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TMI Blog1989 (5) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration there had been deposits, the source of which was stated to be sale of shares, units and dividends. Withdrawals were on account of payment of advance tax stated to be for personal purposes to the extent of Rs. 1,55,135, out of the deposits made by the assessee in the current account earned by it as income. Some further queries were also raised by the learned ITO. He, however, not believing the assessee s version made an addition of Rs. 78,167 with the following observations: "It may however, also be stated that the assessee had converted the investment into stock-in-trade. Only that part of conversion could be taken as a business asset. The liability, if any, payable, in respect of that investment cannot be taken a liability of the business. The assessee had not been maintaining any accounts and in its absence it is difficult to say that the liability continued to be of the business. On that account also the interest of Rs. 78,167 could not be allowed as a revenue expenditure. 3. The disallowance of finance charges was subsequently contested by the assessee. It was submitted before the learned CIT(A) that the sum of Rs. 78,167 represented interest paid to ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Mrs. Dolly Nanda of this very group wherein also the Bench was required to decide a similar circumstance. According to the learned authorised representative the present issue is required to be decided in the manner the Bench did in that case. 5. On behalf of the Revenue the learned Senior Departmental Representative, Shri Amitabh Kumar, placed reliance on the finding under challenge and contended further that no interference was warranted. 6. Rival submissions have been heard. It was nobody s case before us that the facts in the present case and in the case of Mrs. Dolly Nanda are not identical. After the perusal of the order in the case of Mrs. Dolly Nanda, especially paragraph 7 it is seen that the issue was set aside to the file of the learned CIT(A) for determining the question of allowability of interest once again in the light of the observations made by the Bench. We have gone through the relevant paragraphs in that order and are in full agreement. In the given circumstances, we consider it proper to set aside this issue to the file of the learned CIT(A) for decision afresh keeping in view the observations of the Bench in the case of Mrs. Dolly Nanda, of this group. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs to the assessee @ 15 per cent. It comes to Rs. 5,250." 10. This issue was also contested by the assessee and the submissions made before the learned ITO were repeated. The learned CIT(A), however, accepted the gift to two donees i.e., Miss Nitasha Nanda and Master Nikhil Nanda to the extent of Rs. 10,000 and in fact directed the learned ITO to add to the income of the HUF, the income on the balance sum of Rs. 25,000, with the following observations: "Therefore, it was held that the gifts made to the relations of the Karta were also void. Further, it was held that if the gifts were void, it was the assessee which retained the title to the properties gifted away and the income from those properties gifted must have been regarded in law as accruing or deemed to be accruing to the assessee. If the other view was taken that even if the gifts were void, the income therefrom would not be recorded as the income of the assessee, then it would amount to allowing the assessee to take advantage of its own wrong and avoid its liability to pay income-tax. Accordingly, the income from properties gifted was held to be taxable as income of the assessee HUF. Now the only point which remains f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onees. The learned CIT(A) since has accepted the gifts to the children of the karta s son, we leave this issue here itself as this issue is not before us since the relief was allowed by the learned first appellate authority. However, the gifts made to the 5 children of the karta s daughters were found void by the learned ITO and thus was the interest added and for the same reasons confirmed also by the learned CIT(A). Now the issue before us for consideration and determination is as to whether the gifts made to the 5 children of Karta s daughters are void or valid. The assessee being HUF is governed by the Hindu law. On behalf of the Revenue mention was made of Art. 217 of the Principle of Hindu Law by Mulla. According to the said Article no female could be a co-parcener under the Mitakshara law. The type of situation discussed and described in the said Article is not relevant for the controversy in hand. Thus, any reference to the said Article in our view is of no relevance or consequence because we are not concerned with the issue of the females being or not being co-parceners. In fact for determination of the present controversy, Art. 225 of the Principles of Hindu Law is releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including therein the interest on the said sum of Rs. 4,00,000. The Tribunal directed that the interest be deleted from the assessment on the ground that under the Law gifts made by Karta of HUF were not void and on reference it was held that "the interest accruing on the gifted amounts did not accrue to the assessee family for income-tax purposes on either view, whether the gift of Rs. 4,00,000 was void or voidable. The entire sum of Rs. 4,00,000 had passed into the hands of other persons and they were earning income from the amounts and not the assessee. The IT Act taxes the person whose income it is and not the person who may per chance have title of the property through which income has been earned". The above ratio clearly establishes that gift in the case before us was not invalid and interest thereon could not be taxed in the assessee s hands. 14. Assessee also gets support from the case of Daljit Singh. According to the ratio in the said case, Karta had powers to give gifts within reasonable limits out of love and affection. 15. On behalf of the Revenue the reliance was placed on the ratio in the case of Gangadhar Narsingdas Agarwal (HUF). Even according to the ratio i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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