Deemed gift under Gift-tax Act not attracted where family debt write-off was bona fide and not a taxable transfer.

A write-off of a time-barred debt owed by a son was examined under the Gift-tax Act to see whether it constituted a deemed gift under section 4(1)(c). The liability had continued to be shown by both parties in their wealth-tax returns for later years, indicating that it was treated as an existing debt until the relevant accounting year. The assessee also had plausible reasons for not enforcing recovery, including the family relationship and the impracticability of proceedings. On those facts, the write-off was treated as bona fide and, even if viewed as abandonment of the debt, it was not a taxable transfer by way of gift.

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Issues: Whether the assessee's write-off of a debt due from his son constituted a deemed gift under section 4(1)(c) of the Gift-tax Act.

Analysis: The debt had become time-barred, but both the lender and the borrower had continued to reflect it in their wealth-tax returns for the later years, showing that it was treated as an existing liability until the relevant accounting year. The assessee gave plausible reasons for not pursuing recovery, including the close family relationship and the impracticability of enforcement proceedings. On the facts, the write-off was bona fide. Even if the act amounted to an abandonment of the debt, the circumstances did not show a taxable transfer by way of gift within section 4(1)(c).

Conclusion: The write-off did not amount to a deemed gift and the addition was not sustainable, in favour of the assessee.

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