1967 (8) TMI 35 - HC - Income Tax

Estate Duty Act, 1953 - assessment to estate duty on the estate passing on the death - gift by deceased - Whether valid gifts were made by the deceased by merely effecting transfer credit entries in the books of the firm - Held, no

Summary

Issues: Assessment of estate duty on alleged gifts made by deceased through entries in firm's account books, validity of gifts, acceptance by donees, inclusion of gifted amount in estate passing on death.

Analysis:
The judgment pertains to a reference under section 64(1) of the Estate Duty Act regarding the assessment of estate duty on alleged gifts made by the deceased through entries in the firm's account books. The deceased, a partner in a firm, purportedly gifted sums to his grandsons by debiting his capital account and crediting the grandsons' accounts. The Assistant Controller of Estate Duty contended that the gifts were not genuine as there was no written direction for transfer and insufficient cash balance. He relied on the Privy Council's decision in Clifford John Chick v. Commissioner of Stamp Duties to include the gifted amount in the estate value under section 10 of the Act.

The Appellate Controller upheld the decision, stating that as the property sought to be gifted was the deceased's share in the firm, a written instrument was required under section 130 of the Transfer of Property Act. He emphasized that the mere opening of separate accounts did not validate the gifts. The Tribunal concurred, highlighting the absence of a signed letter of authority and donees' acceptance. It referenced precedents to assert that entries in account books alone could not establish valid gifts.

Upon appeal to the High Court, the accountable person argued that the deed of partnership, entered into by the deceased and donees, evidenced acceptance of gifts. However, the court's scope was limited to determining if entries in account books alone could constitute valid gifts. Citing a Madras High Court decision, the court acknowledged the relevance of account entries but stressed the need for additional evidence to establish gifts conclusively. As subsequent events were not considered by lower authorities, the court held that the gifts were not proven solely based on entries.

Consequently, the court answered the first question in the negative, implying that the gifts were not valid. As a result, it deemed the second question unnecessary to address. The judgment concluded by declining to award costs, with both judges concurring on the decision.

In essence, the judgment delves into the intricacies of proving the validity of gifts made through entries in account books, emphasizing the necessity of additional evidence beyond mere entries to establish the genuineness of gifts under the law.