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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether, for the purpose of section 4(1)(a) of the Gift-tax Act, 1958, gift-tax payable by the donee under the settlement deed could be treated as consideration deductible from the market value of the transferred property.
Analysis: Section 4(1)(a) deems as a gift the excess of market value over the value of consideration where property is transferred otherwise than for adequate consideration. The provision creates a legal fiction enlarging the tax base, but its language does not treat the gift-tax payable by the donee as part of the consideration or as a deductible item. In a taxing statute, only what is clearly stated can be read into the charging provision, and nothing can be implied by equity or intendment. The Tribunal's construction was held to be strained and unsupported by the text of the provision.
Conclusion: Gift-tax payable by the donee is not deductible as consideration under section 4(1)(a) of the Gift-tax Act, 1958, and the answer to the referred question was against the assessee and in favour of the Revenue.
Ratio Decidendi: Under a taxing provision, a liability undertaken by the donee cannot be treated as consideration unless the statute expressly so provides; section 4(1)(a) of the Gift-tax Act, 1958 applies only to the excess of market value over the actual consideration stated or proved.
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