Family settlement is not a transfer in law, so deemed gift provisions do not apply when rights are only crystallised.

A family arrangement treated as a partition or settlement among family members does not amount to a transfer in law because each member already has an antecedent title in the family property and the arrangement merely crystallises their respective rights. On that basis, a transfer of shares under such an arrangement does not attract deemed gift under Section 4(1) of the Gift-tax Act, and the question of whether consideration is adequate or inadequate does not arise once no transfer is found. The Tribunal's view that no deemed gift arose was therefore upheld, and the appeals failed.

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Issues: Whether a transfer of shares under a family arrangement amounts to a transfer attracting deemed gift under Section 4(1) of the Gift-tax Act, 1958, and whether the adequacy of consideration can be examined when the transaction is claimed to be a family settlement.

Analysis: The transaction was held to be a family arrangement in the nature of a partition or settlement among members of a family. A partition or family settlement does not constitute a transfer in law, since each member has an antecedent title to the family property and the arrangement only adjusts and crystallizes their respective rights. Once the transaction is not a transfer, the further question whether the consideration is adequate or inadequate does not arise. On that basis, the Tribunal's view that no deemed gift arose under Section 4(1) was found to be correct.

Conclusion: The transfer under the family arrangement was not a transfer attracting deemed gift, and the appeals failed.

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