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TMI Blog1992 (9) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... er year. On further appeal, the CIT(A) upheld the action on the part of the ITO. 4. The learned counsel for the appellant, at the outset, stated that there was no personal use of the company's cars by the assessee and that being the situation the standard deduction was required to be allowed at Rs. 5,000 and not at the reduced figure as had been held by the ITO and subsequently by the CIT(A). According to him, on identical facts the matters of the other directors of these companies had come up before the Tribunal and the consistent view which was being adopted was that standard deduction at Rs. 5,000 was allowable. In support he invited our attention to copies of some of these orders appended to his paperbook and these being: (i) Shri Raman Kumar Sood Asst. yr. 1983-84, ITA No. 1460 (Del) of 1987 (order dt.12th Jan., 1990); (ii) Shri Raman Kumar Sood Asst. yr. 1984-85, ITA No. 152 (Del) of 1988 (order dt.24th May, 1990); (iii) Shri Satish Kumar Sood Asst. yr. 1982-83, ITA No. 4724 (Del) of 1989 (order dt.15th Jan., 1991); and (iv) Shri Rattan Chand Sood Asst. yr. 1984-85, ITA No. 3069 (Del) of 1989 (order dt.28th Jan., 1991). The learned Departmental Representative, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing pointed out by the Departmental Representative. The addition for both the years is accordingly deleted and the common ground in the appeals is allowed. 8. Ground No. 3 pertains to the claim for deduction in respect of "1/6th repairs" against income taxable under the head "property". The assessee is 1/5th owner in "ErosCinemaBuilding" along with other members of the family. This building has been leased out to M/s R.C. Sood Co. Pvt. Ltd. on a monthly rent of Rs. 36,000. The ITO in the course of the assessment proceedings did not allow deduction in respect of repairs claimed at 1/6th on the ground that the liability to carry out repairs was with M/s R.C. Sood Co. and not the owners and this fact being duly substantiated by the repair expenses being debited in the books of the company. The ITO also referred to the fact that in the lease agreement there was no clause pertaining to the liability on account of repair expenses. On these facts he rejected the claim for deduction and which was subsequently upheld by the CIT(A). 9. The learned counsel at the outset invit our attention to the various orders passed by the Tribunal in the case of the other co-owners whereby the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily business. On these facts, the ITO concluded that no genuine gift as such has been made and the control over the money remained with the appellant. Learned counsel argued that since the relation of husband and wife did not subsist on the date of the gift, the provision of s. 64(i)(vii) would not apply. I am not impressed with the contention. The sequence of events as well as the conduct of the appellant clearly lead to the inference that the gift was a colourable device. Making out of the cheque of Rs. 25,000 on2nd Nov., 1979and encashment of the same on the very next day and investing the money in the family business of the appellant amply brings out the real substance of the transfer as a colourable device designed for frustrating the provisions of s. 64. The ITO has next referred to a series of gifts transactions which are held to be cross-gifts. The important point to be noted regarding these gifts transactions are that the appellant has made gifts to children of his daughters and the donees have invested the amounts with the appellant's family. Further, by way of cross-gifts the married daughters, whose children have received gifts from the appellant, have in turn made gift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Anita Malhotra had taken loans of Rs. 20,000 in cash from Shri Raman Kumar Sood, son of the appellant and out of the loan amount gifts of Rs. 10,000 each were made as above to Master Avneesh Kumar Sood, son of Raman Kumar Sood and Baby Shivani, daughter of Shri Raman Kumar Sood. This is a peculiar case where loans were taken by a lady from her brother for making gifts to his children. The facts as mentioned above, amply indicate that the gifts transactions were mere colourable devices which have been resorted to by the appellant for the sole purpose of frustrating the provisions of s. 64. In my opinion this is a clear case where the ratio of the celebrated decision of Supreme Court in McDowell Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC) applies. The ITO is fully entitled to penetrate the veil of covering any transaction and ascertain the truth. The said decision has been followed by the Hon'ble Supreme Court in the case of Workmen of Associated Rubber Industry Ltd. vs. Associated Rubber Industry Ltd. (1985) 48 CTR (SC) 355 : (1986) 157 ITR 77 (SC). Thus when we get behind the smoke screen and discover true state of affairs, it is amply established that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kash on 4th April, 1982 was concerned the same was to be treated as a cross-gift inasmuch as the corresponding gift came about within a couple of days only. 16. In support of his arguments advanced in the direction of contending that the gifts were valid and genuine and not cross-gifts as held by the tax authorities, he placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs. C.M. Kothari (1963) 49 ITR 107 (SC). The learned Departmental Representative, on the other hand, supported the orders passed by the authorities below reiterating thereafter the reasons recorded in these orders in rejecting the viewpoint canvassed on behalf of the assessee. In his short reply, the learned counsel contended that since gift-tax assessments had already been made and the factum of gifts having been made duly accepted by the Department, there was no question of treating the transactions as a device and applying the decision of the Hon'ble Supreme Court in the case of McDowell Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC). He invited our attention in this connection to the later decision of the Hon'ble Supreme Court in the case of CWT vs. Arvind Naro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and this is appended at pages 46 and 47 of the paperbook. In the final analysis the corresponding addition on account of interest vis-a-vis the aforesaid gift of Rs. 25,000 would have to be excluded from the taxable income of the assessee. The remaining addition in both the assessment years is, however, confirmed. 19. Before we part with this ground, we would like to mention that no doubt the gift-tax assessments have been duly completed by the GTO and these have not been held to be void, but the Department had no option but to frame these assessments especially when the assessee had filed the returns. This fact, however, cannot lead to the conclusion that the present is not a case of cross-gifts which have been entered into with a view to bypass the provisions of s. 64. On the facts of the case the decision of the Hon'ble Supreme Court in the case of CWT vs. Arvind Narottam would not come to the aid of the assessee. 20. The last common ground in these appeals pertains to the addition of Rs. 1,20,000 in each of the years on account of "household expenses". 21. The ITO in the course of the assessment proceedings undertook the exercise of ascertaining the "sufficiency" of wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he family plus 4 servants, not having visited any hospital or Nursing Home for some months altogether is one of the impossibilities. The household expenses depend mainly upon : (a) The real income of the family (b) Environments (c) Society in which we move (d) Relations; and (e) Associates The family consisting of 16 members, all having income in higher bracket, even one year's old child is having high taxable income and wealth. The total declared income of the family is about Rs. 10,00,000. They are living in 15 roomed Bungalow inDelhi's most affluent, sophesticated and excellent area "Golf Links". Family members are members of the most important clubs of Metropolities. The expenses in my view, the minimum hereunder per month for 16/17 members of the family plus 4 children: Salary of servants (There should be atleast 2 servants for upkeep,, 2 for kitchen and 2 nurses/ayas) . 1,000 Medical attendance . 2,000 Club and entertainment . 2,000 Education of children . 1,000 Cloth atleast Rs. 2,000 per adults and Rs. 1,200 per child p.a . . 12 adults x 2,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat low taking note of the background and standard of living as also the period of time with which we are concerned. We are, however, not able to subscribe to some of the figures adopted by the Assessing Officer in arriving at the said estimate. The ITO has arrived at a figure of Rs. 17,500 per month by assuming birthday celebrations every month, the employment of six servants, medical expenditure of Rs. 2,000 per month and club and entertainment once again at Rs. 2,000 per month. In our opinion, these estimates are somewhat in the realm of imagination. Then again the ITO has assumed expenditure on clothing at Rs. 2,500 per month whereas the real situation may be that in some months there may be no expenditure at all whereas in others it may be more than this figure. As regards the clubs, the assessee in the course of his statement categorically mentioned that he was not in the habit of frequenting the various clubs, of which he had been a member for the last many years. Another aspect of the matter which has to be referred to is that in the preceding assessment years the household expenses as shown by the assessee and other family members had been duly accepted and to refer to one ..... 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