Deemed-gift transfers and stamp-duty deduction: legal fiction extended to allow deduction for additional conveyance duty paid.

Deemed-gift treatment of a transfer for inadequate consideration was extended to the stamp-duty deduction provision, so the deduction was not confined to an instrument formally styled as a gift deed. Because the conveyance could be completed only after payment of additional stamp duty arising from the enhanced value, and the gift-tax charge itself arose through the legal fiction, the same fiction was applied to allow the related stamp-duty deduction. The assessee was therefore entitled to deduct the additional stamp duty paid on the conveyance under the deduction provision.

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Issues: Whether, in a case where gift-tax is attracted on a transfer for inadequate consideration under the deemed-gift provision, the assessee is entitled to deduction of the additional stamp duty paid in respect of the conveyance under the deduction provision for stamp duty on an instrument of gift.

Analysis: The transfer was treated as a deemed gift because the consideration was less than the market value, and the charge to gift-tax arose by applying the legal fiction. The deduction provision was construed in the light of that fiction. Since the property could be effectively conveyed only after payment of the additional stamp duty arising from the enhanced value, and the very tax charge was linked to that conveyance, the fiction was extended to the deduction provision as well. The provision was not read narrowly by restricting it only to an instrument formally styled as a gift deed.

Conclusion: The assessee was entitled to deduction of the additional stamp duty under the deduction provision.

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