TMI Blog1972 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... a gift of Rs. 28,000 each in favour of his three sons, Satya Narain, Radhe Sham and Suresh Chand. The latter two were minors. He made this gift by debiting his own account with Rs. 84,000 and crediting Rs. 28,000 each in the accounts of his three sons. In subsequent years, the income from interest on these amounts was also credited to the individual accounts of the sons. In the assessment year 1957-58, Sheo Narain claimed deduction of interest on Rs. 84,000 credited to the accounts of his sons, but the said claim was rejected by the Income-tax Officer. This order was confirmed by the Appellate Assistant Commissioner, who found that there was no evidence on the record to show that the donees, especially the minors, had accepted the gifts. The Appellate Assistant Commissioner was further of the opinion that the assessee had not divested himself of Rs. 84,000 by merely making transfer entries in his books of account, while the said amount remained in his own business. As a result, he held that the gift was not a bona fide one. It appears that the assessee did not claim an deduction of interest credited to the accounts of his sons in subsequent years. In the assessment year 1964-65, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in Balimal Nawal Kishore's case was distinguishable and that the present case was covered by the rule of law laid down by the Allahabad and Patna High Courts, referred to above. The Tribunal, consequently, held that there was no valid gift made by the assessee and accepted the department's appeals. In order to answer the question referred to us, it is first of all necessary to find as to what a " gift " means and how it is effected. " Gift " is defined in section 122 of the Transfer of Property Act. 1882. It is the transfer of certain existing movable or immovable property made voluntarily and without consideration by one person to another and accepted by or on behalf of the latter. Such acceptance has to be made during the lifetime of the former and while he is still capable of giving. Section 123 of the same Act mentions the method by which the gift is effected. In the case of a gift of immovable property, the transfer has to be made by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. If the property gifted is movable, then the transfer is effected either by a registered instrument or by delivery of the gifted propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e money without taking the permission of the donees The donees also, on the other hand, even if they wanted to, could not utilise the gifted property in any mariner they liked without the permission of the donor. Under these circumstances, it could not be held that the money had been completely transferred in favour of the donees and, therefore, a valid gift had taken place. It may also be stated that there was nothing on the record to show that the alleged gift was accepted by or on behalf of the donees, especially by the minors, as required under the law. In Balimal Nawal Kishore's case, on which reliance has been placed by the assessee, it was held by a Bench of this court : " The validity of a gift made by way of debit and credit entries in the account books of a firm of which the donor is a partner must depend on whether, in the circumstances, this is a natural method of transfer ; it is not necessary for the donor to withdraw sums in cash from the firm to be reinvested by the donee or donees in the firm. A few days before he died, a partner of a firm made an entry in his own hand in the account books of the firm to the effect that he was making a gift of Rs. 60,000 out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er account by the same account. A memorandum signed by her and O. N. recited that she had orally given Rs. 1 lakh to O. N. and delivered the amount to him by the transfer entries made in her personal accounts and placed him in possession and control of the amount and that he had accepted the gift and entered into possession and control of the money. Her accounts showed a cash balance of only Rs. 15-10-0 on that date : Held, there was no valid gift as there was no delivery of possession of the amount. Executing the memorandum and making entries in her own accounts were the only acts she had done and these two acts did not have the effect of putting the money in the possession of O. N. As the account books were in her possession, dominion and control, so were the entries, and simply by making entries in them she did not vest O. N. with possession, dominion and control over the money. Nor could it be said that making transfer entries in personal accounts is constructive delivery." At another place in this very judgment, it was pointed out that : " No money changed hands ; whatever money the assessee had either in cash or in the form of assets or bank balance remained where it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting in the names of three ladies. On these credit balances certain amounts were paid as interest to each of the three ladies and these payments of interest were claimed as deductions by the firm. The Income-tax Officer disallowed the claim on the ground that the firm had neither sufficient cash balance nor bank balance on the date of the alleged gifts to cover the amounts gifted. On a reference : Held, (i) that from the mere fact that there was no cash balance it could not be held that the gift was invalid when there is no allegation that the gift was a sham : and (ii) that the fact that interest was paid to the donees would itself indicate that the donees took the interest because they accepted the gift of the corpus. Therefore, there was a valid gift of the amounts by the donor and the interest paid by the firm could be allowed as admissible deductions in assessing the firm. " In the latter authority, it was observed: " The assessee was the karta of a Hindu undivided family. On November 20, 1956, the assessee purported to transfer a sum of Rs. 50.000 from his account to the account of his son, Keshav Kumar Swarup. The transfer was effected by debiting the assessee's person ..... X X X X Extracts X X X X X X X X Extracts X X X X
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