Law:

Section:

section 4(1)(c) of the gift-tax act, 1958- deeemed gifts-secret profits were advanced during 1941 to 1946 and were brought into books in 1957-debt was written off in 1967-68-whether it was a case of abandonment of debt not bona fide and gift tax was payable-held, no Facts During 1941 to 1946, the assessee and his two brothers advanced a sum of Rs. 2,84,763 to Sohanlal Singhania out of their secreted profits. As a result of a settlement with the Central Board of Revenue on 17-1-1957, the amount was brought into the books by each of the brothers debiting Rs. 94,921 in the name of Sohanlal in their respective books. This debt was ultimately written off by them in 1967-68. In January 1957, Sohanlal also entered the debt in his books but showed it to the credit of Shroff & Company and not to the credit of the assessee and his brothers and claimed deduction in wealth-tax assessments. The assessee did not show this debt of Rs. 94,921 in his wealth-tax return for 1967-68 on the ground that it had become a bad debt. The ITO assessed the said amount to gift-tax holding that the assessee had abandoned the debt which was not bona fide. The AAC dismissed the assessee's appeal. The Tribunal, however, held that the amount in question was not liable to gift-tax because Sohanlal did not admit the debt in his books in favour of the assessee and the debt had become time-barred and irrecoverable even when the amount was brought into the books. On a reference : Held The sum of Rs. 94,921 was not liable to gift-tax because, firstly, the debt had become time-barred even in January 1957, when it was brought to books and thus became irrecoverable and as such, there was no question of abandonment and, secondly, the write-off was bona fide and when a release, discharge, surrender, forfeiture or abandonment of a debt was made bona fide, it would not become liable to gift-tax. JUDGMENT Satish Chandra, C.J.-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…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492