Distinct taxable incidents can support both capital gains and gift-tax on the same transfer value.

Section 52 of the Income-tax Act and sections 3 and 4 of the Gift-tax Act operate in different fields: capital gains tax applies to income deemed to arise on transfer, while gift-tax applies to the transfer element treated as a deemed gift. A transaction may therefore attract both levies because the taxable incidents are distinct, and the absence of any prohibitory provision in the Gift-tax Act supports concurrent assessment. Accordingly, inadequacy of consideration was not excluded from gift-tax merely because the same amount had already been brought to capital gains tax.

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Issues: Whether the difference between the declared sale consideration and the deemed market value, already brought to capital gains tax under section 52 of the Income-tax Act, could also be subjected to gift-tax as a deemed gift under section 4 of the Gift-tax Act.

Analysis: Section 52 of the Income-tax Act and sections 3 and 4 of the Gift-tax Act operate in different fields. Capital gains tax is levied on the income deemed to arise from a transfer, whereas gift-tax is levied on the transfer element treated as a gift. The same transaction may attract both levies because the taxable incidents are different. The absence of any provision in the Gift-tax Act barring such assessment, and the contrast with the relief provisions found in the Estate Duty Act, supports the view that payment of capital gains tax does not exclude gift-tax on the inadequacy of consideration.

Conclusion: The amount of Rs. 52,000 was liable to gift-tax notwithstanding that it had also been taken into account for capital gains; the question was answered against the assessee and in favour of the Revenue.

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