TMI Blog1960 (9) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the two accounts under the provisions of section 10(2)(iii) of the Income-tax Act? The Tribunal has stated the facts and circumstances of this case as noted below. The assessment year under consideration is 1954-55, the previous year being the period ranging from October 10, 1952, to October 26, 1953 (both inclusive). The assessee is a partnership firm registered under section 26A of the Indian Income-tax consisting of 4 partners, one of them being Shri Kishan Chand, son of Maya Ram, opposite party No. 2. He had an account with an opening credit of ₹ 2,94,644 in the books of the assessee firm. On September 31, 1953, on the instructions of the said Kishan Chand the assessee firm debited Kishan Chand's account with a sum of ₹ 1 lakh and credited ₹ 60,000 in the account of his father, Maya Ram, and ₹ 40,000 in the account of his mother, Shrimati Jasodha Bai. Copies of the accounts of Kishan Chand, his father and his mother are parts of the statement of this case and are marked as annexures 'A', 'B' and 'C'. On this date, the cash book of the firm showed a cash balance of ₹ 603 only. The assessee firm allowed interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttiar v. Commissioner of Income-tax and Hanmantram Ramnath v. Commissioner of Incometax in holding that book entries were not sufficient to create gifts in the eye of law and the amounts of interest on the sums donated could not, therefore, be allowed under section 10(2)(iii) of the Act. In Chamber v. Chamber, it was held that the donee had the intention of making gifts but the mere entries in the books of account of the company did not complete the gift for the reason that delivery of possession was not made. In arriving at the decision, the court followed the decision of the Privy Council in Hariram Serowgee v. Madan Gopal Bagla#. In Muthappa Chettiar v. Commissioner of Income-tax it was laid down that credit entries in the books of account without allocation of specific assets or funds corresponding to such entries cannot operate as valid gifts or trust of the sums credited. In Hanmantram Ramnath v. Commissioner of Income-tax the karta of a joint Hindu family which carried on business made an oral declaration of trust resolving to set apart a sum of rupees two lakhs for religious and charitable purposes and to create a trust of it and directed that the above sum should be kep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the eye of law particularly when there was a cash balance of ₹ 603 only in the firm's books on the day when gifts involving a sum of ₹ 1 lakh was made. Section 123 of the Transfer of Property Act prescribes two modes for effecting a gift of movable property. Firstly, a gift may be effected by a registered instrument signed by the donor and secondly by delivery of the property. The delivery according to section 123 may be made in the same way as goods sold may be delivered. Section 33 of the Sale of Goods Act, 1930, which provides for delivery of goods sold, is as follows: Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf. In the present case, the gift has been effected not by execution of a registered instrument of gift but by delivery of goods. The case of the assessee is that the delivery of the amounts of ₹ 60,000 and ₹ 40,000 was effected by the donor issuing instructions to the firm, which as mentioned above is a private banking concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of delivery and of the inability of the firm to make delivery. It may be noted that the assessee is a firm carrying on banking business and though it may have had a petty amount of ₹ 603 only as its cash balance on the date when the gifts were made, yet the firm may have had sufficient resources to make cash payments, and if called upon to do so it may have arranged to make cash payments. The firm may have had deposits with other banks, or it may have had other liquid assets or it may have some arrangements with other banks to allow its overdrafts and it would, therefore, be highly unsafe to judge the ability of the firm to discharge its liability merely from the state of the cash balance in its coffers on a particular day. The amount of cash balance in hands is, in the case of a banking concern, not a sure indication of the capacity of the firm to meet its liabilities. The proposition which has been submitted for our opinion by the Appellate Tribunal is in our opinion not a sound one and no inference one way or the other can be drawn from the amount of the cash balance regarding the capacity of a banking concern to make payments of amounts larger than the amounts of its cash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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