Bona fide debt write-off not taxable as deemed gift under the Gift-tax Act despite time-barred loan status.

A bona fide write-off of a debt does not attract gift-tax under section 4(1)(c) of the Gift-tax Act, 1958, even where the debt has become time-barred and the transaction may be characterised as abandonment, release, discharge, surrender, or forfeiture. The provision applies only where the relinquishment is not bona fide, and the surrounding book entries and circumstances must support that inference. On the stated reasoning, a genuine write-off was treated as outside the charging provision and therefore not taxable as a deemed gift.

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Issues: Whether the write-off of a loan was hit by section 4(1)(c) of the Gift-tax Act, 1958.

Analysis: The debt had become time-barred, but the statutory consequence under section 4(1)(c) arose only if the release, discharge, surrender, forfeiture, or abandonment of the debt was not bona fide. The continuing book entries and the surrounding circumstances were examined, and the finding that the write-off was bona fide was treated as unsupported by material. Even assuming the write-off amounted to abandonment, a bona fide write-off did not attract gift-tax under the provision.

Conclusion: The write-off was not hit by section 4(1)(c) of the Gift-tax Act, 1958, and the question was answered in the negative in favour of the assessee.

Ratio Decidendi: A bona fide write-off of a debt does not constitute a taxable gift under section 4(1)(c) of the Gift-tax Act, 1958, even if the transaction may otherwise amount to abandonment, release, discharge, or surrender of the debt.

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