1. These appeals by the revenue are consolidated for the sake of convenience and disposed of by this common order.
2. [This para is not reproduced here as it deals with a minor issue not covered in the synopsis.] 3. The revenue's second contention is that the interest of Rs. 10,000 should be assessed for the assessment year 1977-78 as it was neither offered nor assessed for the assessment year 1976-77. For the assessment year 1977-78, the ITO included a sum of Rs. 10,000 as interest income under other sources as under : The assessee has filed Form 19A dated 28-3-1977 in which it is stated that a sum of Rs. 10,000 was paid as interest and Rs. 1,000 was tax deducted at source for the period 13-2-1975 to 12-6-1975.
The assessee had taken loan on which interest of Rs. (0,000 has been paid and this sum was advanced to UMS Radio Factory (P.) Ltd. from which the assessee has recovered interest of Rs. 10,000 as per Form No. 19A dated 28-3-1977. The interest of Rs. 10,000 was paid during the account year ended 31-3-1976 relating to the assessment year 1976-77. Hence, the assessee should have claimed this interest payment for 1976-77 assessment itself. The assessee has actually received interest of Rs. 10,000 only during the previous year relating to this assessment year. The assessee's plea to set off the receipt of Rs. 10,000 for 1977-78 assessment to the interest payment of Rs. 10,000 for 1976-77 assessment cannot be accepted. Hence, the interest of Rs. 10,000 received is taken as income under other sources.
On the assessee's appeal, the Commissioner (Appeals) directed deletion of Rs. 10,000 as under : The interest receivable from UMS Radio Factory (P.) Ltd. had been offered for assessment in 1976-77 and was duly assessed in that year but credit could not be given in that assessment for the tax withheld at source for the reason that no tax was in fact deducted, and neither was such credit asked for by the appellant. The certificate of deduction of tax at source was issued by the company only at the time when the interest was paid and since this happened in the previous year, we are now concerned with credit for such tax was claimed and allowed in the assessment for that year, but the matter did not end there. The ITO went further and included the interest, which had been included in the earlier year's assessment by reference to receivability, once again in the assessment to which the present appeal relates, on the basis of actual receipt. He was quite obviously not entitled to do this.
We have heard the parties and find no merit in the revenue's contention. The interest account for the year ended 31-3-1976 (assessment year 1976-77) showed interest credit of Rs. 10,000, being the interest receivable from UMS Radio Factory on the assessee's advance of Rs. 2,50,000 from 10-2-1975 to 10-5-1975 at 12 per cent (Rs. 7,500) plus from 11-5-1975 to 10-6-1975 (Rs. 2,500), Against this the interest payments were Rs. 11,200 and the net interest payment of Rs. 1,200 was claimed by the assessee as deduction for the assessment year 1976-77 which was allowed by the ITO. The certificate dated 28-3-1977 issued under Rule 19A also refers to the interest for the period from 13-2-1975 to 12-6-1975. It is, therefore, patent that the interest due to the assessee from UMS Radio Factory of Rs. 10,000 was duly accounted for the assessment year 1976-77. The fact that the certificate under Rule 19A was issued in March 1977 and the interest was actually received by the assessee only after 31-3-1976 would not again make the amount in question taxable. The departmental representative was also not able to place before us any material to displace the findings of the Commissioner (Appeals). This contention is, hence, rejected. In the result the appeal is dismissed.
4. [This para is not reproduced here as it deals with a minor issue not covered in the synopsis.} 5. The revenue's next common ground is that the Commissioner (Appeals) was wrong in allowing the gift-tax liability as deduction for both the years. The late Shri G.D. Naidu had made certain gifts in the previous years, relevant to the assessment years 1972-73 and 1974-75, and the gift-tax assessments in respect of these gifts were made on 12-8-1975 on the assessee, as the legal representative of the late Shri G.D.Naidu. The total amount of tax determined as payable on the basis of this assessment was Rs. 1,10,000 which the assessee was liable to pay as the sole heir of the donor. The assessee sought to deduct the above gift-tax liabilities as a debt due by the assessee as on each of the valuation dates, viz., 31-3-1974 and 31-3-1975. The ITO, however, rejected the claim, apparently because the gift-tax returns for the relevant years had been filed and the gift-tax demand was raised by the GTO only after 31-3-1975. On appeal the Commissioner (Appeals) accepted the assessee's contention that the deduction of tax liability does not depend on the quantification of the liability by assessment. We agree with the Commissioner (Appeals) that the gift-tax liability is a debt owed on the relevant valuation dates. The liabilities for gift-tax attaches as soon as the gift is made, though its quantification by assessment would necessarily take place after the close of the relevant accounting year. In the present case, the gifts in question were made long before the valuation dates, though the gift-tax assessments were pending as on the valuation dates under present consideration. The liability for gift-tax is, therefore, deductible. Our above view is supported by the Punjab High Court decision in Raja Sir Harinder Singh Brar Bans Bahadur v. WTO  64 ITR 394 and the Gujarat High Court decision in CWT v. Kantilal Manilal  88 ITR 125. This ground is hence, rejected.
6. [This para is not reproduced here as it deals with a minor issue not covered in the synopsis.]