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TMI Blog1980 (8) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1959. In the year 1965-66, the assessee sold the property to three persons. The particulars relating to the sale, the date of sale as also the market value of the property as on March 31, 1964, according to the valuation made by the valuers, in connection with the assessment to wealth-tax are as follows : --------------------------------------------------------------------------------------------------------------------------------------------------- Sold to Plot Sale Date of Market value price sale as on 31-3-64 as per value --------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. M/s. Canara Plot of Public Conve- 6,522 yance Ltd. sq.yds. 90,000 17-2-66 1,12,000 Hindustan Plot of Milk Food 6,522 Manufacturers sq.yds. Ltd. 3,75,000 23-9-65 3,00,000 Aroor Ram Plot of Mohan Rao & 10,746 + 7 ors. (Aroor 1,213 family) sq.yds. 1,40,000 15-11-65 1,92,000 --------------------------------------------------------------------------------------------------------------------------------------------------- The ITO found that the sale price of items I and 3 abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, i.e., November 15, 1965, was Rs. 30 per sq.yd. and on this basis came to the conclusion that in view of s. 52(2) of the Act the sale consideration of the site sold to the Aroor family must be taken to be Rs. 3,35,000 as against Rs. 1,40,000 shown in the sale deed. In this case also, the ITO did not have any evidence and consequently did not record any finding that any money over and above the capital consideration mentioned in the sale deed had been received by the assessee. However, he fixed capital gains liability on the basis of the difference of the amount between the price mentioned in the sale deed and the market value of the property as ascertained by him as on the date of sale relying on sub-s. (2) of s. 52 of the Act. The matter was taken up in appeal before the AAC. The appellate authority accepted the plea of the assessee that there was no connection between the assessee and the C.P.C. (P.) Ltd. having regard to the fact that the C.P.C. (P.) Ltd. was a limited company and, therefore, s. 52(1) of the Act was not attracted. However, he came to the conclusion that as regards the first item of property, its sale for Rs. 90,000 was for a value lesser than the market value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich we are not concerned. Section 48 of the Act is the section which provides for the mode of computing capital gains. It provides that the income chargeable under the head " Capital gains " shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset-(i) expenditure incurred wholly and exclusively in connection with such transfer ; and (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto. Sub-sections (1) and (2) of s. 52 of the Act read as follows: " 52. Consideration for transfer in cases of under-statement.-(1)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, 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. (2) Without prejudice to the provisions of sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed. Per contra Sri Sarangan, learned counsel for the assessee, argued that the condition imposed in sub-s. (1), namely, the existence of material to hold that there has been an understatement of consideration with the intention to avoid tax on capital gains is equally applicable to sub-s. (2) of s. 52 of the Act and the only difference between the two sub-sections was, while sub-s. (1) is attracted only in cases where there has been direct or indirect connection between the vendor and the vendee, sub-s. (2) is attracted in all cases of sales where the difference between the market value of the property as on the date of sale and the consideration for sale mentioned in the sale deed is 15% or more irrespective of the fact whether there was any direct or indirect connection between the vendor and the vendee. He submitted that the answer to the question was concluded by the decision of this court in the case of Ranga Pai [1975] 100 ITR 413. Learned counsel for the revenue, however, argued that the case of Ranga Pai was decided on the peculiar facts of the said case and, therefore, the said decision cannot be taken as a precedent. He further argued that the reliance placed on the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee, the difference was liable to capital gains in view of sub-s. (2) of s. 52 of the Act. This court interpreted sub-s. (2) of s. 52 of the Act and held that the evidence regarding understatement as well as avoidance of tax, which was a condition precedent for invoking sub-s. (1) of s. 52 was equally applicable to sub-s. (2) of s. 52 of the Act, even though there was no specific condition incorporated in s. 52 as the object of s. 52 as revealed from the marginal note was to deal only with cases of understatement and observed that the difference between the two sub-sections was as follows : (i) In order to attract sub-s.,(1) there should be indirect or direct relation between the vendor and the vendee, whereas for invoking sub-s. (2) no such relationship is necessary. (ii) In order to invoke sub-s. (2) of s. 52 of the Act, the difference between the market value of the property as on the date of sale and the consideration mentioned in the sale deed should be 15% or more whereas such a condition was not necessary to invoke sub-s. (1). In that view of the matter, the court held that as on the facts of Ranga Pai's case [1975] 100 ITR 413, there was no evidence of making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which excludes gifts from the purview of s. 45 otiose. The decision in Ranga Pai's case [1975] 100 ITR 413 (Kar) was rendered on January 2, 1975. It is not disputed that the said decision is not taken in appeal and is being followed by the department all these years. In Ranga Pai's case, this court agreed with the view taken by Isaac J. in K. P. Varghese v. ITO [1970] 77 ITR 719 (Ker) distinguishing the majority view taken to the contray in appeal against the said decision in ITO v. K. P. Varghese [1973] 91 ITR 49 (Ker) [FB]. Subsequently, the view taken by this court in Rahga Pai's case has been agreed to by the Madras High Court in Addl. CIT v. P. S. Kuppuswamy [1978] 112 ITR 1012 and by the Andhra Pradesh High Court in Addl. CIT v. S. R. Y. Ankineedu Prasad [1978] 115 ITR 78 and by the Madhya Pradesh High Court in CIT v. Smt. Sethani Godwaribai. However, in view of the submission made for the revenue, we proceed to have a second look at the provisions of s. 52. Before proceeding further it is necessary to state that the department is not in a position to contend that the assessee has received any money over and above the consideration mentioned in the two sale deeds. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re persons either on account of urgent need for various reasons including financial difficulties or on account of ignorance or having been misled by some one, might sell their property for a price lesser than the market value, the difference being more than 15 per cent. It is also natural that when a person on account of his own urgency wants to sell the property immediately he is likely to get a lower offer. Similarly, it is not unnatural that a person though not willing to gift away his property may be willing to sell his property for a lesser value out of his affection or regard for a person or his noble occupation or for a laudable purpose and such value may be lesser by more than 15 per cent. of the fair market value. The question for consideration is, is the provision intended to make such persons liable to pay the tax for capital gains for the act of selling the property for a lesser value under unavoidable circumstances or with good intention as indicated above and to subject them to additional burden ? Obviously not. According to sub-s. (2) of s. 52, if the fair market value of the capital asset transferred by an assessee, as on the date of transfer exceeds the full value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration ". The definition of gift given in s. 122 of the Transfer of Property Act is also identical. If the word " gift " was intended to be used in s. 47(iii) of the Act in the above sense then there was no necessity to use it at all, i.e., there was no necessity to except a " gift " from the provisions of s. 45 as that section speaks of profit or gain arising out of the transfer of a capital asset and, therefore, the question of taking " gift " out of s. 45 would not arise. Therefore, in order to make the provision meaningful, the word " gift " used in s. 47(iii) of the Act should be given the same meaning as is given to that word in the G.T. Act, 1958 (18 of 1958), which gives an extended meaning by including a transfer of property for inadequate consideration also within its meaning. The word,(gift " is defined in s. 2(xii) of that Act which has to be read with s. 4 of that Act. The definition and relevant part of s. 4(1) of that Act read as follows : " 2. In this Act, unless the context otherwise requires,-... (xii) 'gift ' means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutes are in pari materia which relate to the same person or thing, or to the same class of persons or things. The word par must not be confounded with the word similis. It is used in opposition to it, as in the expression magis pares sunt quam similes, intimating not likeness merely, but identity. It is a phrase applicable to the public statutes or general laws made at different times and in reference to the same subject.' As Knight Bruce L.J. said in Ex. P. Copeland [1852] 22 L.J. Bank 17, 21 upon a question of construction arising 'upon a subsequent statute on the same branch of the law, it is perfectly legitimate to use the former Act, though repealed'. 'For this ', continued he, 'I have the authority of Lord Mansfield, who in R. v. Loxdale [1758] 1 Burr. 445, 447 thus lays down the rule, " Where there are different statutes in pari materia, though made at different times, or even expired and not referring to each other, they shall be taken and construed together as one system and as explanatory of each other''' .. .... PRESUMPTION FROM USE OF SAME LANGUAGE IN LATER ACT.-It has been held that, where the legislature has given to words a statutory definition in one statute, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri materia. This principle was applied by this court in relying on the definition of " industry " defined in the Industrial Disputes Act to interpret the said word in the Trade Unions Act as it was not defined in the latter. (See Central Machine Tool Institute v. Asst. Labour Commissioner [1978] 53 FJR 194 ; ILR 1979 1 Kar 484), From the principles set out above, it is clear that where two legislations are in pari materia in that they deal with the same subject-matter and are meant to enforce each other, it is permissible to assign the meaning given to a word in an earlier enactment, to the same word used in a later enactment. Bearing in mind the above principle, as also the word of caution given by Lord Simonds, regarding the application of the principle to taxing statutes, we consider its applicability to this case. The G.T. Act was enacted in the year 1958 and the I.T. Act was enacted in the year 1961 by Parliament. Both the enactments impose direct taxes and are administered by the same administrative agency, i.e., the I.T. Dept. or the CBDT. In particular, the provisions of the I.T. Act in so far as they relate to capital gains, and the provisions of the G.T. Act are enacted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue would lead to incongruous and absurd results as demonstrated by the following illustrations : If the cost of acquisition of a capital asset is Rs. 50,000 and the vendor and vendee are strangers and the fair market value of the property as on the date of the sale as determined by the ITO is Rs. 1,00,000: (a) if it is found to have been sold for a fancy price of Rs. 1,20,000 which was paid by the purchaser owing to its special use for him and which price no other party would have paid and evidence is also available to that effect, but the consideration shown in the sale deed was Rs. 70,000, then applying s. 52(2) of the Act the sale consideration has to be taken only at Rs. 1,00,000, i.e., less than the actual consideration received, for the computation of capital gains ; (b) if it is sold only for Rs. 90,000 and it is also proved, but the sale consideration shown in the sale deed is Rs. 70,000 then for purposes of computing capital gains, the sale value has to be taken at Rs. 1,00,000 only, i.e., Rs. 10,000 more than the actual amount received. (c) if there is an agreement to sell the property shortly after the property is acquired for a sum of Rs. 60, 000 and for one reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he undeclared value received or agreed to be received and to the extent I of the value so received or agreed to be received. To put it differently, a case which falls under sub-s. (2) of s. 52 of the Act is one in which there has been concealment of income, which would also attract the penal provisions contained in s. 271 (1) of the Act and not the one in which transfer of capital asset was for inadequate consideration, which obviously means that there was no concealment of any income and, therefore, to which s. 271 (1) of the Act is not attracted. In the result, we reiterate the view taken by this court in Ranga Pai's case [1975] 100 ITR 413 and hold that sub-s. (2) of s. 52 of the Act applies to cases of understatement of valuation made in the sale deed, to wit, where there is in truth a capital gain, but it is concealed by declaring a lower price in the deed of transfer with an intention to make unaccounted gains and avoidance or reduction of capital gains tax, and not to cases of transfer for inadequate consideration, whatever be the reason, resulting in the avoidance of the receipt of capital gains itself. For the aforesaid reasons, we answer the first question in the negati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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