Book-entry gift of money held valid where accounts showed a genuine transfer and interest deduction followed.

A bona fide gift of money can be completed through book entries in a firm's accounts without physical delivery where the transfer operates as a real and effective change in ownership. The decisive question was not the cash available on the date of the entries, but whether the transaction was genuine and completed in law. Because the donees' accounts were credited on the same day, interest was later credited on those balances, and withdrawals were made, the entries were treated as an effective transfer in the ordinary course of business. On those facts, section 123 of the Transfer of Property Act did not defeat the transfer, and interest paid on the credited amounts was an allowable deduction.

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Issues: Whether a valid gift of money was made by entries in the firm's books without physical delivery, so as to justify deduction of interest paid on the gifted amounts.

Analysis: The question turned on whether the gift was a genuine and completed transfer in law, not on the mere sufficiency of cash in hand on the date of the entries. The governing principle applied was that, where the subject-matter is money or a firm interest credited through the accounts of a business, physical hand-to-hand delivery is not indispensable if the transfer is effected by a natural and effective method and the transaction is bona fide. The donees' accounts were credited on the same day, interest was later credited on those balances, and some withdrawals were actually made, showing that the entries operated as a real transfer in the ordinary course of business. The restrictions in section 123 of the Transfer of Property Act were not treated as defeating such a transfer on these facts.

Conclusion: The gift was valid in law, and the interest paid on the credited amounts was an allowable deduction; the question was answered in favour of the assessee and in the affirmative.

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