TMI Blog1987 (2) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of his sons and grandsons by his letter dated January 1, 1957 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal rightly held that the sum of Rs. 1,50,000 was properly included in the assessee's net wealth ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal rightly held that the assessee did not make valid gifts aggregating Rs. 67,560-12-0 ? (5) Whether, on the facts and in the circumstances of the case, the Tribunal rightly held that the sum of Rs. 67,560-12-0 was rightly included in the net wealth of the assessee ? " The case relates to the assessment year 1957-58 and the relevant date of valuation was March 31, 1957. The assessee, Dr. R. S. Gupta, had maintained an account in the books of Messrs. Tika Ram and Sons P. Ltd. On January 1, 1957, the account showed a credit of Rs. 1,50,740. On that day, the assessee had addressed a letter to the company stating that he had decided to gift away for love and affection various sums to the following persons : Rs. Ved Prakash Gupta 25,000 Om Prakash Gupta 25,000 Hari Prakash Gupta 50,000 Pravin Kumar Gupta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty made voluntarily and without consideration by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. Section 123 of the said Act deals with how transfers are effected and stipulates, inter alia, that for the purpose of making a gift of movable property as in this case, the transfer must be effected either by a registered instrument signed by the donor and attested or by delivery. Such delivery may be made in the same way as goods sold may be delivered. The next contention was regarding the inclusion in net wealth of a sum of Rs. 67,560-42-0 standing to the credit of the assessee in the books of M/s. Pearls and Beads. The assessee claimed to have gifted the said amounts by transfer entries in the books of M/s. Pearls and Beads on March 30, 1957. No letter as in the previous case was addressed by the assessee but only oral instructions were said to have been given. The Tribunal held that there were no valid gifts. There was no evidence, it appears, that the said sum was available with the said firm of M/s. Pearls and Beads. The High Court, in view of the decision of the Division Bench of the Allahabad High Court, in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructions given by the assessee. The assessee must also have sufficient credit balance to enable him to make the gift. Reference may also be made for this proposition to the decision of the Delhi High Court in New, India Colour Co. v. CIT [1971] 80 ITR 206. The effect of the two aforesaid decisions of the learned judges of the Delhi High Court indicates that in case there was not sufficient cash balance from out of which the amount gifted could be physically given to the donee, mere entries in the books of account in the firm would not constitute delivery of possession over the gifted property to the donee and a gift in such case will not be valid. The position, however, might be different if such firms or companies or Hindu undivided family in whose accounts gifts are effected have overdraft facilities. The Calcutta High Court had occasion to discuss this aspect in the case of CIT v. Ashok Glass Works [1976] 103 ITR 379. There, it was held that the fact that the entries had been made contemporaneously showed that the transaction was genuine and there was no suggestion that the interest which was credited in the accounts of the minor donees by the firm which carried on money-le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83] 143 ITR 509 (Bom) and CIT v. Devichand Uttamchand [1984] 148 ITR 530 (Bom)). In the background of the facts of those cases, the Bombay High Court held that the gifts were valid. In the case of Paliram Mathuradas v. CIT [1966] 59 ITR 278, the Bombay High Court had occasion to consider this question and held that there was no evidence of acceptance. It was held by the Bombay High Court that there was no valid gift. Similarly, in the case of Virji Devshi v. CIT [1967] 65 ITR 291, the Bombay High Court held (at page 300) " just as the entries in his own accounts by a person would not constitute a valid transfer, even the entries in the accounts of the partnership firm of which the person is partner would not be sufficient to constitute a valid transfer." The Madras High Court had also taken divergent views. It may be noted that in E. Al. V. Muthappa Chettiar v. CIT [1945] 13 ITR 311, the Madras High Court held that mere entries were not enough to constitute valid gifts particularly when gift of funds continued to be used in the donor's business. The Madras High Court in the case of Mrs. Ida L. Chambers v. Kelland Huxford Chambers [1941] ILR 232, was dealing with a case where C, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be valid. In Sukhlal Sheo Narain v. CWT [1973] 89 ITR 157, the Punjab and Haryana High Court had dealt with a case where the father had gifted Rs. 84,000, i.e., Rs. 28,000 to each of his sons. The father had complete control and dominion over that amount. There was no evidence that gifts were accepted on behalf of the minors. It was held by the High Court that gifts were invalid. The Rangoon High Court, in Abba Dada and Co. v. CIT [1938] 6 ITR 470, held that mere book entries were not sufficient in that case to constitute a valid gift. The Rajasthan High Court, in K. P. Brothers v. CIT [1961] 42 ITR 650, held that there was a valid gift but in that case it was a banking company. The Allahabad High Court, in the case of CIT v. Smt. Shyamo Bibi [1966] 59 ITR 1, had to deal with a case where the credit balance of Rs. 2 1/2 lakhs was with the firm. Balance of the firm was only Rs. 15. Memo of gift was recorded on stamp paper. It was held that the gift was not valid. In CWT v. Gulab Rai Govind Prasad [1972] 85 ITR 308 (All), there was an alleged gift of Rs. 2 lakhs to a minor son by book entries. Cash balance was only Rs. 7,626. No interest was credited to the donee's account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deal with gift by way of transfer in the account books. There, this court held that when the property was gifted by a donor, the possession and enjoyment of which was allowed to a partnership firm in which the donor was a partner, then the mere fact of the donor sharing the enjoyment or the benefit in the property was not sufficient for the application of section 10 of the Estate Duty Act, 1953, until and unless such employment or benefit was clearly referable to the gift, i.e., to the parting with such enjoyment or benefit by the donee or permitting the donor to share them out of the bundle of rights gifted in the property. If the possession, enjoyment or benefit of the donor in the property was consistent with the facts and circumstances of the case other than those of the factum of gift, it could not be said that the donee had not retained the possession and enjoyment of the property to the entire exclusion of the donor, or, to the entire exclusion of the donor in any benefit to him by contract or otherwise. There, M, the deceased, was a partner in a firm having a half-share in the partnership. On March 27, 1957, M made a gift of Rs. 1 lakh to his son, L, and of Rs. 50,000 to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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