Book transfer gifts can be valid and acted upon when credited balances and interest payments show genuine acceptance.

A completed gift by book transfer can be valid without physical cash withdrawal where the assessee has sufficient capital balance, the amount is debited to the donor's account, credited to the donees' accounts, and interest is actually paid on those balances. Those facts show that the transaction is not a mere paper entry and that the gifts have been acted upon. Payment of interest to the donees is strong evidence of acceptance of the gifted corpus, and lack of cash balance alone does not invalidate the transfer. On that basis, the assessee was entitled to deduct the interest paid on the gifted amounts.

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Issues: Whether, on the facts found, the gifts credited in the firm's books were valid and accepted so as to entitle the assessee to deduction of the interest paid on the gifted amounts.

Analysis: The assessee had sufficient credit balance in his capital account, the gifted sums were debited to his account and credited to the accounts of the donees, and interest on those credit balances was actually paid to the donees in the relevant years. These facts showed that the transaction was not a mere paper entry and that the gifts had been acted upon. A completed gift by book transfer does not depend on physical cash withdrawal if the transfer is a natural method of dealing and the bona fides of the gift are established. The payment of interest to the donees was treated as strong evidence that the corpus had been accepted, and the absence of cash balance by itself did not invalidate the gift. The earlier decision on similar facts was applied, and the contrary cases were distinguished because they involved no evidence that the gifts had been acted upon.

Conclusion: The gift was valid and accepted, and the assessee was entitled to the deduction of the interest paid.

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