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Commissioner of Income-tax Vs. Tarachand Meghraj - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 107 of 1970
Judge
Reported in[1983]142ITR630(Cal)
ActsIndian Income Tax Act, 1922 - Section 66(1)
AppellantCommissioner of Income-tax
RespondentTarachand Meghraj
Appellant AdvocateA.K. Sengupta, Adv.
Respondent AdvocateD. Pal and ;R. Murarka, Advs.
Excerpt:
- .....to this court : '1. whether, on the facts and in the circumstances of the case, there was a valid gift on march 28, 1957, to bai kamala and bai indu so as to justify allowance of interest claimed with respect to the amounts credited to their account on the said date for the assessment years 1957-58 and 1958-59?' 2. in order to appreciate the question, we must mention that this reference arises out of the income-tax assessments for the assessment years 1957-58 and 1958-59. in these assessments the assessee claimed deduction for interest paid to bai kamala and bai indu with respect to the credits in their names on march 28, 1957, of rs. 1 lakh and rs. 50,000 respectively. the relevant facts relating to these sums have been set out in the statement of the case and under the g.t. act.....
Judgment:

Sabyasachi Mukharji, J.

1. In this reference under Section 66(1) of the Indian I.T. Act, 1922, the following question has been referred to this court :

'1. Whether, on the facts and in the circumstances of the case, there was a valid gift on March 28, 1957, to Bai Kamala and Bai Indu so as to justify allowance of interest claimed with respect to the amounts credited to their account on the said date for the assessment years 1957-58 and 1958-59?'

2. In order to appreciate the question, we must mention that this reference arises out of the income-tax assessments for the assessment years 1957-58 and 1958-59. In these assessments the assessee claimed deduction for interest paid to Bai Kamala and Bai Indu with respect to the credits in their names on March 28, 1957, of Rs. 1 lakh and Rs. 50,000 respectively. The relevant facts relating to these sums have been set out in the statement of the case and under the G.T. Act for the assessment year 1958 which had been simultaneously prepared and submitted. We may incidentally point out that we shall refer to the judgment by which the reference had been disposed of by this High Court.

3. The ITO, who was also the GTO, had taken the view that the sums of Rs. 1 lakh and Rs. 50,000 were gifted on November 24, 1957, and February 16, 1958, to Bai Kamala and Bai Indu respectively. It was on these two dates the donees withdrew the amounts. Consistently with this conclusion the ITO held that the interest of Rs 150, claimed for the assessment year 1957-58, could not be allowed as deduction as the relevant gift took place subsequent to this year. In the assessment for the assessment year 1958-59, the ITO held that the interest of Rs. 1,944 and Rs. 1,326, claimed in the case of Bai Kamala and Bai Indu with respect to the period prior to their withdrawal, was not an allowable deduction as there was no gift when the book entries were made.

4. The assessee appealed to the AAC against the disallowance by the ITO. The AAC held that the gift could be recognised only from November 24, 1957, and February 16, 1958, and interest credited up to these dates could not be allowed.

5. Thereafter the matter came up in appeal before the Tribunal at the instance of the assessee. The Tribunal heard these appeals along with the gift-tax appeal and by its common order passed in all the three appeals, the Tribunal upheld the claim of gift of the assessee on March 28, 1957, and, therefore, directed allowance of interest. We may incidentally refer to the relevant observations of the Tribunal in its order. The Tribunal observed in para. 12 of its order, which is given in the statement of case in the paper books, that it appeared to the Tribunal in that case that there was a valid gift on March 28, 1957, and the document was executed before the notary public and the donees simultaneously agreed to keep the amount in deposit in the family firm's business at the annual interest of 3 per cent. The Tribunal thereafter observed, dealing with the income-tax appeals, that as the question was bound up with the decision of the gift-tax appeal, the disallowance of interest credited in these two accounts was ' solely based on the conclusion drawn by the I.T. authorities that there was no valid gift on March 28, 1957, and that the gifts arose only when they were actually withdrawn by the donees'. The Tribunal had not agreed with the view of the departmental authorities and the Tribunal held that the gifts on March 28, 1957, were established. Therefore, the Tribunal directed the allowance of the interest, as claimed by the assessee.

6. The gift-tax matter came up in reference before the court and the matter was disposed of. The decision of this court is CGT v. Tarachand Meghraj : [1977]109ITR775(Cal) . On behalf of the Revenue, before us, our attention was drawn to this decision and a reference was made to the document which had been set out at p. 777 of the said decision whereinthe purpose of the gift was mentioned. This inference was answered in favour of the assessee and it was held that the Tribunal was right in its conclusion that there was a valid gift. In that context, in our opinion, that being the only contention as urged, in view of the question, the gifts were valid the interest paid to the donees was utilised in the business of the assessee-firm, which was not disputed or no other question was raised or argument was urged before the Tribunal, the answer is obvious. The Tribunal held that the interest should be allowed as business expenditure.

7. Our attention was also drawn to the observations of the Supreme Court in the case of Madhav Prasad Jatia v. CIT : [1979]118ITR200(SC) , where the Supreme Court analysed the difference between money lying in a business and the money lying for the purpose of the business. That was the main controversy before the Supreme Court. The Supreme Court went into that question and made its observations in that context. In this case, that was not the controversy and we do not see any relevancy in examining this aspect of the matter.

8. In view of the fact that the answer to the question is obvious in the context of the controversy, we will answer the question in the affirmative and in favour of the assessee.

9. The Revenue shall pay the costs of this inference.

Suhas Chandra Sen, J.

10. I agree.


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