1974 (11) TMI 11 - HC - Income Tax

Summary

Issues:
1. Validity of a gift made through entries in the books of account.
2. Interpretation of findings of fact by the Tribunal regarding a gift made by the assessee to his son.

Analysis:
The High Court of Bombay dealt with two questions referred to them. The first question, set out in paragraph 12, was resolved in favor of the revenue based on a previous judgment. The second question, outlined in paragraph 11, concerned the validity of a gift made by the assessee to his son through entries in the books of account. The business initially belonged to the assessee as a sole proprietary concern, and he credited half of the capital to his son's name, who later became a partner in the business. The Tribunal found that the gift was valid as the donor consented to it, and the donee accepted and utilized the amount as his capital in the partnership. The question before the court was to determine if these findings constituted a valid gift.

In the case of Chimanbhai Lalbhai v. Commissioner of Income-tax, the court established that a gift through entries in account books is valid if evidence shows the donor's intention, acceptance by the donee, and action based on the gift by both parties. The court rejected the argument that physical possession transfer was necessary for a valid gift. The court distinguished this case from Virji Devshi v. Commissioner of Income-tax, where the absence of evidence of the gift being made or acted upon led to the gift being deemed invalid. Another case, Paliram Mathuradas v. Commissioner of Income-tax, was deemed inapplicable due to findings that the entry in question was not made in the regular course of business. Based on the facts and the precedent set in Chimanbhai Lalbhai's case, the court held that the gift made by the assessee to his son was valid, answering the question in paragraph 11 in favor of the assessee.

In conclusion, the High Court of Bombay affirmed the validity of the gift made by the assessee to his son through entries in the books of account, based on established legal principles and previous judgments. Both judges concurred, and the questions in paragraphs 11 and 12 were answered in the affirmative.