Capital gains computation and section 52: actual consideration controls, and tax-avoidance purpose is required for substitution.

For capital gains computation under section 48, "full value of consideration received" was construed as the actual consideration received by the transferor, not the market value of the shares. The section was therefore not treated as authorising substitution of market value for the price actually received. Section 52 was also held inapplicable to a share transfer to the transferor's sons where there was no finding that the transfer was effected to avoid or reduce tax liability; mere relationship between transferor and transferees was insufficient. The stated ratio is that actual consideration governs section 48, and section 52 requires a tax-avoidance purpose to operate.

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Issues: (i) Whether the amount to be taken under section 48 of the Income-tax Act for computing capital gains was the actual consideration received or the market value of the shares transferred. (ii) Whether section 52 of the Income-tax Act applied to the transfer of shares to the assessee's sons in the absence of a finding that the transfer was effected for the purpose of avoiding or reducing tax liability.

Issue (i): Whether the amount to be taken under section 48 of the Income-tax Act for computing capital gains was the actual consideration received or the market value of the shares transferred.

Analysis: The expression "full value of the consideration received" in section 48 was treated as referring to the actual consideration received by the assessee and not to the market value. That construction was found to accord with the view previously taken on the corresponding provision in the Income-tax Act, 1922.

Conclusion: The contention that section 48 authorised substitution of market value for actual consideration was rejected, and the actual consideration alone was to be taken.

Issue (ii): Whether section 52 of the Income-tax Act applied to the transfer of shares to the assessee's sons in the absence of a finding that the transfer was effected for the purpose of avoiding or reducing tax liability.

Analysis: The Tribunal's finding was that the transfer was not made with a view to avoid or reduce liability to tax on capital gains under section 45. On that finding, section 52 could not be invoked merely because the transferees were related to the assessee. The reasoning was consistent with earlier decisions on the scope of the provision.

Conclusion: Section 52 was held inapplicable.

Final Conclusion: The reference was answered in favour of the assessee and against the revenue, as neither substitution of market value under section 48 nor invocation of section 52 was warranted on the facts found.

Ratio Decidendi: For computation of capital gains, "full value of consideration" denotes the actual consideration received, and section 52 cannot be applied unless the transfer is found to have been effected for the purpose of avoiding or reducing tax liability.

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