1963 (8) TMI 73 - HC - Income Tax

Summary

Issues:
- Claim of loss in share dealings for the assessment year 1950-51
- Transfer of shares to a charitable institution
- Dispute over whether the transfer constituted a sale or a gift
- Allowability of the claimed loss as a revenue loss

Analysis:
The case involved the assessee claiming a loss of Rs. 2,12,540 in share dealings for the assessment year 1950-51, attributed to the alleged sale of shares to a charitable institution. The assessee introduced shares valued at Rs. 5,07,930 into his accounts in the previous accounting year, crediting this sum to his capital account and debiting Rs. 3,00,000 as a donation to the charitable institution. However, no cash payment was made to the institution that year. The Income-tax Officer rejected the claim, stating it was a donation and not a business loss. The Appellate Authorities upheld this decision. The Tribunal also rejected the claim, ruling that the transfer of shares was not a sale. The High Court was asked to determine whether the loss claimed was allowable as a revenue loss arising from the assessee's share business.

The assessee argued that the transfer of shares was a valid sale in discharge of a debt owed to the charitable institution. However, the High Court disagreed, finding that essential conditions of sale were lacking, as no consideration was received, and the transfer was deemed a charitable act, not a sale. The Court cited legal principles stating that a gift requires giving and taking, and in this case, there was no evidence of acceptance of the gift by the charitable institution. The Court referenced precedents where mere book entries did not constitute completed gifts. Comparisons were made to cases where valid gifts were completed through registered deeds or delivery of possession.

The Court distinguished a Bombay High Court case where a valid gift was established through clear instructions and actions by the donor and the donees. In contrast, the present case lacked evidence of acceptance by the charitable institution and did not meet the criteria for a valid gift. Therefore, the claimed loss could not be allowed as a revenue loss from the share business. The Court ruled against the assessee, holding that the transfer of shares did not discharge any previous liability to the charitable institution, as no valid gift was established. The question of law was answered against the assessee, who was directed to pay the costs of the reference.