Ordinary meaning of "gift" under tax law applies, and gift-tax does not bar capital gains tax on the same transaction.

The term "gift" in section 47(iii) of the Income-tax Act was held to bear its ordinary meaning in general law, consistent with the Transfer of Property Act, and not to be confined to the definition in the Gift-tax Act, whose deeming fiction operates only within that enactment. The Court also held that gift-tax and capital gains tax arise from different taxable events and bases, so prior liability to gift-tax does not exempt the same transaction from capital gains tax if the charging provisions are otherwise attracted. The transaction was therefore liable to capital gains tax.

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Issues: (i) Whether the expression "gift" in section 47(iii) of the Income-tax Act, 1961 is confined to a gift as defined in the Gift-tax Act, 1958 or bears its ordinary meaning as understood in general law and the Transfer of Property Act, 1882; (ii) whether liability to gift-tax on the same transaction excludes chargeability to capital gains tax under the Income-tax Act, 1961.

Issue (i): Whether the expression "gift" in section 47(iii) of the Income-tax Act, 1961 is confined to a gift as defined in the Gift-tax Act, 1958 or bears its ordinary meaning as understood in general law and the Transfer of Property Act, 1882.

Analysis: The expression "gift" in section 47(iii) was construed in the context of the Income-tax Act itself, particularly section 2(47) defining "transfer" and section 45 charging capital gains. The definition of gift in the Gift-tax Act, 1958 and the deeming provision in section 4(1)(a) operate only for that Act and cannot control the meaning of the same word in the Income-tax Act. The Court treated the statutory fiction in the Gift-tax Act as confined to that enactment and held that the word "gift" in section 47(iii) must be read in its ordinary sense, consistent with the Transfer of Property Act, 1882.

Conclusion: The expression "gift" in section 47(iii) is not restricted to the Gift-tax Act, 1958 and includes gift as ordinarily understood in general law.

Issue (ii): Whether liability to gift-tax on the same transaction excludes chargeability to capital gains tax under the Income-tax Act, 1961.

Analysis: The Court held that the two statutes impose tax on different taxable events and on different bases. Payment of gift-tax on a deemed gift does not create immunity from capital gains tax if the transaction otherwise answers the charging provisions of the Income-tax Act. There is no general prohibition against double taxation where the Legislature has enacted separate taxing provisions for distinct taxable incidents.

Conclusion: Prior assessment to gift-tax did not prevent levy of capital gains tax on the transaction.

Final Conclusion: The transaction was liable to capital gains tax, and the reference was answered in favour of the Revenue.

Ratio Decidendi: A word used in a charging exemption or exclusion clause in one taxing statute is to be construed according to that statute and its legal context, and liability under one tax enactment does not bar levy under another enactment where the taxable events are distinct.

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