Satish Chandra, C.J.
1. It appears that the assessee along with his two brothers advanced a sum of Rs. 2,84,763 to Sohanlal Singhania somewhere between 1941 and 1946. This money was advanced out of the secret profits of the assessee and his brothers, which were outside the books. The assessee and his brothers reached a settlement with the Central Board of Revenue on 17th January, 1957, as a result whereof each of the three brothers entered an amount of Rs. 94,921 in his books of account to the debit of Sohanlal Singhania. They continued to repeat this entry year after year. But in the year 1967-68, they wrote off this debt from their books. In the year 1967-68, the assessee did not show this debt in his return under the W.T. Act. On enquiry, the assessee stated that the debt had become bad and so it was written off. The WTO issued notices under s, 16 of the G.T. Act asking the assessee to show cause why the sum of Rs. 94,921 be not brought to books under Section 4(1)(c) of the G.T. Act. The assessee's explanation was not believed. The GTO held that the assessee had abandoned the debt and the abandonment was not bona fide, and the amountwas, hence, liable to be treated as gift by virtue of Section 4(1)(c) of the Gift-tax Act. The appeal filed by the assessee was dismissed by the AAC. The assessee took up the matter to the Tribunal. The Tribunal held that the debt had become barred by time and was irrecoverable even in January, 1957, when it was brought into the books of the assessee for the first time. The fact that Sohanlal Singhania has simultaneously in January, 1957, entered this debt in his books was not very material, because he in his books had shown this amount as debt standing to the credit of M/s. Shroff & Company. He continued to claim deduction under the W.T. Act on that basis. Therefore, there was no acknowledgment forthcoming even in Sohanlal Singhania's books of account in favour of the assessee or his brothers. The debt having become time barred was not recoverable. The writing off of this amount did not amount to abandonment or surrender of the debt within the meaning of Section 4(1)(c) of the G.T. Act. The Tribunal further found that the write-off by the assessee of this amount was not hit by Section 4(1)(c) of the G.T. Act. At the instance of the CGT, the Tribunal has referred the following question of law for our opinion :
'Whether, on the facts and in the circumstances of the case, the writeoff of loan was hit by Section 4(1)(c) of the Gift-tax Act, 1958 ?'
2. There is no doubt that the loan really became barred by time in January, 1957, when the assessee included it in his books of account. The fact that Sohanlal Singhania had also included this debt in his books of account was not very material because he had admitted M/s. Shroff & Company to be the creditor. He has not showed the assessee or his brothers as the creditors. The Tribunal is right in holding that the debt having become time-barred was not recoverable in 1957. None the less, the assessee and his brothers continued to maintain the entry in relation to this debt year after year till 1967. The assessee's explanation is that during this period no legal steps could be taken for recovery, as the advance had become time-barred and only verbal requests were made to Sohanlal Singhania from time to time for repayment of the advance. He, however, kept repayment in abeyance. If he had any intention of making repayment he would have made the repayment long ago when he wanted to close down the chapter of secret wealth. In the circumstances, there was no alternative but to write off the debt. The Tribunal was influenced by the totality of the circumstances in coming to the conclusion that the write-off by the assessee was bona fide. We have been persuaded to hold that this finding was without any material to support it. On this finding, the question whether in fact or in law the write-off was in reality a release or discharge or surrender or forfeiture or abandonment of the debt becomes one of academic interest only. Clause (c) of Section 4(1) of the G.T. Act makes release, discharge, surrender, forfeiture or abandonment of any debt to be a gift to the extent to which ithas not been found to have been made bona fide. The position is that, even in a case of release, discharge, surrender, abandonment, etc., of a debt, the value becomes liable to gift-tax only in so far as the release, discharge, surrender, abandonment, etc., is not bona fide. If the write-off is bona fide, then for that reason alone it becomes exempt from gift-tax. It is hence a futile exercise to look into the differences in legal implications of the ideas behind release, discharge, surrender, forfeiture or abandonment. Assuming that the write-off in the present case amounts to abandonment, yet it will not be a gift within the meaning of Clause (c) of Section 4(1) of the G.T. Act, because the finding is that the entire write-off was bona fide.
3. We, therefore, answer the question referred to us in the negative, in favour of the assessee and against the department. The assessee is entitled to his costs, which are assessed at Rs. 200.