COMMISSIONER OF INCOME TAX Vs. SHYAMO BIBI SMT

JUDGEMENT

(1.) THE following question has been referred to this Court for its opinion by the Income-tax Appellate Tribunal, Allahabad Bench, at the instance of the Commissioner of Income Tax, U.P.

(2.) AN application has been made by the assessee praying that the reference be returned unanswered to the Tribunal because the question formulated by the Tribunal does not arise out of the order passed by it. The Income-tax Officer had called upon the assessee to prove the gift of Rs. 1,00,000 said to have been made by her to Om Nath in respect of her claim for deducting Rs. 150 paid as interest in the previous year. The assessee had relied upon the memorandum, and the transfer entries made in her account books dated 22-12-1953. The Income Tax Officer had rejected the alleged gift because there were only book entries, the cash in her hands on 22-12-1953 was only Rupees 15-10-0 and she had retained full control over the money and also utilized it in her business. No question had been raised before him about the allowability of the amount of Rs. 150 even if there had been a gift of Rs. 1,00,000; he had not held either that she had not actually paid Rs. 150 as interest or that even if she had paid it the amount was not deductible from her income either under Section 10(2)(iii) or under Section 10(2)(xv) of the Income Tax Act. The question whether she had paid the money as interest on capital borrowed for her business or to defray business expenditure had not been gone into by him at all. His order was maintained by the Appellate Assistant Commissioner; he held that there had been no delivery of Rupees 1,00,000 by the assessee to Om Nath and that consequently there had been no gift within the meaning of Section 123 of the Transfer of Property Act. From these findings he had concluded that the deduction of Rs. 150/- had been rightly disallowed. Before him also the question whether the deduction was allowable under Section 10(2) or not had not been raised.

(3.) SECTION 123 of the Transfer of Property Act lays down the law governing all gifts made for whatever purpose and it is to be applied whenever the question arises whether there was a gift or not. Regardless of whether the question arises in a suit by a donee to recover possession or in a suit to define his title or in an income-tax assessment proceeding it has to be answered with reference to the provisions of SECTION 123 T. P. Act. There is no warrant for saying that the law contained in SECTION 123 T. P. Act does not apply when an income-tax authority has to decide whether there was a gift or not. Consequently there has to be a delivery, if a gift is not made by a registered document. A question may arise whether a certain act done by the alleged donor amounts to delivery of property to the alleged donee but it cannot be said that delivery is not required at all. With great respect I am unable to agree with the following statements of Chagla C. J. in the case of Chimabhai Lalbhai, 1958-34 ITR 259 (Bom.) (supra).