Deemed gift provisions require more than a sale below market value; bona fide distress sales were not treated as gifts.

Transfers of textile factory properties for the declared consideration were held not to constitute a deemed gift under section 4(1)(a) of the Gift-tax Act. The phrase "inadequate consideration" does not mean every sale below market value is automatically taxable as a gift; the statutory focus is whether the transfer was truly lacking adequate consideration and whether it reflects an artificial device or element of bounty. On the facts, financial distress, bank pressure, recession in the textile market, and a compelled sale to unrelated purchasers supported bona fide transactions. There was no material of understatement or intent to confer benefit, and the consideration had been accepted in income-tax proceedings, so the deemed gift additions were unsustainable.

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Issues: Whether the sale of the textile factory properties for the declared consideration was a transfer for inadequate consideration so as to attract deemed gift under section 4(1)(a) of the Gift-tax Act.

Analysis: The expression "inadequate consideration" under section 4(1)(a) does not mean that every transfer for less than market value automatically becomes a gift. The statutory scheme requires first a finding that the transfer was not for adequate consideration, and only then does market value become relevant for quantifying the deemed gift. Reading section 4(1)(a) with the definition of "gift" in section 2(xii), the provision is intended to catch artificial devices or transfers carrying an element of bounty. On the facts, the assessees showed financial distress, bank pressure, recession in the textile market, and a compelled sale of assets. The transactions were with unrelated purchasers, there was no material to show understatement with an intent to confer benefit, and the declared consideration had been accepted in the income-tax assessment.

Conclusion: The transfers were bona fide and for adequate consideration, so section 4(1)(a) was not attracted. The deemed gift additions were unsustainable and the assessees succeeded.

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