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TMI Blog1964 (12) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... ine firm and that the business continued to be that of Abdul Rahaman Rowther alone. On appeal, the Appellate Assistant Commissioner concurred in these findings. He also thought that the interest of the two daughters in the firm was created by alleged gifts of ₹ 25,000 to each of them by the father, and that the gifts were not valid as there was no handing over of the cash to the daughters. He was also inclined to hold that the making of a gift of a large part of the assets to only two of his daughters in preference to his several other children was unnatural. He further relied on the fact that on an earlier occasion Abdul Rahaman Rowther had also purported to form a partnership, the registration of which had also been rejected. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference by the Appellate Assistant Commissioner to the last mentioned feature is wholly out of place and suggests some sort of prejudice against the assessee. The questions which had to be considered in the disposal of the application by the assessee are, firstly, whether a genuine partnership did come to exist, and, secondly, if the formation of the partnership was preceded by certain other transactions, which were necessary for the formation of the partnership, whether those transactions were true and valid. Undoubtedly, upon the claim that the petitioner had made gifts to his daughters, which gifts went to form their capital in the partnership, the department was entitled to examine whether the making of the gifts conforms to the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the family, so that an air of unreality was cast over the whole transaction. We may also observe that it does not appear to have been questioned that the assessee had the legal authority to make the gifts of any description and of any amount to any person as he desired. According to the assessee, the gifts were occasioned by the fact that he had made a promise to his daughters at the time of their marriage that he would make such gifts. It is true that we have only his statement in that regard. We shall content ourselves with remarking that that is not unusual in Mohammadan families. On June 8, 1954, the assessee purported to make the gifts by incorporating certain entries in his accounts. On that day, he debited himself to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There, the assessee, who was the sole proprietor of a concern, debited his personal account with a certain sum and credited each of his sons with various amounts. This was followed by the execution of partnership deed between the father and his sons. The Income-tax Officer refused registration holding that there was no deed of gift and that the credit entries were not sufficient to constitute gifts, among other reasons. It was observed in that case that though the entry as such might not conclusively establish a real and effective gift, it was evidence in support of the gift, and the subsequent acts and conduct of the parties, taken along with such evidence in the books of account, could establish a valid gift. It was pointed out further th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich he gives, namely, such right as he himself has...He must evidence the reality of the gift by divesting himself so far as he can of the whole of what he can. Relying upon this passage, it was pointed out that the principle that the possession of the thing gifted must be given physically to the donee must depend on the nature of the subject-matter of the gift, and in such circumstances, where the subject-matter of the gift consisted of the assets of the firm, the entries in the accounts, followed by such acts as would effectuate a divestment on the part of the donor, would be sufficient. In the present case also, we have noticed that after making the necessary entries, a partnership document was executed. In that document, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real points of distinction. It is true that in Muthappa Chettiar v. Commissioner of Income-tax [1945] 13 I.T.R. 311 , where certain book entries were relied upon to postulate the formation of a trust and it was admitted that no funds corresponding thereto had been set apart or allocated at any time, it was held that such entries did not operate as valid gifts or trusts. But here again, the position in the present case is certainly different. If the validity of the gifts cannot be challenged and the subsequent conduct of the parties does support the formation of a genuine partnership, the circumstances that the two partners were the daughters of the assessee, or that they took no active part in the conduct of the business, are irrelev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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