Deemed gift under the Gift-tax Act failed where transfer of an undivided house share lacked proof of inadequate consideration.

Release of an undivided 1/4th interest in a single indivisible residential house did not create a deemed gift under section 4(1)(a) of the Gift-tax Act because the asset could not be separately enjoyed or separately sold. The Revenue failed to show that the consideration was inadequate or that the transaction was mala fide. In the absence of proof that the transfer was otherwise than for adequate consideration, the statutory condition for deeming a gift was not satisfied, and the gift-tax assessment was cancelled.

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Issues: Whether the release of an undivided 1/4th share in a single indivisible residential house for consideration of Rs. 25,000 gave rise to a deemed gift under section 4(1)(a) of the Gift-tax Act.

Analysis: The transferred asset was found to be only an indivisible interest in a residential house incapable of separate enjoyment or separate sale. The Revenue failed to establish that the consideration received was inadequate or that the transaction was mala fide. In the absence of proof that the transfer was otherwise than for adequate consideration, the statutory condition for a deemed gift was not satisfied.

Conclusion: The transaction did not attract section 4(1)(a) of the Gift-tax Act and the cancellation of the gift-tax assessment was ?

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