Law:

Section:

Section 5, read with section 2(24), of the Income-tax Act [Corresponding to section 4(1), read with section 2(6C), of the Indian Income-tax Act, 1922] - Income - Accrual of - Assessment years 1957-58 to 1959-60 - Karta of assessee-HUF made gift of certain amount under gift deed in favour of members of another HUF without reserving any right in gifted amount to assessee or to himself - Whether interest accrued on gifted amount did not accrue to assessee for income tax purposes on either view whether gift was void or voidable - Held, yes Section 3, read with section 2(m), of the Wealth-tax Act, 1957 - Charge of tax - Assessment years 1957-58 to 1959-60 - Whether on facts stated under head 'Income - Accrual of', Tribunal was justified in holding that amount of gift together with estimated interest thereon ceased to be asset of assessee for wealth-tax purposes whether gifts were void or voidable and that amount could not be taxed under Act - Held, yes FACTS The karta of assessee-HUF made a gift of Rupees four lacs under a gift deed in favour of members of another HUF which was at one time joint with family of the assessee. The assessee had business with the donees. The assessee was assessed as HUF for the relevant assessment years. The ITO found that the karta was not competent to make gift of a substantial amount to donees and included the gifted amount together with the estimated interest in the total income of the assessee. On appeal, the AAC set aside the order of the ITO. On second appeal, the Tribunal confirmed the order of the AAC. The Tribunal also held that the amount gifted together with estimated interest thereon ceased to be the asset of the assessee family for wealth-tax purposes. On reference: HELD Whether the act is void or voidable, it is only persons having some rights in the property affected by that act who can come in a Court of law to seek an appropriate relief by declaring the act void or voidable. Under a void gift there is no passing of title, from the donor to the donee, while under a voidable gift, there is such passing of title, but that title is defeasible under certain circumstances under appropriate proceedings brought in by the person…

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