Quoted share valuation under Gift-tax Act follows the exchange where sale occurred, defeating deemed-gift treatment.

For quoted shares, market value under the Gift-tax Act is the price prevailing in the stock exchange where the shares are actually sold, not a higher quotation in another exchange. On that footing, the difference between the sale consideration and a quotation elsewhere could not be treated as a deemed gift under section 4(1)(a), because the transfer was for adequate consideration at the relevant market. Acceptance of the same sale price in related income-tax and wealth-tax proceedings reinforced that valuation and left no basis for a contrary gift-tax assessment. The reference was answered in favour of the assessee and the Revenue's deemed-gift theory failed.

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Issues: (i) Whether the difference between the stock exchange quotation and the consideration received on sale of shares could be treated as a deemed gift under section 4(1)(a) of the Gift-tax Act, 1958. (ii) Whether acceptance of the sale price in income-tax proceedings for the same assessment year precluded a different valuation for gift-tax purposes.

Issue (i): Whether the difference between the stock exchange quotation and the consideration received on sale of shares could be treated as a deemed gift under section 4(1)(a) of the Gift-tax Act, 1958.

Analysis: Section 4(1)(a) applies only where property is transferred otherwise than for adequate consideration, and the relevant inquiry is the market value of the property at the date of transfer. For quoted shares, the market is the stock exchange, and quotations may vary between exchanges. A higher quotation in one exchange does not displace the quotation at another exchange where the shares were actually sold. Treating the highest quotation anywhere as the universal market value would lead to unreasonable and absurd consequences, because each exchange constitutes a separate market for traded shares.

Conclusion: The transfer did not give rise to any deemed gift, and the finding was in favour of the assessee.

Issue (ii): Whether acceptance of the sale price in income-tax proceedings for the same assessment year precluded a different valuation for gift-tax purposes.

Analysis: The same sale price had been accepted as the true consideration in the related income-tax and wealth-tax proceedings. Once the sale was effected at the quoted market rate prevailing in the exchange where the transaction took place, there was no basis to reject that price merely because a higher quotation existed in another exchange. The conclusion on valuation for gift-tax therefore followed from the same market-value principle.

Conclusion: The acceptance of the sale price in the related proceedings supported the assessee's case and the Revenue's contrary valuation could not stand.

Final Conclusion: The reference was answered in favour of the assessee, and the Revenue's case on deemed gift failed because the relevant market value was the quotation at the exchange where the shares were sold.

Ratio Decidendi: For quoted shares, market value under the Gift-tax Act is the price prevailing in the stock exchange where the shares are actually sold, and a higher quotation in another exchange does not by itself establish transfer for inadequate consideration or a deemed gift.

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