GOPAL RAJ SWARUP Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) THIS is a case stated by the Appellate Tribunal, Delhi Bench "B", under Section 66(1) of the Income-tax Act, 1922, hereafter referred to as the Act. The statement of the case relates to the assessment year 1958-59, the relevant valuation date being March 31,1958. The material facts are these. The assessee is the karta of a Hindu undivided family styled M/s Gopal Raj Swarup and Sons. 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 donee. The transfer was effected by debiting the assessee's personal account in the books of the Hindu undivided family by the sum of Rs. 50,000 and crediting the same amount in the personal account of his son, Keshav Kumar Swarup. It is relevant to mention in this connection that on November 20, 1956, the date of the gift, the assessee had a substantial credit balance far exceeding the sum of Rs. 50,000 which he purported to give to his son. The adjustment of entries made as aforesaid in the books of the Hindu undivided family was in pursuance of a letter written by the assessee to the said Hindu undivided family on the same date. The letter, which is annexure " A" to the statement of the case, runs as follows:

(2.) THE first assessment for wealth-tax after this gift was in respect of the year 1957-58. In the assessment for that year the assessee claimed that the sum of Rs. 50,000 no longer formed a part of his assets and should not, therefore, be included in his net wealth assessable to wealth-tax, but the Wealth-tax Officer rejected the claim of the assessee on the ground that there was no valid gift and that the transaction in question was made by the assessee with the only object of escaping the incidence of wealth-tax on that amount. THE assessee carried the matter in appeal to the Appellate Assistant Commissioner who dismissed the appeal holding that the gift alleged to have been made by the assessee in favour of his son was not a genuine gift, and, there fore, the Wealth-tax Officer was justified in including the sum of Rs. 50,000 in the net wealth of the assessee. THE assessee does not appear to have carried the matter further in second appeal to the Tribunal for that year.

(3.) AT the hearing of the appeal reliance was placed by the learned counsel for the assessee on several decisions which we shall discuss presently. The first case is the decision of the Bombay High Court in Commissioner of Income-tax v. New Digvijaysinghji Tin Factory, to which we have adverted above. As already stated, the Tribunal has not indicated how that case is distinguishable from the instant case. It will be noticed that in that case entries were made in the books of the firm debitiEg the accounts of the partner, who was the donor and crediting the accounts of the donees by the amount of the gift. This was subsequently followed by a declaration of the gift and, as it appears, the gift was accepted by the donees. In the circumstances, the Bombay High Court held that the case was taken out of the rule that mere entries in the books of accounts are not sufficient to constitute a valid gift. It should be pointed out at this stage that-on the date on which Vithaldas purported to make the gift in favour of his daughter-in-law and his grand-children the firm did not have sufficient cash in hand and it was contended on behalf of the revenue that the entries in the books of account could not, in law, constitute a valid gift inasmuch as the firm was not in a position to deliver the amount gifted to the donees if they had so wanted. Repelling the contention the learned judges observed that actual physical delivery is not the sine qua non for validity of the gift. They pointed out that delivery could be symbolical and they agreed with an earlier decision of the same court in Chimanbhai Lalbhai v. Commissioner of Income-tax, [1958] 34 I.T.R. 259 (Bom,), in which a similar question was dealt with. The facts in the instant case are on a stronger footing inasmuch as we have found that on the relevant date the donor had ample funds to his credit to make good the gift which he had made in favour of his son. The department did not either file the accounts of the Hindu undivided family nor contend that on the date of the gift (November 20, 1956) the Hindu undivided family was not in possession of sufficient funds and was not in a position to deliver the amount gifted to the donees if they had so liked.