T.P. Mukerjee, J. - (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: " Gopal Swarup, M.A., Telephone No. 85 Muzaffarnagar, Dated Nov. 20, 1956. M/S. GOPALRAJ SWARUP and SONS, MUZAFFARNAGAR. Dear Sirs, I have decided to give, out of my free will, a sum of Rs. 50,000 (Rupees Fifty thousand only) to my son, Keshav Kumar. Please pay to the said gentleman this amount. From to day I have no right, title or interest in the aforesaid amount. Yours faithfully, Sd/-andnbsp;andnbsp; andnbsp;andnbsp; andnbsp;andnbsp; (Gopalraj Swarup)"
(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. In the assessment for the year 1958-59 the assessee again made the same claim, i.e., for the exclusion of the sum of Rs. 50,000 from his net wealth. The assessee's claim was again rejected successively by the Wealth-tax Officer and the Appellate Assistant Commissioner of Wealth-tax. The assessee then preferred a second appeal to the Tribunal but with no better result. The Tribunal in its short order dated 18th September, 1961, discussed only three cases, one of them being Commissioner of Income-tax v. New Digvijaysinhji Tin Factory, 1959 36 ITR 72. This was a decision of the Bombay High Court in which the facts in short were that there was a 6rm of two partners one of whom was Vithaldas, and the other his son, Harjivandas. Apparently, Vithaldas was a widower in the relevant year and his son apprehended that his father might remarry. To allay such apprehension on the part of his son, Vithaldas executed an instrument in writing stating that out of his own share of profits of the firm he would give l/4th to his daughter-in-law and grandson. Thereupon entries were made in the books of the firm debiting Vithaldas by the sum representing his accumulated amount of capital and profits and similar amounts were credited to the accounts of his daughter-in-law and his grandson who was a minor. Subsequently, Vithaldas executed an instrument on a stamp paper addressed to his daughter-in-law in which he affirmed the gift which he had made in her favour and in favour of his grand-children. The daughter-in-law of Vithaldas, in her turn, made an endorsement at the face of the instrument stating that she had accepted the gift on her part as well as on behalf of her minor children. There was also evidence in that case that the transaction was subsequently acted upon and the donees had withdrawn part of the amount standing to their respective credits. The amount of the gift, however, continued to remain invested in the firm which paid interest to the donees on their credit balance in the books. On these facts the Bombay High Court held that, although mere book entries could not result in a valid gift or trust, as, in this case, the gifts were accepted by the donees, and the firm had accepted the transaction, there was ample material to satisfy the legal requirements of a completed and valid gift. The Tribunal held that the decision of the Bombay High Court in the aforesaid case was distirguishable on facts. The Tribunal, however, did not indicate in its order the grounds of distinction. The Tribunal was of the view that the instant case was fully covered by the decision of the Privy Council in Chambers v. Chambers, AIR 1944 P.O. 78 and of the Madras High Court in E. M. V. Muthappa Chettiar v. Commissioner of Income-tax, [1945] 13 I.T.R. 311 (Mad.). Holding as above, the Tribunal confirmed the assessment made by the departmental authorities and dismissed the assessee's appeal. At the instance of the assessee the Tribunal has referred the following question for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the assessee had made a valid gift of the value of Rs. 50,000 to his son, Keshav Kumar Swarup, on November 20, 1956 ? "
(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. The next case relied upon by the learned counsel for the assessee is a decision of this court in Juggilal Kamlapat v. Commissioner of Income-tax, 1964 52 ITR 811. In that case it was held that it cannot be laid down as a general legal proposition that because a person has not with him ready cash he cannot create a trust in excess-of the amount. The trust in that case was created by one Kamlapat a couple of days before his death. Shri Kamlapatgave an information to an employee of the assessee-firm, which was a banking concern, to the effect that he had donated two specific sums of money, one amount of Rs. 5 lakhs for charitable purposes and the other amount of Rs. 2,46,500 to some of his needy relations. On the same date the employee of the assessee-firm, to which such information was given by the donor, Shri Kamlapat, opened an account styled "Kamlapat Ji Dharamkhata" crediting the same by the sum of Rs. 5 lakhs. On the date on which the alleged trust was created, Shri Kamlapat had a sum of Rs. three lakhs and odd only to his credit in the assessee-firm and it was not obviously possible for him to create a trust of Rs. 5 lakhs aud also to pay a sum of Rs. 2,46,500 to his relations. This court, however, held that a legal and valid trust was created by the deceased donor when the assessee-firm not only opened an account in the name of the trust, Kamlapat Ji Dharamkhata, but also credited it with a sum of Rs. 5 lakhs.;