Bona fide transfer to a 100% subsidiary was not a deemed gift where valuation difference stayed below the statutory benchmark.

A transfer of property to a 100% subsidiary was not treated as a deemed gift under section 4(1)(a) of the Gift Tax Act because the valuation difference between declared consideration and departmental valuation was small and fell below the statutory benchmark in the rules. The transaction was also found to be bona fide and commercial, with no material indicating tax evasion. On that basis, rule 11A did not justify invoking the deeming provision, and the gift tax liability was not sustained.

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Issues: Whether the transfer of property by the assessee to its 100% subsidiary could be treated as a deemed gift under section 4(1)(a) of the Gift Tax Act, and whether rule 11A of the Gift Tax Rules permitted such invocation on the facts of the case.

Analysis: The valuation difference between the declared sale consideration and the valuation adopted by the Department was found to be comparatively small and below the statutory percentage benchmark referred to in the rules. The transfer was also treated as a bona fide commercial transaction, with no discernible attempt at tax evasion. The Court agreed with the concurrent factual findings of the appellate authority and the Tribunal that the transaction did not justify treating the sale as a deemed gift.

Conclusion: The invocation of section 4(1)(a) of the Gift Tax Act was not justified, and the issue was decided in favour of the assessee.

Final Conclusion: The Revenue's challenge failed, and the deletion of gift tax liability was sustained.

Ratio Decidendi: A bona fide transfer for consideration to a 100% subsidiary cannot be treated as a deemed gift where the valuation difference does not warrant application of the statutory deeming provision and there is no material indicating tax evasion.

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