TMI Blog1975 (9) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... l their rights and interests in the said property in favour of the second partner. This deed also was registered under the Registration Act. The value of the property as per the release deed was Rs. 64,000. In the accounts of the partnership the book value of the property, namely, Rs. 63,327, was transferred to the debit of the second partner with the following narration : "Cost of Daya Sadan purchased from M/s. Dhuraji Khusalji Co. on November 1, 1962." For the assessment year 1964-65, corresponding to the year ending October 17, 1963, the assessee-firm filed a return in which under the heading "Capital gains" a sum of Rs. 18,353 was shown. This had been done by arriving at the net annual value of the property as Rs. 4,084 and determining the market value at 20 times the annual value. From the resultant figure of Rs. 81,680 it had deducted a sum of Rs. 63,327 which is the value of the property as per books, and arrived at the capital gain of Rs. 18,353. After making certain enquiries and considering the market condition and the rent the property fetched, the Income-tax Officer, with the approval of the Inspecting Assistant Commissioner, determined the market value at Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not operate to effect a transfer. Moreover, it would appear to be open to the partner to agree to confer exclusive right in favour of any one partner in respect of any property belonging to the firm. This is what has been done under the release deed. Having regard to all the facts of the case, we have to hold that there has been no sale by the firm so as to attract capital gains. We uphold the decision of the Appellate Assistant Commissioner and dismiss the appeal. " At the instance of the revenue, the following two questions have been referred in the matter relating to the firm's assessment : " 1. Whether, on the facts and in the circumstances of the case, there was a transfer of the house property by the assessee-firm to a partner of the firm ? 2. Whether, on the facts and in the circumstances of the case, capital gains was chargeable on the basis of the fair market value of the property as on the date of the transaction ? " In the case of the individual assessment of the partner, the following question also has been referred at the instance of the revenue : " Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as follows : " Whereas the releasors and releasee are carrying on business in partnership under the name and style of Sanghvi Dhuraji Khusalji Co. at Madras, and whereas the house, ground and premises bearing door No. 34, Perumal Mudali Street, and 1/23, 2/23, and 3/33, Audiappa Naick Street, G.T., Madras, more particularly described in the Schedule hereto, and hereinafter referred to as the said property, was purchased by the said firm under deed of sale dated November 21, 1947, from R. Seshagiri Rao and others, and as such the releasors and the releasee are the co-owners of the said property and are in possession and enjoyment of the same as such and whereas the releasors at the request of the releasee, have agreed to release all their right, title and interest in the said property in favour of the releasee. Now this deed witnesseth that in pursuance of the said agreement, the releasors hereby jointly and, severally release all their right and interest in the said property in favour of the releasee, and hereby declare that as and from this date, the releasee shall own, possess and enjoy the said property as his own property free from the claims of the releasors or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m under the deed dated November 21, 1947, and as such the releasors and the releasee are the co-owners of the said property. The use of the words as such conjoint with the recitals of their relationship as partners and the fact that the property was purchased by the partnership clearly show that the releasors referred to their right as partners in the partnership property and were releasing their right as partners in the property in favour of the releasee who was again one of the partners. The entries in the accounts of the partnership which here referred to earlier also show that the firm was transferring the property to the individual partner. In the return filed also the firm has disclosed the capital gain on the basis that there was a sale by the firm to the individual partner. These circumstances clearly show that, though the executants described themselves as releasors without any reference to the firm, the were in fact acting for and on behalf of the firm and executing the document in their capacity as partners. They have no separate right in the property of the firm. They conveyed only the right of the firm in the property to the individual partner. Since the transfer is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there was no finding that the transfer was to reduce any tax liability. This could only be a reference to section 52(1). In fact, learned counsel for the revenue contended, as against this statement, that there was an implied finding in the order of assessment that the transfer was to reduce tax liability. Therefore, we are satisfied that section 52(1) alone was invoked by the assessing officer and considered by the Tribunal and, therefore, the applicability of section 52(2) does not arise for consideration in this reference. Section 52(1) reads as follows : " 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. " Learned counsel for the revenue argued that while section 45 and the computation provision under section 48 deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the capital gains, that portion should also have been deemed as having been received or accrued as a result of the transfer which the section failed to do. We cannot also accept the contention that the consideration is always either received or accrued and there is no consideration which is not either received or accrued. The words "full value of the consideration" referred to in section 48, in our opinion, relate to the factual receipt of the consideration and have no reference to the adequacy or inadequacy of the consideration. In the case of a transaction for inadequate consideration, the difference between the adequate consideration and the consideration actually received or accrued though not received or accrued, is deemed by section 52, as consideration. Section 4 of the Gift-tax Act, 1958, treats that portion as a gift. In other words, a person may transfer his property for less than adequate consideration instead of writing two separate documents, one for adequate consideration and the other as a gift. So far as the portion of the gift is concerned, no consideration is received or accrued. We are also unable to agree with the learned counsel that the words "recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intention of the legislature. That was clearly laid down (3 Co. Rep 7b) by the resolution of the judges [Sir Roger Manwood C.B. and other barons of the Exchequer] in Heydon's case, and it is the safest guide today. Good practical advice on the subject was given about the same time by Plowden in his note (2 Plowd. 465) to Eyston v. Studd. Put into homely metaphor it is this : A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out ? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases. " It is not necessary for us to refer to those catena of cases where it was held that in taxing statutes we have to construe a provision with reference to the language employed and not with reference to the supposed intentions of Parliament of any presumptions or assumptions. The decision, referred to by the learned counsel does not in any way propound a different principle. The question there for consideration was as to the meaning to be given to the word "burden" appearing in section 2(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fection or for other conceivable reasons on pain of being hauled up for having attempted to avoid or reduce the tax liability and on that basis made liable to tax on the difference between the consideration for the transaction and the fair market value nor does it treat what is not an actual capital gain as a deemed capital gain but it must be limited to escaped capital gain, which is so in truth and in fact, and is not intended to bring about a fictional gain on an assumption and charge the same. " Thus, section 52 applies to cases of under-statement of consideration where the consideration received is more and not to cases of bona fide transfers were nothing more is received than that recited in the document itself. This was also one of the reasons given by the learned Chief Justice in his dissenting judgment in Income-tax Officer v. Varghese. A similar view was taken by the Mysore High Court in Additional Commissioner of Income-tax v. Ranga Pai (unreported judgment in I.T.R.C. 30/1973/dated January 2, 1975), and by the learned single judge who decided the case reported in K. P. Varghese v. Income-tax officer, and whose decision was the subject-matter of consideration by the F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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