Deemed gift under Gift-tax law fails unless inadequate consideration is first proved by the revenue.

Section 4(1)(a) of the Gift-tax Act, 1958 applies only where property is transferred for inadequate consideration, and the revenue must first prove that condition before the deeming fiction can operate. On the facts discussed, the assessee supported the share sale with contemporaneous comparable transactions, public advertisements, correspondence, and prior group cases showing genuineness, while the revenue relied mainly on break-up valuation and did not produce comparable evidence to show the price was unfair or unreasonable. As the statutory precondition was not established, the deemed gift treatment could not be sustained and the addition was deleted.

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Issues: Whether the sale of shares could be treated as a deemed gift under section 4(1)(a) of the Gift-tax Act, 1958 on the footing that the consideration was inadequate and the transaction was not bona fide.

Analysis: Section 4(1)(a) applies only where property is transferred otherwise than for adequate consideration. The burden lies on the revenue to establish inadequacy of consideration before the deeming fiction can be invoked. On the material on record, the assessee produced evidence of contemporaneous sales at the same or similar price, public advertisements, supporting correspondence, and prior group cases indicating that the transactions were genuine. The revenue relied mainly on break-up valuation and did not bring comparable evidence to show that the declared price was not fair or reasonable. In these circumstances, the statutory precondition for invoking the deeming provision was not satisfied.

Conclusion: The invocation of section 4(1)(a) was not sustainable and the deemed gift addition was deleted in favour of the assessee.

Ratio Decidendi: A deemed gift under section 4(1)(a) of the Gift-tax Act, 1958 can be sustained only if the revenue first proves that the transfer was for inadequate consideration and not a bona fide transaction.

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