Validity of HUF gifts to daughters barred taxation of interest on deposits funded from those gifted amounts.

A gift made by a karta of a Hindu undivided family to his daughters, within reasonable limits, was treated as valid. On that basis, interest credited on deposits representing the gifted amounts could not be assessed as the assessee's income merely by disputing the validity of the gifts. The Tribunal followed its earlier view on identical facts and held that the addition of the interest amounts was not sustainable. The deletion of the addition was therefore upheld in favour of the assessee.

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Issues: Whether interest credited on deposits made from amounts gifted by the karta of a Hindu undivided family to his daughters could be added to the assessee's income on the footing that the gifts were invalid.

Analysis: The Tribunal followed its earlier view that a gift made by the karta of a Hindu undivided family within reasonable limits was valid. Since the facts were identical to the earlier year and the deposits represented gifted amounts, the interest credited on such deposits could not be treated as the assessee's income merely by questioning the validity of the gifts.

Conclusion: The addition of the interest amounts was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The Revenue's challenge to the deletion of the interest additions failed, and the appeal was dismissed.

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