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Commissioner of Gift-tax Vs. Abraham Kochuthomman - Court Judgment

SooperKanoon Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 10 of 1972
Judge
Reported in[1975]98ITR394(Ker)
ActsGift Tax Act, 1958 - Sections 4
AppellantCommissioner of Gift-tax
RespondentAbraham Kochuthomman
Appellant Advocate P.A. Francis and; P.K. Raveendranatha Menon, Advs.
Respondent Advocate C.T. Peter,; T.C. Karunakaran and; V.G. Kumaran, Adv
Cases ReferredGoli Eswariah v. Commissioner of Gift
Excerpt:
- - an intention to abandon and an overt act or failure to act which carried the implication that the owner neither claims nor retains any interest. then for income-tax purposes he claimed the amount as a bad debt. that purpose failed. clearly, therefore, there was no absolute and resolute intention to give up. counsel for the revenue, we think, is well-founded in his contention that the decision cannot apply. there was only an attempt made,by the assessee to make it appear that the debt was a bad debt and hadbecome irrecoverable......on section 4(c) of the gift-tax act, 1958.3. the act of writing off of the debt due from the brother of the assessee has not been contended to be a transfer within the meaning of the definition of the term 'gift' and of 'transfer' in the act. the contention was that the writing off must be deemed to be a gift by virtue of section 4(c) of the gift-tax act, 1958, which is in these terms :'4. (c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the gift-tax officer to have been bonafide, shall be deemed to be a gift made by the.....
Judgment:

Govindan Nair, C.J.

1. The question is :

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the writing off by the assessee in his books of account of a sum of Rs. 2,50,829.73 due from his brother does not amount to a gift liable to be assessed under Section 4(c) of the Gift-tax Act, 1958 ?'

2. As is evident from the question the matter arises under the Gift-tax Act, 1958, for short 'the Act'. The year of assessment was 1968-69. The answer to the question turns on the interpretation to be placed on Section 4(c) of the Gift-tax Act, 1958.

3. The act of writing off of the debt due from the brother of the assessee has not been contended to be a transfer within the meaning of the definition of the term 'gift' and of 'transfer' in the Act. The contention was that the writing off must be deemed to be a gift by virtue of Section 4(c) of the Gift-tax Act, 1958, which is in these terms :

'4. (c) Where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bonafide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment.'

4. It was urged that there was abandonment of the debt. In order that there may be an 'abandonment', it is perhaps unnecessary that there should be a bilateral act. Assuming that this is the position without deciding so, what we have to consider is whether there has been an abandonment. It we turn to the legal meaning of the term 'abandonment' two requirements are insisted upon. An intention to abandon and an overt act or failure to act which carried the implication that the owner neither claims nor retains any interest. The abandonment must of course be giving up of a thing absolutely without reference to any particular person or purpose. The intention to abandon must be evident. With these preliminary observations we shall examine the facts of the case.

5. Admittedly, a sum of Rs. 2,50,829.73 was due to the assessee as on the 1st April, 1967, from his brother. On the 13th March, 1968, the assessee issued a lawyer's notice demanding this amount. The brother promptly replied totally denying liability. Without any protest the assessee accepted the position and wrote off the debt on the 31st March, 1968, in his account. Then for income-tax purposes he claimed the amount as a bad debt. He was no doubt worsted. He did not appeal from the decision of the Income-tax Officer. The Income-tax Officer had issued notice to the brother and in his reply the brother admitted that he owed the amount. This was opposed to what he said in his reply to the lawyer's notice issued at the instance of the assessee. It appears to us to be evident that the writing off was a pretence for a particular purpose. That purpose failed. Clearly, therefore, there was no absolute and resolute intention to give up. This in effect is the finding of the Tribunal though it has referred to very many other aspects. If there has been no abandonment no question of bona fides can arise.

6. The ruling of the Supreme Court in Goli Eswariah v. Commissioner of Gift-tax, relied on by the Tribunal, may not have any application. Counsel for the revenue, we think, is well-founded in his contention that the decision cannot apply. The ruling dealt with the interpretation to be placed on Section 2(xxiv)(d) of the Gift-tax Act, 1958. That clause dealt with 'any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person'. It was while interpreting this provision that the Supreme Court said that the transaction must be a bilateral one in order to fall under Section 2(xxiv)(d). The decision cannot have any application in determining the scope and ambit of Section 4(c).

7. This is not a case of abandonment. There was only an attempt made,by the assessee to make it appear that the debt was a bad debt and hadbecome irrecoverable.

8. In the circumstances mentioned above, we answer the question referred to us in the affirmative, that is, in favour of the assessee and against the department. We direct the parties to bear their respective costs.

9. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be sent to the Appellate Tribunal as required by Sub-section (1) of Section 26 of the Gift-tax Act, 1958.


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