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TMI Blog1972 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... me from interest on these amounts was also credited to the individual accounts of the sons. In the assessment year 1957-58, Sheo Narain claimed deduction of interest on Rs. 84,000 credited to the accounts of his sons, but the said claim was rejected by the Income-tax Officer. This order was confirmed by the Appellate Assistant Commissioner, who found that there was no evidence on the record to show that the donees, especially the minors, had accepted the gifts. The Appellate Assistant Commissioner was further of the opinion that the assessee had not divested himself of Rs. 84,000 by merely making transfer entries in his books of account, while the said amount remained in his own business. As a result, he held that the gift was not a bona fide one. It appears that the assessee did not claim an deduction of interest credited to the accounts of his sons in subsequent years. In the assessment year 1964-65, it appears that he again claimed such a deduction, but the Income-tax Officer held that a finding had already been given by the Appellate Assistant Commissioner for the assessment year. 1957-58 against the assessee, who had not brought any fresh material on the basis of which the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department's appeals. In order to answer the question referred to us, it is first of all necessary to find as to what a " gift " means and how it is effected. " Gift " is defined in section 122 of the Transfer of Property Act. 1882. It is the transfer of certain existing movable or immovable property made voluntarily and without consideration by one person to another and accepted by or on behalf of the latter. Such acceptance has to be made during the lifetime of the former and while he is still capable of giving. Section 123 of the same Act mentions the method by which the gift is effected. In the case of a gift of immovable property, the transfer has to be made by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. If the property gifted is movable, then the transfer is effected either by a registered instrument or by delivery of the gifted property. This delivery has to be made in the same manner as the goods are delivered when they are sold. Section 33 of the Indian Sale of Goods Act, 1930, deals with the delivery of goods sold. It says that such a delivery may be made by doing anything which the parties have agreed shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completely transferred in favour of the donees and, therefore, a valid gift had taken place. It may also be stated that there was nothing on the record to show that the alleged gift was accepted by or on behalf of the donees, especially by the minors, as required under the law. In Balimal Nawal Kishore's case, on which reliance has been placed by the assessee, it was held by a Bench of this court : " The validity of a gift made by way of debit and credit entries in the account books of a firm of which the donor is a partner must depend on whether, in the circumstances, this is a natural method of transfer ; it is not necessary for the donor to withdraw sums in cash from the firm to be reinvested by the donee or donees in the firm. A few days before he died, a partner of a firm made an entry in his own hand in the account books of the firm to the effect that he was making a gift of Rs. 60,000 out of an amount of some Rs. 81,000 standing to his credit in his capital account with the firm in favour of 13 donees, the gift being Rs. 3,750 to each of the four sons of partners A, B and C, and Rs. 15,000 to the only son of partner D. These sums were credited on the same day in the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ift and entered into possession and control of the money. Her accounts showed a cash balance of only Rs. 15-10-0 on that date : Held, there was no valid gift as there was no delivery of possession of the amount. Executing the memorandum and making entries in her own accounts were the only acts she had done and these two acts did not have the effect of putting the money in the possession of O. N. As the account books were in her possession, dominion and control, so were the entries, and simply by making entries in them she did not vest O. N. with possession, dominion and control over the money. Nor could it be said that making transfer entries in personal accounts is constructive delivery." At another place in this very judgment, it was pointed out that : " No money changed hands ; whatever money the assessee had either in cash or in the form of assets or bank balance remained where it was. She was not authorised by Om Nath to receive the money on his behalf ; consequently, by her detaining possession of the money even if she had in her possession Rs. 1,00,000, it could not be said that the money was put in possession of her as authorised to hold it on Om Nath's behalf. The dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nor bank balance on the date of the alleged gifts to cover the amounts gifted. On a reference : Held, (i) that from the mere fact that there was no cash balance it could not be held that the gift was invalid when there is no allegation that the gift was a sham : and (ii) that the fact that interest was paid to the donees would itself indicate that the donees took the interest because they accepted the gift of the corpus. Therefore, there was a valid gift of the amounts by the donor and the interest paid by the firm could be allowed as admissible deductions in assessing the firm. " In the latter authority, it was observed: " The assessee was the karta of a Hindu undivided family. On November 20, 1956, the assessee purported to transfer a sum of Rs. 50.000 from his account to the account of his son, Keshav Kumar Swarup. The transfer was effected by debiting the assessee's personal account in the books of the Hindu undivided family with the sum of Rs. 50,000 and crediting the same amount in the personal account of his son, Keshav Kumar Swarup. On November 20, 1956, the date of the gift, the assessee had a substantial credit balance exceeding the sum of Rs. 50,000 which he purport ..... X X X X Extracts X X X X X X X X Extracts X X X X
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