1967 (2) TMI 10 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the gift of Rs. 3,00,000 by the assessee to his minor son.
2. Inclusion of Rs. 22,531 as the income of the assessee.
3. Inclusion of Rs. 3,80,887 and Rs. 4,03,418 in the net wealth of the assessee for the years 1957-58 and 1958-59, respectively.

Detailed Analysis:

1. Validity of the Gift of Rs. 3,00,000:

The primary issue was whether the gift of Rs. 3,00,000 by the assessee to his minor son was valid. The assessee, a partner in several registered firms, had credited Rs. 3,00,000 to a new account in the name of his minor son on October 18, 1952, and subsequently made a declaration before the Presidency Magistrate on October 24, 1952, stating the gift. The Tribunal held that the requirements of a valid gift were not satisfied because there was no acceptance of the gift by or on behalf of the donee, and there was neither a registered instrument nor delivery of the movables to the donee. The Tribunal pointed out that mere book entries do not constitute a valid gift, and there was no evidence of acceptance by the son or his guardian. The court agreed with the Tribunal, emphasizing that the mere making of entries in the partnership's books does not constitute a transfer or acceptance of the gift. The declaration made by the assessee was deemed insufficient as it was a private document and did not create any rights in favor of the donee. Therefore, the court concluded that there was no valid gift.

2. Inclusion of Rs. 22,531 as the Income of the Assessee:

The second issue was whether the Tribunal was justified in including Rs. 22,531 as the income of the assessee. This amount represented the interest paid by the partnership firm on the amount standing to the credit of the minor son. The Income-tax Officer had included this amount in the assessee's income, and the Tribunal upheld this decision, stating that there was no valid gift, and the interest remained the income of the assessee. The court agreed with the Tribunal's view, holding that since the gift was invalid, the interest paid on the amount was rightly treated as interest received by the assessee.

3. Inclusion of Rs. 3,80,887 and Rs. 4,03,418 in the Net Wealth of the Assessee:

The third issue was whether the amounts of Rs. 3,80,887 and Rs. 4,03,418 were rightly included in the net wealth of the assessee for the years 1957-58 and 1958-59, respectively. These amounts represented the sum of Rs. 3,00,000 along with accumulated interest. The Wealth-tax Officer had included these amounts in the assessee's net wealth, and the Tribunal upheld this inclusion, stating that the gift was invalid and the amounts remained the assessee's own money. The court agreed with the Tribunal's view, holding that since the gift was invalid, the amounts were rightly included in the assessee's net wealth.

Conclusion:

The court answered all the questions in the affirmative, holding that the gift of Rs. 3,00,000 was invalid, the interest of Rs. 22,531 was rightly included in the assessee's income, and the amounts of Rs. 3,80,887 and Rs. 4,03,418 were rightly included in the assessee's net wealth for the respective years. The assessee was ordered to pay the costs of the department.