Gift-tax on property transfers turns on bona fide total consideration, including retained contractual rights, not market value alone.

A transfer made for a stated price together with retained rights of reconveyance and first option/pre-emption was not treated as involving inadequate consideration for gift-tax purposes. The retained contractual rights formed part of the real bargain, so the transfer could not be tested by market value alone or by a higher guideline value adopted for stamp duty. The proper inquiry was whether the transaction was bona fide and whether the total consideration was reasonable and adequate. On that footing, section 4(1)(a) of the Gift-tax Act was not attracted and the gift-tax assessments were cancelled.

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Issues: Whether the transfer of property for a stated price, coupled with retained rights of reconveyance and first option/pre-emption, involved inadequacy of consideration so as to attract gift-tax under section 4(1)(a) of the Gift-tax Act.

Analysis: The sale deed showed that the stated price was only one part of the bargain and that the transferors retained valuable contractual rights to repurchase the property after 25 years and to insist on the first option if the purchaser resold within that period. These retained rights formed part of the real consideration and could not be ignored merely because the registering authority had adopted a higher guideline value or because stamp duty had been paid on that value. The proper inquiry was whether the transaction was bona fide and whether the consideration was reasonable and adequate, not whether the apparent price matched an independently estimated market value. On the facts, the consideration could not be said to be inadequate.

Conclusion: Section 4(1)(a) of the Gift-tax Act was not attracted, and the gift-tax assessments were liable to be cancelled.

Ratio Decidendi: For purposes of gift-tax, where a transfer is made for a stated price together with valuable retained rights forming part of the bargain, adequacy of consideration must be judged by the bona fides and total consideration of the transaction, and not by market value alone.

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