9911796707
TMI Blog1981 (9) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... started for Deepankar with the said amount, Sushil Kumar accepting the gift on behalf of the minor. For the assessment year 1971-72, the assessee-firm claimed as deduction a sum of Rs. 1,587 credited to the account of Deepankar in respect of the sum of Rs. 15,000 said to have been gifted to him by his grandfather. The ITO disallowed the deduction claimed by the assessee on the very short ground that, on the date of the alleged gift, the cash balance with the firm was only Rs., 3,197 and hence there could have been no valid gift of Rs. 15,000 by jai Gopal in favour of Deepankar. The assessee preferred an appeal to the AAC contending that it was not correct to say that there was not enough cash with the assessee-firm on the date of the gift. It was claimed that the cash balance in the books and the bank account taken together exceeded Rs.1,00,000. It was, therefore, submitted that the interest claimed by the assessee should have been allowed and in this regard reliance was placed on the decision of the Supreme Court in Ramarathnam's case [1973] 91 ITR 1. The AAC, however, did not accept this contention and confirmed the disallowance made by the ITO. The assessee preferred an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71] 80 ITR 206 (Delhi) on the facts and in the circumstances of the assessee's case ? " In the course of the proceedings for the assessment years 1972-73 and 1973-74 the assessee-firm claimed, in addition to the interest paid to Deepankar, other sums of interest paid to Smt. Manju Rastogi, Smt. Beena Rastogi and Miss Anjula on the ground that the partners of the firm had made gifts to these persons. This was done by debiting their current accounts with the firm and crediting such amounts to the accounts of the donees in the books of the firm. For purposes of convenience, the details of these gifts may be tabulated as under: --------------------------------------------------------------------------------------------------------------------------------------------------- " S. No. Date of Name of donor Name of donee Amount gift relationship Rs. --------------------------------------------------------------------------------------------------------------------------------------------------- 1. 14-5-70 Sh. Jai Gopal Master Deepankar Rastogi Kumar (minor grandson) 15,000 2. 15-9-71 Sh. Jai Gopal Smt. Beena Rastogi Rastogi (Daughter in-law) 10,000 3. 15-9-71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o of the judgment in the case of New India Colour Co. reported in [1971] 80 ITR 206 (Delhi) on the facts and in the circumstances of the assessee's case ? It will thus be seen that the deduction for interest claimed by the assessee has been disallowed by the Tribunal in all the years following its decision in the appeal for the assessment year 1971-72. In that order, the Tribunal had not accepted the assessee's attempt to distinguish the decision of this court in the case of New India Colour Co. v. CIT on the two grounds, (a) that the firm had enough cash and bank balances, and (b) that the gift had been made by making entries in the personal and drawing account of the donor which had sufficient credit balances on the date of the gift. We are of opinion that the Tribunal has misconstrued the true scope of the decision of this court in the case of New India Colour Co. [1971] 80 ITR 206 (Delhi). It is settled law that a registered deed is necessary to effect a gift of immovable property and that even in respect of movable property, there should be a identification of the property and a delivery thereof to the donee should accept the same. A gift cannot be said to have been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that next arises is whether it is always necessary for the validity of the gift that the family, firm or company should have sufficient cash on hand on the material date or that the donor should have sufficient credit balance in his account with such concern. It has been held in a large number of cases that a gift of money is perfectly valid if proper entries, are made in the account books notwithstanding that there is no transfer of possession, that the donor does not have sufficient balance in his account and that even the firm does not have sufficient cash balance on the material date: (see Chimanbhai Lalbhai v. CIT [1958] 34 ITR 259 (Bom). K.P. Brothers v. CIT [1961] 42 ITR 650 (Raj), E. S. Hajee Abdul Kareem and Son v. CIT [1963] 50 ITR 396 (Mad), Bhau Ram Jawaharmal v. CIT [1971] 82 ITR 772 (All), Gopal Jalan v. CIT [1972] 86 ITR 317 (All), Phool Chand Gajanand v. CIT [1973] 89 ITR 148 (All), and Jhaverbhai Patel v. CIT [1976] 103 ITR 728 (Pat), Srinath Das v. Income-tax Appellate Tribunal [1977] 109 ITR 315 (All), CGT v. Tarachand Meghraj [1977] 109 ITR 775 (Cal) and Smt. B. Muniyamma v. CGT [1979] 117 ITR 47 (Kar). What is necessary in all these cases is to examine whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence of the acceptance of the gift by or on behalf of the donee or of the gift having been acted upon. In these circumstances it was held that there was no valid gift. Again, in CWT v. Gulab Rai Govind Prasad [1972] 85 ITR 308 (All) though there were book entries transferring funds from the account of the karta to that of his minor son, it was found that there was no acceptance of the gift, no cash balance on the date of the transfer, no payment of interest to the donees and, in addition, the gifted amount and the property purchased therefrom were utilised for the business of the HUF. In these circumstances, it was held that there was no valid gift. A review of these cases indicates that it is possible for a person to effectuate a gift by instructing a firm, family or company in which he has an account to give effect to the gift by debiting his account and crediting an account in the name of the donee. But in such cases it is not sufficient that there should be Merely book entries: the circumstances attending upon the transaction must be such as to make it clear that there were sufficient funds at the disposal of, the donor by reason of which he could make the gift by means of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of which the donor is a partner must depend entirely on whether, in the circumstances, this is a natural method of transfer and it is certainly not necessary for the donor to withdraw sums in cash from the firm to be reinvested by the donee or donees in the firm.", were endorsed. It was pointed out that, in that case, though there was not enough cash balance in the firm, the firm had unutilised drawing power to the extent of Rs. 1,27,088. So far as the case of Naunihal Thakar Dass v. CIT [1970] 77 ITR 332 (P H) was concerned; it was pointed out that it had only followed Balimal Nawal Kishore's case [1966] 62 ITR 669 (Punj), but it was observed that in that case the nature of the rights of partner during the subsistence of, the partnership with respect to the capital account of the partnership was not taken into consideration. As regards the case before it, the court found, (a) that the firm had neither enough cash balance nor any unutilised drawing power on a bank such as would have enabled the parties, if they had wished to realise cash to the extent of the amount of the gifts, to give it to the donees ; and (b) that the account, from which gifts were purported to have been ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that there had been no valid or genuine gifts made by the assessee to his grandsons. The ITO and the AAC held that mere entries in the account books were not sufficient evidence for a valid gift and that, in any, event, the amount due by the partnership to the assessee was a debt and, therefore, an actionable claim which could not be validly transferred without executing a proper document as required by s. 130 of the Transfer of Property Act. On appeal, the Appellate Tribunal was not satisfied with the genuineness of the gift, and was of opinion that the entries in the books had not been made in the regular course of business and had no evidentiary value.. That apart, the Tribunal also agreed with the AAC that the assessee could have transferred the debt due to him from the firm only by means of an instrument in writing and as there was no such document, no valid transfer has been effected. Both these findings of the Tribunal were upheld by the High Court on reference. Apart from sustaining the Tribunal's conclusion that, the gift was not genuine, the court also observed that the reasoning that the amount owed by the partnership to the assessee was a debt and was, therefore, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionable claim then the book entries could be evidence of a transfer of the actionable claim and if that is the claim which is put forward, then it may be necessary that it should be evidenced by a document as envisaged under the Transfer of Property Act. On the other hand, the case of the present assessee, as well as the assessees in the various decisions to which we have referred, is not that there has been transfer of an actionable claim but that there is a transfer of money to the extent evidenced by the book entries. The case is that the donor in question has gifted monies to the donees and that it is this gift of movable property in the form of money that is evidenced by the book entries. The argument is that, though there has been no actual withdrawal of monies and delivery of possession thereof to the donee and an acceptance of such money by the donee, the position practically is tantamount to that, for, having regard to the nature of commercial transactions, the book entries represent a withdrawal of cash to a corresponding extent, delivery thereof to the donee and the latter's deposit thereof with the firm. It is this argument that has been accepted in all the decisions a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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