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TMI Blog1973 (2) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... to gift-tax under section 4(1)(a) of the Gift-tax Act ? (2) Whether, on the facts and circumstances of the case, the transaction was liable to be taxed under section 52(1) of the Income-tax Act? (3) Whether, on the facts and circumstances of the case, the transaction was liable to simultaneous taxation to gift-tax as well as to tax on capital gains? " The facts leading to these references briefly are that for the assessment year 1965-66, i.e., during the year ending 31st March, 1965, Sardarni Ahilya Raghbir Singh of Raja Sansi, Amritsar (hereinafter referred to as " the assessee "), transferred 100 shares of Simbhaoli Sugar Mills Private Ltd. of which she was the owner, to her step-son, S.B.S. Harinder Singh. These shares had the face va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated the difference and added the same as income derived out of capital gains. He further charged the assessee to gift-tax for the difference in the sale price, i.e., Rs. 1,000, and the market value arrived at by him. The assessee appealed to the Appellate Assistant Commissioner who upheld the order of the Income-tax Officer regarding levy of capital gains tax as well as gift-tax, but reduced the valuation of the shares to Rs. 2,850 each. In the further appeal, the Tribunal, relying on the past valuations, computed the value of the shares at Rs. 2,450 per share, but otherwise upheld the order of the subordinate authorities and imposed income-tax on the, difference between the cost price and the computed market value, and gift tax on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued to the Tribunal to refer these questions also. We must, therefore, proceed on the basis that the market value of each share was Rs. 2,450 on the date of the transfer and also that the intention of the assessee in making such transfers was " avoidance or reduction of the liability ". Sub-section (1) of section 52 of the Income-tax Act is in the following terms: "Where the person who acquires a capital asset from an assessee is directly or indirectly connected with the assessee and the Income-tax Officer has 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.......be taken to be the fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This amount being the capital gains shall be liable to be taxed as income and this is what has been done by the Tribunal and the authorities subordinate to it. The answer to question No. 2, therefore, has to be given in the affirmative. Hardly any arguments were addressed against this. This now brings us to the matter which is in controversy. Having treated the sale as for a consideration of full market value, can this transaction be treated as a transaction of gift under section 4 of the Gift-tax Act? Relevant part of section 4 runs as under: 4. (1) For the purposes of this Act,- (a) where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a certain state of affairs; it does not say that, having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs." Now, in the present case, the assessee made the transfer for consideration of Rs. 1,000. This he treated to be the proper consideration. The Income-tax Officer came to the conclusion that the transferees being directly connected with the assessee, the transfer has been made for an inadequate consideration with a view to avoid his liability to payment of tax on capital gains or to reduce such liability, and having come to that conclusion, notwithstanding that the consideration in the transaction was mentioned to be inadequate, i.e., Rs. 1,000 per share, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes. This was a tax which was paid in the third year for the three years of which average income was to be taken for the purpose of tax according to the statute. It was held that, in arriving at the liability of the company, the tax paid in Transvaal should be deducted from the profits of the year to which it related before arriving at the average. All that the learned counsel wanted to refer was to the following observations made by the learned judge at 407 of the report:" "There could be double taxation if the legislature distinctly enacted it, but upon general words of taxation, and when you have to interpret a taxing Act, you cannot so interpret it as to tax the subject twice over to the same tax. But it all depends upon its being the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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