Primary facts and deemed consideration in gift-tax: reopening valid, but partnership property transfer was not a deemed gift.

Failure to disclose primary facts in the gift-tax return justified reopening because the assessees omitted required particulars of property transfers and jointly held assets; disclosure in income-tax proceedings did not cure the omission. On the substantive issue, contribution of immovable property to a partnership firm was a transfer, but the credit in the partner's capital account was only notional and did not constitute real consideration for the deemed-gift test. As actual inadequacy of consideration was not established, the transaction did not attract gift-tax as a deemed gift, and the assessees succeeded on merits.

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Issues: (i) Whether the reopening of the gift-tax assessments was valid for failure to disclose material facts. (ii) Whether the transfer of immovable property by the assessees to a partnership firm gave rise to a deemed gift under the gift-tax provisions.

Issue (i): Whether the reopening of the gift-tax assessments was valid for failure to disclose material facts.

Analysis: The return form required particulars of transfers of property and of jointly held properties. The assessees omitted those particulars, which amounted to non-disclosure of relevant primary facts. A failure to furnish material particulars in the return justified reopening, and the fact that some information may have been available in income-tax proceedings did not substitute disclosure in the separate gift-tax proceedings.

Conclusion: The reopening was valid.

Issue (ii): Whether the transfer of immovable property by the assessees to a partnership firm gave rise to a deemed gift under the gift-tax provisions.

Analysis: Under the deemed-gift provision, there must be a transfer for inadequate consideration and the market value must exceed the consideration. Although contribution of immovable property to a partnership is a transfer within the wide statutory definition, the credit entry in the partner's capital account is only notional and does not represent real consideration. The true commercial consideration lies in the partner's right to share in profits and to bear risks and liabilities, which cannot be monetarily equated to the book entry. On that basis, inadequacy of consideration was not established.

Conclusion: No deemed gift arose from the transaction.

Final Conclusion: The assessments were validly reopened, but the transfer did not attract gift-tax as a deemed gift, so the assessees succeeded on merits and the appeals were allowed.

Ratio Decidendi: A transfer of property by a partner to a partnership firm is a transfer, but the credit recorded in the partner's capital account is not real consideration for determining inadequate consideration under the deemed-gift provision; unless actual inadequacy of consideration is shown, no deemed gift can be assessed.

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