TMI Blog1962 (10) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... date was not sufficient to enable Abdul Kareem to withdraw any amounts and make the gifts by way of cash. Following this, the constitution of the assessee firm underwent several changes. Besides Abdul Kareem and his eldest son, six other employees of the firm were taken on as partners. In the assessment year following these gifts, the accounts of the various parties to whom the gifts had been made figured as depositors in the accounts of the firm and interest was credited to their accounts. In the assessment year 1954-55, such interest was claimed as a deduction but was disallowed by the Income-tax Officer. This view was accepted by the Tribunal in due course. In the subsequent years 1955-56 and 1956-57, again interest payments on these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal took the view that these affidavits had been brought into existence by the interested persons and could not be accepted as they stood. In the opinion of the Tribunal, in order that there should be a valid gift, there should have been actual delivery of cash, which admittedly was not done. The Tribunal thought that the declaration and the entries made in the account books did not amount to valid gifts. 2. On the application of the assessee, the following questions have been referred to us: 1. Whether there had been valid gifts on the 31st March 1953 ? 2. If the answer to the above question is in the affirmative, whether the interest of ₹ 7950 is interest paid on capital borrowed for purposes of business allowable Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s one of the partners, had not been attacked. If the gift in favour of the other donees is invalid for the reason that there was no actual delivery, the same defect should attach to the gift that was made to Abdul Gaffer, the eldest son, who happened to be a partner in the firm. In the appellate order of the Tribunal, the Tribunal referred to the case of Chimanbhai Lalbhai v. Commr. of Income-tax, (1958) 34 I.T. R. 259 (Bom). The Tribunal thought that in that case, in addition to the entries in the assessee's own books of account, the assessee had further instructed his bankers to debit him and credit the donees with respective amounts of the gifts. This, in the opinion of the Tribunal, made a difference, because there was the interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvalid, unless the donor transfers what he himself does not possess, viz., the corpus of the property. He must evidence reality of the gift by divesting himself so far as he can of the whole of what he gives. The portion extracted above appears to be from Anwari Begam v. Nazimuddin Shah, ILR 21 All 165. 4. There is thus clear authority that the question as to how far the possession of the thing gifted can be .given physically to the donee must depend upon the nature of the subject-matter of the gift. In the instant cases, in have noticed that what the donor purported to give were certain amounts representing the assets of the firm which were taken to the credit of the donees in the accounts of the firm. If the donee should be requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for the assessee to deliver physically any part of the subject-matter of the gift. As we have pointed out, if he had set out to do so, the only solution would have been to have liquidated the' firm, convert its assets into cash and thereafter to distribute the assets. We are exceedingly loath to believe that the validity of the gifts having regard to the nature of the subject-matter of the gift, should be made to depend upon such an impractical course. 5. In Ratnaswamy Nadar and Sons v. Commr. of Income-tax, Madras, T. C. No. 34 of 1959, a case decided by us, a similar question arose. There a father made gin of Rs, 4500 to each of his six sons, and debited himself with those amounts, and credited the sons with similar amounts. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the interest payments to these donees have been entered in the accounts, year after year, and it is not too much to say that there has been no word of protest from the other partners of the firm. Obviously, if the entries relating to the gifts were untrue, the other partners of the firm would have found occasion to object to the payment of this interest. On the other hand, this has been accepted by all parties, so that the genuineness of the gifts is beyond question. As we have already indicated, whether physical delivery should exist in any given case is a matter which would depend upon the nature of the subject-matter of the gift. In the present case, we are satisfied that the gifts were guanine and valid. 7. It accordingly follows ..... X X X X Extracts X X X X X X X X Extracts X X X X
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