of "remission of trading liability", yet, in our view, the said question would not have much significance in the facts and circumstances of the instant case. 10. In the instant case, the question to be decided is whether the amount of Rs.75.00 lakhs received by the assessee from his maternal uncle by way of gift can be termed as remission of liability in the facts and circumstances of the case. In our view, the question should be decided by duly considering the facts surrounding the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as a gift. Reliance is placed on the decision of Hon. Supreme Court in Dr. K. George Thomas v. CIT [1985] (156 ITR 412 (SC)." 11. In the case of Dr. K. George Thomas v. CIT [1985] 156 ITR 412, the assessee therein was propagating religious faith and publishing newspaper. He received donations from USA for furtherance of his objects. The Hon'ble Supreme Court held that the said donations cannot be considered as casual and non-recurring receipt, but it is taxable as receipts arising from the carrying on of a vocation. In our view, the said decision cannot be applied to the facts of the instant case. The existence of both personal relationship and business relationship, in our view, cannot convert a "gift" into a "remission of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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