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Interpretation of section 4(c) of the Gift-tax Act, 1958 regarding writing off a debt as a gift. Analysis: The case involved a question regarding the interpretation of section 4(c) of the Gift-tax Act, 1958, concerning the writing off of a debt by an assessee in his books of account. The central issue was whether the writing off of a debt due from the assessee's brother amounted to a gift liable to be assessed under the Act. The court emphasized the importance of determining whether there was an abandonment of the debt, as claimed by the revenue. The court examined the legal meaning of "abandonment," which requires both an intention to abandon and an overt act or failure to act indicating that the owner no longer claims any interest in the debt. The court highlighted that the intention to abandon must be clear and absolute, without reference to any specific person or purpose. The court analyzed the facts of the case, where a significant sum was due to the assessee from his brother, who denied liability when a lawyer's notice was issued. Subsequently, the assessee wrote off the debt in his accounts and claimed it as a bad debt for income tax purposes. However, the Income-tax Officer's notice to the brother revealed that he admitted owing the amount, contradicting his earlier denial. The court found that the writing off was a pretense for a specific purpose that ultimately failed, indicating no absolute intention to give up the debt. The court concluded that there was no abandonment of the debt, leading to a ruling in favor of the assessee against the department. Furthermore, the court distinguished the present case from a previous Supreme Court ruling in Goli Eswariah v. Commissioner of Gift-tax, emphasizing that the interpretation of section 4(c) differs from the provision discussed in the Supreme Court case. The court clarified that the case at hand did not involve a bilateral transaction to diminish the value of property, as in the Supreme Court ruling, but rather an attempt by the assessee to portray the debt as irrecoverable. Ultimately, the court answered the question in favor of the assessee, directing each party to bear their respective costs and sending a copy of the judgment to the Appellate Tribunal as required by the Gift-tax Act, 1958. In conclusion, the court's analysis focused on the crucial distinction between abandonment of a debt and a mere attempt to declare it as irrecoverable, leading to a ruling in favor of the assessee under section 4(c) of the Gift-tax Act, 1958.
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