Law:

Section:

Section 3 of the G ift-tax Act, 1958 - Gift - Assessee, a Muslim, gifted a sum to his minor son by book entry though there was not sufficient cash in books to cover amount of gift - Assessee showed gifted amount in gift-tax return and credited interest thereon to donees' account who withdrew the same and used it - Whether, where physical delivery or possession is not possible in view of nature of property, it is sufficient to constitute a valid gift that donor intended to divest himself of his dominion over the property - Held, yes Section 2(m) of the W ealth-tax Act, 1957 - Net wealth - Assets belonging to assessee - Whether in view of facts mentioned under the head 'gift', it was assessee's intention to make a gift and in view of nature of gift it had to be regarded as valid gift enabling assessee to claim exclusion of gifted amount and interest paid thereon from his wealth - Held, on facts, yes Facts The assessee, a Muslim, credited a sum of Rs. 25,000 to the account of his minor son and made a corresponding debit entry in his capital account in his books even though the opening cash balance in the assessee's books of account as on date of gift was Rs. 1,097 only. He also credited interest on the gifted amounts to the donees' accounts and the latter withdrew the same and spent it. The assessee duly filed a gift-tax return showing therein the gifted amount. In his return of wealth for the assessment year 1969-70, he excluded the value of the gift from his total wealth. The WTO held that there was no valid gift on the grounds (i) that mere book entries would not constitute a valid gift; and (ii) that on the date of the gift there was not sufficient cash balance in the assessee's books. He, therefore, included the gifted amount in the total wealth of the assessee. The WTO also included the interest accrued on the gifted amount in the total wealth of the assessee. On appeal, the AAC and the Tribunal upheld the conclusion of the ITO that there was no valid gift. On reference: Held According to Muslim law, a gift is valid if there is a declaration by the donor, an acceptance of the gift, express or implied, by or on behalf of the donee, and delivery of possession,…

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