SABYASACHI MUKHARJI - (1.) THE appeal under S. 29(1), Wealth-tax Act, 1957 (hereinafter called the Act) is directed against the judgment and order of the High Court of Allahabad dated 6/01/1971. THE questions involved before the Allahabad High Court in the reference under S. 27(1) of the Act were as follows : (1) Whether, on the facts and in the circumstances of the case, the Tribunal rightly held that the assessee did not make valid gifts aggregating Rs. 1,50,000.00 on 1-1-1957 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal rightly held that the assessee did not validly assign Rs. 1,50,000.00 in favour, of his sons and grandsons by his letter dated 1-1-1957 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal rightly held that the sum of Rs. 1,50,000.00 was properly included in the assessee's net 'wealth ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal rightly held that the assessee did not make valid gifts aggregating Rs. 67,560/12.00 ? (5) Whether, on the facts and in the circumstances of the case, the Tribunal rightly held that the sum of Rs. 67,560/12.00 was rightly included in the net wealth of the assessee '?
(2.) "The case relates to the assessment year 1957-58 and the relevant date of Valuation was 31/03/1957. The assessee, Dr. R. S. Gupta had maintained an account in the books of Messrs. Tika Ram and Sons Pvt. Ltd. On 1/01/1957, the account showed a credit of Rs. 1,50,740.00. On that day, the assessee had addressed a letter to the Company stating that he had decided to gift away for love and affection various sums to the following persons : JUDGEMENT_84_2_1987Html1.htm By that letter the assessee had directed the Company to debit his account to the extent of Rs. 1,50,000.00 and credit the respective amounts in the, names of the aforesaid persons. It appears further that copies of this letter were sent to one Om Prakash Gupta and Ved Prakash Gupta. There was no dispute that instructions of the assessee were carried out by the Company and relevant debit and credit entries were made in the respective accounts. On the same day, i.e., on 1/01/1957, Om Prakash Gupta wrote to the assessee, his father, thanking him for the gift of Rs. 25,000.00 made in his favour and the gift of Rs. 50,000.00 in favour of his son Pravin. A similar letter was written by Ved Prakash thanking the assessee, his father, for the gift of Rs. 25,000.00 made to him and Rs. 50,000.00 gifted to his son. It must be mentioned, however, that the company i.e. Messrs Tika Ram and Sons Pvt. Ltd., was stated to be running an oil mill and carrying on business as grain tillers, contractors and brick kiln owners. It was also stated to be carrying on business of advancing money and taking money on loan when necessary. But it appears that it was admitted position that Tika Ram and Sons had a cash balance of Rs. 4,000.00 only on 1-1-1957 and it did not have any overdraft facilities with any bank. The respective donees were stated to have later on withdrawn amounts from the amounts so transferred to their accounts. The assessee contended that a total sum of Rs. 1,50,000.00 was validly gifted by him to his sons and grandsons and hence the amounts had been wrongly included in his net wealth by the Income-tax Officer and the Appellate Assistant Commissioner. It was his contention that Tika Ram and Sons carried on the business of banking and hence the gifts were valid. but there was no evidence that Tika Ram and Sons were carrying on any banking business. The Tribunal held that they were not carrying on banking business. The main question therefore that falls for consideration is whether gifts in question made by transfer entries in the books of debtor company were valid gifts even though the debtor company was not carrying on business of banking and had no cash in hand for the amount in question on that date. Gift is defined in S. 122, T.P. Act, 1882, as transfer of certain existing movable or immovable property made voluntarily and without consideration by one person, called the donor to another, called the donee, and accepted by or on behalf of the donee. Section 123 of the said Act deals with how transfers are effected and stipulates, inter alia, that for the purpose of making a gift of movable property as in this case, the transfer must be effected either by a registered instrument signed by the donor and attested or by delivery. Such delivery may be made in the same way as goods sold may be delivered. The next contention was regarding the inclusion of net wealth a sum of Rs. 67,560/12.00 standing to the credit of the assessee in the books of M/s. Pearls and Beads. The assessee claimed to have gifted the said amounts by transfer entries in the books of M/s. Pearls and Beads on 30/03/1957. No letter as in the previous case was addressed by the assessee but only oral instructions were said to have been given. The Tribunal held that there was no valid gifts. There was no evidence, it appears, that the said sum was available with the said firm of M/s. Pearls and Beads.
(3.) THE High Court in view of the decision of the Division Bench of the Allahabad High Court in the case of Gopal Raj Swarup v. Commr. of Wealth-tax, Lucknow, (1970) 77 ITR 912 answered the first question in the negative and so far as the second question is concerned, it declined to answer as it did not arise in view of the answer given to the first question and the questions 3, 4 and 5 were answered in the negative. Aggrieved by the said decision, the revenue has come up in appeal. In order to constitute a valid gift there must be an existing property. In case of entries in the books of account by credit and debit, the sums should be available on the date of gift in the account of the firm whose accounts are said to be credited or debited. In the case of banking companies or other firms and companies who have overdraft facilities, even if the sums are not in credit of the donor and are not with such companies or firms, gifts might be possible by adjustment of the book entries. But in the cases of non-banking companies or firms, if these companies or firms do not have overdraft facilities, it is not possible to make valid gift if sums or funds are not available. This question has been examined by the various High Courts.;