1987 (2) TMI 1 - SC - Wealth-tax

Gifts made of the funds with a company - neither company had funds on that day, nor did it have overdraft facility with any bank - entries in the books of account could not effectuate gifts - hence gift is not valid - revenue s appeal is allowed

Issues involved:
1. Validity of gifts aggregating Rs. 1,50,000 on January 1, 1957.
2. Validity of the assignment of Rs. 1,50,000 in favor of the assessee's sons and grandsons by a letter dated January 1, 1957.
3. Inclusion of Rs. 1,50,000 in the assessee's net wealth.
4. Validity of gifts aggregating Rs. 67,560-12-0.
5. Inclusion of Rs. 67,560-12-0 in the assessee's net wealth.

Detailed Analysis:

1. Validity of gifts aggregating Rs. 1,50,000 on January 1, 1957:
The assessee claimed to have made valid gifts to his sons and grandsons by directing Messrs. Tika Ram and Sons P. Ltd. to debit his account and credit the respective amounts in the names of the donees. The Tribunal held that the gifts were not valid as the company was not carrying on the business of banking and had only Rs. 4,000 in cash on the relevant date. The Supreme Court reiterated that for a gift to be valid, there must be an existing property, and mere book entries are insufficient unless the firm has sufficient funds or overdraft facilities. The court cited various precedents, including decisions from the Delhi, Calcutta, Bombay, Madras, and Punjab and Haryana High Courts, to support this view.

2. Validity of the assignment of Rs. 1,50,000 in favor of the assessee's sons and grandsons by a letter dated January 1, 1957:
The assessee argued that the assignment was valid as it was made out of love and affection. However, the Tribunal found no evidence of the company carrying on banking business or having sufficient funds to honor the gift. The Supreme Court upheld this view, emphasizing that valid gifts require existing property or sufficient funds, which were not present in this case.

3. Inclusion of Rs. 1,50,000 in the assessee's net wealth:
Given the invalidity of the gifts, the Tribunal included the amount in the assessee's net wealth. The Supreme Court agreed, stating that without valid gifts, the amount remained part of the assessee's wealth.

4. Validity of gifts aggregating Rs. 67,560-12-0:
The assessee claimed to have gifted this amount by transfer entries in the books of M/s. Pearls and Beads on March 30, 1957. The Tribunal found no evidence of valid gifts, as there were no written instructions and the firm did not have sufficient funds. The Supreme Court upheld this finding, reiterating the need for existing property or sufficient funds for a valid gift.

5. Inclusion of Rs. 67,560-12-0 in the assessee's net wealth:
Due to the invalidity of the gifts, the Tribunal included this amount in the assessee's net wealth. The Supreme Court affirmed this decision, maintaining that without valid gifts, the amount should be included in the assessee's wealth.

Conclusion:
The Supreme Court set aside the High Court's judgment, answering all questions in favor of the Revenue. The court emphasized the necessity of existing property or sufficient funds for valid gifts and ruled that mere book entries are insufficient without these conditions. The appeal was allowed, and no order as to costs was made.

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