1986 (12) TMI 10

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..... not existing in reality can be made a subject-matter of gift ? 3. Whether modes of gift can artificially be created so as to be treated as a valid gift under the Gift-tax Act ? " The assessee is an individual. During the previous year relevant to the assessment year 1972-73, the assessee made entries in her books showing gifts made to her minor grandchildren as follows : Name of the grandchild Date of gift Amount gifted Rs. 1. Sri Amitabh Kedia April 2, 1971 15,000 2. Sri Sumit Kedia April 2, 1971 15,000 3. Sri Amitabh Kedia July 22, 1971 2,500 4. Sri Sumit Kedia August 13, 1971 2,500 The assessee filed a gift tax return declaring the aforesaid four gifts aggregating to Rs. 35,000 and taxable gifts at Rs. 30,000. T .....

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..... that she donated Rs. 15,000 to Amitabh Kedia and handed over the sum to the guardian, Smt. Sharda Devi Kedia. It is said that the guardian returned the said sum of Rs. 15,000 to the assessee for being kept as a deposit with her. But the assessee did not so keep it. She again made entries in her books to indicate that she gifted the said sum to Sumit Kedia. This money also did not remain with the guardian of Sumit Kedia. It was just a repeat performance. The result of these transactions was that the assessee was in possession of her amount undiminished. What happened thereafter may not be necessary for us and, therefore, we do not refer to the subsequent alleged transactions. It is no doubt true that gifts can be made by making necessary b .....

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..... herself, indicating the gifts in favour of her grandchildren. The entries might have been correct in the sense they have been made by the assessee. The Department did not challenge, and indeed could not, have challenged the correctness of those entries. But then, mere entries should not be accepted as conclusive of the transaction as rightly urged by learned counsel for the Revenue. The authorities are not bound to give effect to a transaction merely because it has been given a legal shape. The statutory authorities could find out whether the entries are make-believe arrangements. They may examine whether the entries were intended to create fictitious capital in the hands of the donee. They may take into consideration whether the donor ha .....

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