TMI Blog1986 (10) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Ardeshir Bomanji Dubash and Smt. Maneckbai Ardeshir Dubash were the first trustees under the trust deed. The property was to be held by the trustees for the settlor for life with such deviation as the settlor may set out from time to time with a power to the settlor to appoint the said four plots or any one or more of them either by deed or deeds revocable or irrevocable or by will or any other testamentary writing upon such of his children or remoter issue subject to the law relating to perpetuities in such manner and proportion and in all respects as the settlor may think fit. This deed was revocable. 3. It was varied by an indenture dated 2-8-1945. By clause 1 of this later deed, the property Mount Nepean was to be held by the trustees upon the following terms and conditions : "(a) During the lifetime of the settlor to permit the settlor to use and enjoy the two rooms on the second floor of the said 'Mount Nepean' and tower room and the space to accommodate five motor cars and five servant rooms and common use of the basement on the ground floor and drawing room and dining room on first floor and other amenities. (b) Subject to the provisions aforesaid for residence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with such personal use. Such right of residence of any member entitled thereto shall forthwith cease or determine and become void if he or she shall attempt to transfer, alienate or incumber the same or if the legal effect or consequence whereof shall be such transfer, alienation or incumbrance or if the beneficiary entitled to such right of residence fails to pay regularly his contribution to the trustees as aforesaid. (vii) From and after the death of the said Kaikhushru the right of residence in the portion allowed to him shall belong to his wife Dinbai with permissive rights like those hereinbefore mentioned in item (v) as if her name were substituted for Kaikhushru and after her death the said right shall belong to their son Behram with similar permissive rights. Similarly the aforesaid right of residence in the portion allotted to the said Ratanji shall after his death belong to his wife Maneckbai. Similarly the said right of residence in the portion allotted to the said Bomanji shall after his death belong to his wife Jean with permissive rights as aforesaid provided that the said rights or residence shall carry with them the obligations to make monthly contributions as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem shall be given for use to Behram and/or Bomanji with their respective families as the trustees may in their absolute discretion think fit subject to their making contribution. The rent so realised or contributions so made shall not be claimed by any of the said parties as compensation in lieu of their rights of residence but shall form part and shall be utilised by the trustees as the income of the trust premises. Such of the garages as may not be required for family use may be let out by the trustees at their discretion. (ix) Up to the death of the last survivor of the said Kaikhushru, Ratanji and Bomanji the room and kitchen and the other adjoining room on the ground floor heretofore used for religious and Baj Rajgar purposes shall be exclusively used for such purposes as heretofore. (x) From and after the death of the last survivor of the said Kaikhushru, Ratanji and Bomanji all the rights of residence created in favour of any persons whatever as aforesaid shall come to an end to all intents and purposes and the trustees shall hold the Mount Nepean free from such rights of residence upon the trusts and with the subject to the powers and provisions contained in that behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nji and Bomanji. (ii) The purchaser to bear and pay all costs, charges and expenses of and incidental to the sale including stamp registration battaki advertisement, search and solicitors costs for the purchasers as well as the vendors. (iii) The purchaser to pay interest on the purchase price from and after six months of the death of the last survivor of the said Kaikhushru, Ratanji and Bomanji at 5 per cent per annum. (iv) The purchaser to be given possession on payment of the consideration money and conveyance to be given by the trustees in favour of the purchaser and not any nominee. The trustees will have the power to vary the terms of the offer except as to price. (v) Offer to be accepted within two months from the date of which it is made by the trustees. (vi) The sale shall be with the benefit of the rights of a way and other easements and covenants restricting the height of the buildings on plot Nos. 1, 2 and 4 for the benefit or Mount Nepean and also shall be subject to the right of way and other easement in favour of the owners or trustees of plot Nos 1, 2 and 4 and the purchaser of the one part and the owners and trustees of plots 1, 2 and 4 of the other part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 22-6-1965, Shri Ratanji Ardeshir Dubash died on 29-6-1966 and Smt. Maneckbai Ratanji Dubash died on 15-11-1967. 7. By another deed of release dated 5-2-1973 made by Shri Bomanji Ardeshir Dubash and Jean Bomanji Dubash released, renounced, relinquished and disclaimed all their respective rights, interests, claims and powers including the right to reside in the said Mount Nepean as the beneficiaries given to and vested in them by the principal deed of trust as varied as stated earlier in all the trust properties to the intent and that all such rights, interests, claims and powers so renounced, released and disclaimed be henceforth extinguished for ever as if they were not in existence and as a result thereof the trust uses powers, provisions and declarations contained in the deed of revocation and new appointment dated 2-8-1945 were accelerated and became effective. 8. The property was thereupon offered for sale to Shri B.K. Dubash in pursuance of clause 4 of the deed dated 2-8-1945 for the stated consideration of Rs. 8 lakhs. Accepting the offer Shri B.K. Dubash purchased the property for that price. The market value of the property according to the GTO at that time was Rs. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fuse the acceptance of the claim of the purchaser, Shri B.K. Dubash to buy the property at Rs. 8 lakhs and, therefore, they have not done any favour to the purchaser on transfer of the property. He, therefore, submitted that no element of gift at all is involved in the present proceedings. In this connection, he has invited our attention to the provisions of section 2(xii) of the Act, which read as under : "(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's worth, and includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section ;', Taking the aid of this definition, Shri Dastur contended that to treat the transfer as a gift, the transfer should be voluntary. He has also invited our attention to the commentary of Sampath Iyengar's Law of Income-tax wherein it has been stated that the word 'voluntarily' means 'willingly and without compulsion' unfettered by influence or intercession, misrepresentation or coercion, force or fraud. One of the chief ingredients of a gift is that the donor must be a free agent, acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental representative, on the other hand, contended that the fact that there was a sale is not in dispute. It was sold for a sum of Rs. 8 lakhs is also not in dispute. The market price of the property at the time of sale was such higher than the said price is also not in dispute, though as per the GTO it was Rs. 76,18,143, whereas as per the assessee it should have been a lower figure. He, therefore, submitted that section 4(1)(a) is clearly applicable in this case. To invoke the provisions of section 4(1)(a), there must be a transfer, such transfer must be otherwise than for adequate consideration (the inadequacy is the amount by which the market value of the property at the date of transfer exceeds the value of the consideration). If these things are in existence, section 4(1)(a) comes into play, unless it comes within the proviso, namely, a transfer to the Government or where the value of the consideration for the transfer is determined by the approval of the Central Government or by the Reserve Bank of India is involved. Coming to the definition of the gift as contained in section 2(xii) it was submitted by the learned departmental representative that this definition is in two p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the transferee to the transferor. No case has been made out by the GTO of such nature. In this case, the consideration intended was Rs. 8 lakhs and it passed from the transferee to the transferor. Therefore, we have to confine our discussion in this case only with reference to the provisions of section 4(1)(a) read with section 2(xii). 16. Section 2(xii) defines 'gift' as the transfer of any existing property, movable or immovable, made voluntarily by one person to another without consideration in money or money's worth. The definition to this extent is more or less in pari materia to the definition given under the Transfer of Property Act, 1882. We agree with Mr. Dastur that to treat a transfer as a gift, the transaction must be voluntary. But this would be relevant only so far as the first part of the definition is concerned. As has rightly been contended by the learned departmental representative that that is not the end of the matter. One should read the definition as a whole without ignoring the second part of the definition contained in section 2(xii), which includes a deemed gift covering a transfer or conversion of any property referred to in section 4, viz., transfers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax under the Gift-tax Act, 1958, but if the construction of sub-section (2) contended for on behalf of the revenue were accepted, such difference would also be liable to be added as part of capital gains taxable under the provisions of the Income-tax Act, 1961. This would be an anomalous result which could never have been contemplated by the Legislature, since the Income-tax Act, 1961 and the Gift-tax Act, 1958 are parts of an integrated scheme of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains." 18. We, however, feel that the considerations of the contractual obligation of the trustees to transfer the property at a particular price could be a relevant factor in determining the adequacy of the consideration. The adequacy, as we have stated above, is the second important characteristic which must be fulfilled for invoking the provisions of section 4(1)(a). The concept of inadequate consideration has to be construed in a broad common sense. Consideration has to be for money or money's worth. If it is money, the inadequacy is easy to determine. If the consideration is not in money but in other forms, the dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. the Bombay High Court has held that the resolution to reduce its share capital by returning to its shareholders' shares of other companies, whose market value on the date of resolution was Rs. 97,75,539 and on the date of actual delivery to the shareholders Rs. 1,04,64,157 did not lead to a conclusion that the transfer was for inadequate consideration, even though the difference was of Rs. 6,87,618. Therefore, even though we do not agree with Shri Dastur on the point that the concept of voluntary transfer has also to be borne in mind while construing section 4(1)(a), we allow the appeal on the ground stated by us above, namely, that there was no inadequate consideration. 20. Our above conclusion would also be in consonance with the ratio laid down by the Supreme Court in the case of Madurai Mills Co. Ltd. wherein their Lordships have held that the receipt of the money by a shareholder on liquidation of the company is in satisfaction of the right which belonged to him by virtue of the holding the shares and not by operation of re-transaction which amounts to sales, exchange, relinquishment or transfer. The purchaser, Shri B.K. Dubash, had been conferred the right to purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X
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