COMMISSIONER OF INCOME TAX Vs. TARACHAND MEGHRAJ

JUDGEMENT

(1.) In this reference under Section 66(1) of the Indian I.T. Act, 1922, the following question has been referred to this court :

(2.) In order to appreciate the question, we must mention that this reference arises out of the income-tax assessments for the assessment years 1957-58 and 1958-59. In these assessments the assessee claimed deduction for interest paid to Bai Kamala and Bai Indu with respect to the credits in their names on March 28, 1957, of Rs. 1 lakh and Rs. 50,000 respectively. The relevant facts relating to these sums have been set out in the statement of the case and under the G.T. Act for the assessment year 1958 which had been simultaneously prepared and submitted. We may incidentally point out that we shall refer to the judgment by which the reference had been disposed of by this High Court.

(3.) The ITO, who was also the GTO, had taken the view that the sums of Rs. 1 lakh and Rs. 50,000 were gifted on November 24, 1957, and February 16, 1958, to Bai Kamala and Bai Indu respectively. It was on these two dates the donees withdrew the amounts. Consistently with this conclusion the ITO held that the interest of Rs 150, claimed for the assessment year 1957-58, could not be allowed as deduction as the relevant gift took place subsequent to this year. In the assessment for the assessment year 1958-59, the ITO held that the interest of Rs. 1,944 and Rs. 1,326, claimed in the case of Bai Kamala and Bai Indu with respect to the period prior to their withdrawal, was not an allowable deduction as there was no gift when the book entries were made.