Law: Income Tax Act, 1922

Section: 23

Law: Income Tax Act, 1922

Section: 23

Section 143 of the Income-tax Act, 1961 [Corresponding to section 23 of the Indian Income-tax Act, 1922] - Assessment - Additions to income - Assessee derived income from property and from shares in a partnership firm - On 22-12-1953, assessee professing to make gift of certain sum to her grandson 'N', made transfer entries in her account books crediting it to donee's account and debiting her own account by same amount and signed memorandum to this effect, though her accounts showed cash balance of much less amount on that date - For relevant assessment year, assessee claimed a deduct in respect of interest paid by her to 'N' from her income for period of 22-12-1953 to 31-12-1953 - Whether mere fact of recital of delivery and acceptance by N did not vest 'N' with possession, dominion and control of money and since money did not exist on date of transfer, transfer entries in account did not amount to delivery merely because donor had a claim for money against a third person - Held, yes - Whether, therefore, entry made by assessee in her books on 22-12-1953 transferring amount from her account to account of her grandson did not amount to a valid gift when book balance on that date showed lower amount and, consequently, assessee would not be entitled for deduction of interest - Held, yes FACTS The assessee derived income from property and from her share in a partnership firm. On 22-12-1953, her account books showed a balance of Rs. 2,50,000 and odd in her favour, however only Rs. 15-10-0 were in cash with her and the rest being investments in the firm and other assets. On that date the assessee professing to make a gift of Rs. 1 lakh to her grandson 'N', made transfer entries in her account books crediting sum of Rs. 1 lakh in the account of N, and debiting her account by the same amount. She did not execute any registered document of gift but prepared a memorandum on a stating that she orally and on account of natural love and affection had given Rs. 1 lakh to N and delivered the amount to him by the transfer entries made in her personal accounts and placed him in possession and control of the amount and that he had accepted the gift and entered into possession…

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