Book-entry gift excluded from net wealth where the transfer was genuine and extinguished the donee's liability.

A genuine gift effected through book entries was treated as having the same substance as payment in cash followed by application to discharge the donee's liability. Because the assessee's credit balance was reduced and the donee's liability to the firm stood extinguished to that extent, the transfer could not be brought into the assessee's net wealth under the Wealth-tax Act for the assessment year 1977-78. The amount was therefore excluded from net wealth, and the issue was answered in favour of the assessee.

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Issues: Whether the sum of Rs. 1,00,000 gifted by the assessee through book entries could be included in his net wealth for the assessment year 1977-78 under the Wealth-tax Act.

Analysis: The credit balance standing in the assessee's favour was reduced by the transfer of Rs. 1,00,000 to the donee's account, and the donee's liability to the firm stood extinguished to that extent. The transaction was accepted as genuine, and the use of book entries did not alter its substance. The result was the same as if cash had been withdrawn and paid over, and then applied towards discharge of the liability.

Conclusion: The amount of Rs. 1,00,000 could not be included in the assessee's net wealth for the assessment year 1977-78, and the issue was answered in favour of the assessee and against the Revenue.

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