BALIMAL NAWAL KISHORE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question has been referred to this court by the Income Tax Appellate Tribunal under section 66(1) of the Income Tax Act :

(2.) IT is to be noted that there is no suggestion at any stage of the proceedings of any taint of mala fides being attached to the disputed transaction, and the gift was rejected as invalid purely on the technical ground that it did not meet with the requirements of section 123 of the Transfer of Property Act which, in the case; of a gift of movable; property, are that the transfer is either to be effected by a registered document or by delivery to be made in the same way as goods sold may be delivered. The only case cited before the Appellate Tribunal on behalf of the assessee, Commissioner of Income Tax v. New Digvijaysinhji Tin Factory was not discussed in the order. In that case the assessee was a registered firm with two partners, Vithaldas Dhanjibhai and his son, Harjivandas Vithaldas, and in certain documents executed in 1946 -48 the father, for the express purpose of assuring his son against any apprehension of his marrying a second wife, made gifts of one quarter out of his half share of the firms profits to his daughter -in -law and grandson and entries were made in the account books of the firm regarding the sums thus gifted, and the donees from time to time withdrew sums from the amounts standing to their credit. Interest on the sums standing to the credit of the donees had been allowed by the Income Tax authorities as deduction in the assessment years 1949 -50 to 1951 -52, but the department objected to these deductions in the assessment year 1952 -53. It was held by S. T. Desai and K. T. Desai JJ. that, although mere book entries could not in a valid gift or trust, since in that case the gifts were accepted by the donees, and the firm accepted the transaction, paid interest on the amounts of the gift and allowed the donees to withdraw moneys, there was ample material to satisfy the legal requirements of a completed and valid gift, that delivery could be symbolical and actual physical delivery was not essential and, therefor, the fact that there was not sufficient cash in hand when the gifts were made did not affect the validity of the gifts and that, therefore, the interest paid by the firm to the donee was an allowable deduction under section 10(2) (iii) of the Income Tax Act.

(3.) THIS case has again been cited before us and although the facts are not altogether on all fours with those of the present case, since there were independent documents executed regarding the gifts, it may be of some assistance on the question whether there can be a valid gift when the amount of the gift exceeds the actual cash in the hands of the firm at the time.