1983 (7) TMI 96 - AT - Income Tax

Appellate Tribunal rules transfers to specified relations lacked adequate consideration.

The Appellate Tribunal upheld the lower authorities' decisions, confirming that transfers made by the assessees to their specified relations were not for ... Adequate Consideration, Market Value, Minor Child Issues:Applicability of section 64(1)(iv), (v), and (vi) of the Income-tax Act, 1961 regarding transfers for inadequate consideration to relations.Analysis:The judgment by the Appellate Tribunal ITAT DELHI-A dealt with appeals concerning the applicability of section 64(1)(iv), (v), and (vi) of the Income-tax Act, 1961, in relation to transfers for inadequate consideration to specified relations by the assessees. The assessees, who were close relatives and promoters of private limited companies, transferred shares at face value to their specified relations. The key question was whether these transfers at face value constituted adequate consideration, as the application of section 64(1) hinges on transfers being deemed otherwise than for adequate consideration. The details of transfers were meticulously examined, including the shares transferred, acquisition dates, and amounts received from transferees.The judgment delved into specific cases of transfers by the assessees to their relations. In one instance, the Income Tax Officer (ITO) noted a significant difference between the face value and market value of shares transferred by an assessee to his minor sons, leading to the conclusion that the transfers were not for adequate consideration. Similar assessments were made in cases of transfers by other assessees to their specified relations, where discrepancies between declared values and market values were observed. The ITO attributed dividends to inadequate consideration in these cases, leading to additions in the assessee's income.The Appellate Tribunal analyzed various legal precedents cited by the assessees' counsel to argue for adequate consideration in the transfers. The Tribunal distinguished these cases based on the specific circumstances of the transfers in question, emphasizing the substantial difference between market values and consideration received. The Tribunal also referenced the determination of fair market value based on break up value of shares, aligning with precedents in similar cases.Furthermore, the judgment referenced decisions by higher courts, such as the Supreme Court and the Calcutta High Court, regarding the concept of adequate consideration in transfers. The Tribunal highlighted that considerations like love and affection, while valid, may not constitute adequate consideration under the law. Ultimately, after thorough consideration of facts, submissions, and legal precedents, the Tribunal upheld the lower authorities' decisions, confirming that the transfers were not for adequate consideration, and thus, the provisions of section 64(1) were rightly applied.In conclusion, the Tribunal dismissed the appeals, affirming the orders of the lower authorities. The judgment provided a detailed analysis of the transfers, market values, legal precedents, and the application of section 64(1) in determining the adequacy of consideration in the transfers made by the assessees to their specified relations.