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Issues:
Gift-tax assessments based on deemed gift due to forgone interest on deposits with sister concern. Analysis: The appeals involved identical issues concerning gift-tax assessments for the assessment years 1982-83 to 1986-87. The Assessing Officer initiated Gift-tax proceedings against the assessee, a cinema theatre business, for not claiming interest on deposits with its sister concern. The Assessing Officer treated the forgone interest as a deemed gift and brought it to tax under the Gift-tax Act, 1958. The assessee contended that the deposits were kept interest-free in exchange for exclusive rights to exhibit films in a theatre. However, the Assessing Officer calculated deemed interest and levied gift-tax after granting basic exemption. The CIT(A) upheld the Assessing Officer's decision, citing section 4(1)(a) of the GT Act, which deems property transfer without adequate consideration as a gift. The assessee appealed the decision, arguing no contractual obligation existed to pay interest on the deposits. The Revenue authorities failed to provide evidence of any such contractual obligation between the parties. The ITAT noted that without a contract specifying interest payment, no surrender or waiver of interest rights could be presumed. The terms "interest foregone" and "surrender of right of interest" used by the authorities indicated uncertainty regarding the existence of a transfer of rights. The ITAT emphasized that deemed gifts under section 4 of the GT Act require a pre-existing right or interest in property, which was absent in this case due to the mutual agreement on interest-free deposits. The ITAT further reasoned that the transaction between the assessee and the sister concern did not involve inadequate consideration, as it was a trade debt with a business connection. The non-charging of interest was part of a legitimate business deal, and the Revenue authorities did not question its bona fides. Consequently, the ITAT concluded that no chargeability to gift-tax existed. Citing precedents and lack of contractual basis for interest payment, the ITAT set aside the lower authorities' orders and annulled the gift-tax assessments, dismissing the appeals.
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