Gift-tax on inadequate consideration depends on proof of market value first, then comparison with the sale price.

Section 4(1)(a) of the Gift-tax Act applies only when transferred property is shown, on relevant evidence, to have a market value higher than the consideration stated in the sale deed. The assessing authority must first determine that market value on proper data and then compare it with the stated consideration to decide whether the shortfall constitutes a deemed gift. If the Tribunal has not examined the correctness of the market value adopted by the Gift-tax Officer or recorded any finding on adequacy of consideration, it cannot conclude that the provision is inapplicable. The matter therefore required fresh determination of market value and consideration adequacy.

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Issues: Whether, for attracting section 4(1)(a) of the Gift-tax Act, the Tribunal had to first determine the market value of the transferred property on relevant evidence and compare it with the consideration stated in the sale deed.

Analysis: Section 4(1)(a) operates only where property is transferred for consideration that is inadequate with reference to its market value on the date of transfer. The market value must be fixed on proper and relevant data by the assessing authority, and only thereafter can the difference between such value and the stated consideration be treated as a deemed gift. The Tribunal did not examine whether the market value adopted by the Gift-tax Officer had been properly determined, nor did it record any finding on adequacy of consideration. Without such a finding, it could not conclude that the provision was inapplicable.

Conclusion: The question could not be answered on the existing findings, and the matter had to go back to the Tribunal for fresh determination of market value and adequacy of consideration.

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