2001 (4) TMI 168

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....s of running a cinema theatre, exhibiting and distributing films, taking cinema theatres on hire/lease and other connected activities. While doing the IT assessment, the ITO noticed that the assessee had kept huge amounts in deposits with its sister concern M/s. Raikar Entertainments, but it had not claimed or received any interest on these deposits. Therefore, the Assessing Officer concluded that the assessee had forgone its right to receive interest on the deposits without adequate consideration and hence, he treated it as a deemed gift and initiated GT proceedings against the assessee. The assessee, however, filed nil returns of gift and pleaded before the Assessing Officer that there was no deemed gift. In consideration of keeping depos....

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....bsp;             4,04,075            72,733 1983-84                3,71,033            66,786 1984-85                4,91,125            88,408 1985-86                9,91,398          1,60,451 1986-87       ....

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....ramma [1986] 160 ITR 829 (Kar.); Bombay Samachar Ltd.'s case. The learned counsel has also brought to our notice a copy of the order of the ITAT, Bangalore in GT Appeal No. 4 (Bang.) of 1992, dated 8-7-1996 in the case of ACIT v. Mookambika Trust, where a similar issue was decided in favour of the assessee by dismissing the departmental appeal against the order of the CIT(A), who allowed the claim of the assessee. Shri Parthasarathi also points out that this is a case where there was no contractual obligation to pay interest as the deposit with the sister concern was made free of interest. Hence there was no surrender of an existing right and consequently there was no deemed gift either attracting the levy of gift-tax. On the other ha....

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.... payment of interest and they are also free to agree not to charge or receive interest on the amount outstanding in respect of trade transactions between them. It is interesting to note in this connection that the Assessing Officer has used the terms "interest foregone" and "surrender of right of interest", whereas the learned CIT(A) has used the expression "transfer of the right to receive interest' while confirming the order of the Assessing Officer. This itself means that the Revenue authorities are not sure whether there has been an actual transfer of any existing right or whether there was any surrender of existing right to receive interest. Deemed gifts are specified in section 4 of Gift-tax Act, 1958 read with the various clauses in ....