Deemed gift under Gift-tax law fails where valuation alone does not prove inadequate consideration or tax evasion.

Section 4(1)(a) of the Gift-tax Act, 1958 applies only when the revenue establishes that property was transferred otherwise than for adequate consideration and that the facts justify the deeming fiction. A departmental valuation report is only expert evidence of persuasive value and does not, by itself, prove market value or inadequate consideration. On the facts, the transfer was treated as a bona fide business transaction, and no material showed any attempt to evade gift-tax. The mere difference between declared price and valuation was therefore insufficient to treat the excess as a deemed gift, and the gift-tax addition was not sustainable.

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Issues: Whether, on the facts of the case, the difference between the declared sale consideration and the valuation adopted by the departmental valuer could be brought to gift-tax as a deemed gift under section 4(1)(a) of the Gift-tax Act, 1958.

Analysis: Section 4(1)(a) applies only where property is transferred otherwise than for adequate consideration and the revenue establishes the existence of circumstances showing taxability. The valuation report by itself was treated as expert evidence of persuasive value only and not as conclusive proof of market value. The transfer was viewed as a bona fide business transaction, with the assessee selling to a firm in which she was the managing partner, and no material was shown to establish any attempt to evade gift-tax. The onus to prove the conditions of taxability was held to lie on the revenue, and mere disparity between declared price and valuation was held insufficient to attract the deeming provision.

Conclusion: The transfer was not shown to be for inadequate consideration and no deemed gift arose under section 4(1)(a); the addition to gift-tax was not sustainable.

Ratio Decidendi: For section 4(1)(a) of the Gift-tax Act, 1958 to apply, the revenue must first establish that the transfer was otherwise than for adequate consideration and that the transaction involved circumstances warranting the deeming fiction; a mere higher valuation of the property, without proof of evasion or lack of bona fides, is insufficient to treat the difference as a gift.

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