Law:

Section:

Section 2(xii) of the Gift-tax Act, 1958 - Gift - Assessee had a cash balance of Rs. 16,201 - She gifted a sum of Rs. 15,000 to her minor grandchild and handed over said amount to his guardian, who handed it back to assessee to be kept as deposit - On same day, assessee made entries in her books and gifted Rs. 15,000 to her second grandchild, whose guardian also deposited said sum with assessee -Whether when Tribunal held second gift as genuine without properly examining bona fides of second gift, matter had to be remanded back to it - Held, yes Facts The assessee had a cash balance of Rs. 16,201. She gifted a sum of Rs. 15,000 to her minor grandchild and handed over the said amount to his guardian. The guardian on the same day returned the said amount to the assessee to be kept as deposit. The assessee, on the same day, again made entries in her books and gifted the said sum to her another minor grandchild. The money also did not remain with the guardian of the second grandchild but was just a repeat performance. As a result the said amount remained in the possession of the assessee. The assessee filed her return declaring aforesaid gifts. The GTO held that the gifts were not genuine and not intended to transfer title to the donees. On appeal, the AAC held that no cash balance was necessary for making a gift and that valid gift could be made by book entries. On further appeal, the Tribunal upheld the AAC's order and observed that since the department did not challenge the genuineness of the book entries, the entries had their normal and legal effect. On reference : Held The department did not, indeed could not, have challenged the correctness of the entries made by the assessee in her accounts. But then, mere entries should not be accepted as conclusive of the transaction. The statutory authorities could find out whether the entries are make-believe arrangements. They may examine whether the entries were intended to create fictitious capital in the hands of the donee. They may take into consideration whether the donor had legitimate source of money for the purpose of gift. They may find out whether the donor really intended to confer title on the donee in…

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