B MUNIYAMMA Vs. COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) THE question referred to this Court by the Tribunal, under s. 26(1) of the GT Act, 1958 (hereinafter referred to as "the Act") reads as under :

(2.) THE assessee, Smt. B. Muniyamma, was a partner in the firm, M/s Lakshminarayana Rice Mills, along with her husband, Jyothinagaram Chikkavenkata Swamaiah, representing the joint Hindu family of which he was the Karta. THE assessee was a partner in her individual capacity. On 22nd Jan., 1967, the said firm was dissolved and on taking accounts, it was found that she was entitled to Rs. 80,114.99. In the books of the firm, the amount standing to her credit was transferred to the account of her husband. On the next day, i.e., on 23rd Jan., 1976, the entire amount which was standing to the credit of her husband which included the amount transferred from the account of the assessee to his account, was partitioned amongst himself and his sons by way of partial partition of the family. THE GTO treated the transfer of the sum of Rs. 80,115 from the account of the assessee to the account of her husband as a gift and levied tax thereon. THE order of the GTO was affirmed in appeal by the AAC of Gift-tax and in the second appeal by the Tribunal. This reference is made at the instance of the assessee.

(3.) IT is, however, seen from another decision cited before us in Bhau Ram Jawaharmal vs. CIT (1971) 82 ITR 772 (All) : TC35R.383, the Allahabad High Court has observed that it was not necessary in every case for the validity of a gift that there would be physical delivery by the donor to the donee and that a transfer could be effected by making debit entries in the account of the donor and by making corresponding credit entries in the account of the donees. So long as the entries made in the respective accounts put the gifted amount beyond the control of the donor and resulted in his ownership in it being replaced by the ownership of the donee, there was no reason why a valid gift cannot be effected through such book entries.