TMI Blog1972 (2) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... the debts due to the sons, the petitioner sold the site and structures for a total consideration of Rs. 80,000 in favour of his sons under a sale deed dated April 15, 1963. For the assessment year 1964-65, the petitioner filed a revised return of income on February 10, 1967, including therein the amount of Rs. 10,958 as capital gains in respect of this transaction. This amount was arrived at by deducting the cost of the capital asset, namely, Rs. 64,042 from the sale consideration of Rs. 80,000 and making other permissible deductions. The Income-tax Officer, B-Ward, Tenali, issued a pre-assessment notice dated June 24, 1968, estimating the value of the building and site sold at Rs. 1,30,586, and called upon the petitioner to file his objections, if any, against the proposed valuation. The petitioner submitted that the value of the building and the site would come to Rs. 86,380 and as he had sold it for a lump sum of Rs. 80,000 the variation is very small and as he was disposing of the property as a whole, the value for which the property was sold was reasonable and fair priced. He stated that the proposed estimate of the building at Rs. 1,30,586 was uncalled for and unwarranted. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer was effected with the object of avoidance or reduction of the liability of the assessee under section 45. In this case the Income-tax Officer did not state in his show-cause notice that he has reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee and that in the order the finding to the above effect was not based upon any evidence, but on the mere ipse dixit of the officer and hence the proceedings under section 52(1) were illegal and without jurisdiction. He also contended that the said proceedings were contrary to the principles of natural justice, as the petitioner was denied the opportunity to satisfy the authorities that the requirements of section 52(1) were not fulfilled. He made a further submission which was not raised in that form in the affidavit in support of the writ petition. He submitted that the petitioner was assessed to gift-tax in respect of the transaction on the footing that the property was not transferred for adequate consideration and hence the amount by which the market value of the property exceeded the value of the consideration, namely, Rs. 1,14,000 minus Rs. 80,000=Rs. 34,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under section 45, the full value of the consideration for the transfer shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be the fair market value of the capital asset on the date of the transfer. " It is clear from section 45 read with section 47(3) that no tax under the head of " Capital gains " can be levied in respect of a transfer under a gift. The expression " gift " is not defined in the Income-tax Act, but I am of the view that the expression has to be understood in the context of the Gift-tax Act. The Gift-tax Act defines " gift " as a transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer of any property deemed to be a gift under section 4. Section 4 deals with transfers which are deemed to be gifts for the purpose of the Act. Section 4(a) states that where the property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Income-tax Act, 1922, also provided for the exemption of transfer of a capital asset under a gift from capital gains tax. On that date, at any rate the expression " gift " occurring in section 12B could have been interpreted only as meaning a gift under the ordinary law or under the Transfer of Property Act, This may be so, but after the Gift-tax Act was enacted-which provided that certain transactions shall be deemed to be gifts for the purpose of the Act, there is no reason why the two Acts should not be read together. It is well-known that the Income-tax Act, the Wealth-tax Act, the Gift-tax Act and the Expenditure-tax Act form different heads of an integrated system of taxation and they are all administered by the officers of the income-tax department. The imposition of tax under one head has relevancy to the liability under other heads of tax. It is, therefore, reasonable to infer that the legislature did not intend to charge income-tax on an amount which is liable to gift-tax. The above view was taken in a decision of the Kerala High Court in K. P. Varghese v. Income-tax Officer. In that case the petitioner purchased a property in 1958 for Rs. 16,500 and sold it for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Constitution. It was also argued that there has been considerable delay in filing the writ petition. This has been explained by the petitioner by stating that the decision of the Kerala High Court which throws considerable light on the legal position was rendered on 3rd April, 1970, and was published only in Part 9, dated August 31, 1970, of the Income-tax Reports. The writ petition was filed on the 16th November, 1970. As stated in that judgment itself, the point was not covered by any judicial pronouncements. In the circumstances I cannot say that the delay is of such a nature as to deny relief to the petitioner. In the result the tax on capital gain will have to be computed on the footing that the transfer is for Rs. 80,000 as stated in the deed and the cost of the asset as admitted by the authorities is Rs. 64,042. The difference between the tax so computed and the tax levied as per the order dated September 28, 1968, will be refundable to the assessee. In this view it is unnecessary to consider the other contentions raised by the assessee as it is admitted by him that tax under the head "Capital gains" is leviable on the footing that the transfer is for Rs. 80,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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