Relinquishment without consideration treated as a gift; section 50C held inapplicable for capital gains computation.

Relinquishment of co-owners' rights in immovable property without consideration was treated as a gift falling within section 47(iii) of the Income-tax Act, so the transfer was excluded from the capital gains charging framework under section 45. Because no consideration passed and the relinquishment deed was genuine, section 50C could not be invoked to substitute a deeming value for computation of short-term capital gain. The addition on account of short-term capital gain was therefore not sustainable, and relief was granted on this issue.

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Issues: Whether the relinquishment of rights in immovable property without consideration was a gift falling within section 47(iii) of the Income-tax Act, 1961 and, if so, whether section 50C could be invoked to compute short-term capital gain.

Analysis: The assessee and other co-owners relinquished their rights in the property without receiving any consideration. The transaction was therefore treated as being in the nature of a gift. The definition of transfer in section 2(47)(i) was noted, but for capital gains computation the transaction must first fall within section 45. Section 47(iii) excludes transfers by way of gift from the ambit of section 45. Since no consideration was received, the statutory condition for applying section 50C, which operates only in the capital gains framework, was not satisfied. The relinquishment deed was genuine and the transfer was without consideration.

Conclusion: The addition towards short-term capital gain was not sustainable. The relinquishment was held to be a gift covered by section 47(iii), and section 50C was held inapplicable. Relief was granted to the assessee on this issue.

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