Deemed gift already taxed cannot be double-taxed as capital gains; assessment must rest on actual sale consideration.

An amount treated as a deemed gift under the Gift-tax Act and already subjected to gift-tax could not again be brought to tax as capital gains under the Income-tax Act. Capital gains under section 45 had to be computed on the actual consideration received, and section 52(1) did not justify taxing the same excess twice. The existence of an appellate remedy did not prevent writ relief where the levy was contrary to the Act, and the delay was not treated as fatal because it was explained by later judicial guidance. The capital gains assessment was confined to the transfer consideration actually received, and tax on the deemed-gift portion was refundable.

---

---

Issues: (i) Whether the amount representing the difference between the fair market value and the sale consideration, having already been treated as a deemed gift and subjected to gift-tax, could also be brought to tax as capital gains under the Income-tax Act; (ii) Whether the writ petition should be entertained notwithstanding the availability of an appellate remedy and the alleged delay in approaching the Court.

Issue (i): Whether the amount representing the difference between the fair market value and the sale consideration, having already been treated as a deemed gift and subjected to gift-tax, could also be brought to tax as capital gains under the Income-tax Act.

Analysis: Capital gains under section 45 of the Income-tax Act are computed on the consideration for transfer, subject to the statutory mechanism in section 48. Section 47(iii) excludes transfers under a gift from the charge under section 45. The transfer in question was treated under the Gift-tax Act as one made for inadequate consideration, and the excess of market value over the stated consideration was brought to gift-tax as a deemed gift. The same amount could not be simultaneously treated as a gift for gift-tax purposes and as consideration giving rise to capital gains tax. Reading the two taxing statutes together, the taxable capital gain had to be confined to the amount actually received under the transfer deed, while the excess already subjected to gift-tax could not again be assessed as capital gains. The invocation of section 52(1) did not justify taxing that excess as capital gains.

Conclusion: The excess amount treated as a deemed gift was not liable to capital gains tax, and capital gains had to be recomputed on the actual sale consideration.

Issue (ii): Whether the writ petition should be entertained notwithstanding the availability of an appellate remedy and the alleged delay in approaching the Court.

Analysis: Although an appeal was available under the Income-tax Act, the levy of capital gains tax on the excess amount was held to be contrary to the Act. In such circumstances, the existence of an alternative remedy did not prevent exercise of writ jurisdiction. The delay was also explained by the subsequent emergence of judicial guidance on the point, and the Court did not treat the interval as sufficient to deny relief.

Conclusion: The writ petition was maintainable and the delay did not bar relief.

Final Conclusion: The capital gains assessment was upheld only to the extent of the actual transfer consideration, and the tax levied on the portion already treated as a deemed gift was directed to be refunded.

Ratio Decidendi: An amount already assessed as a deemed gift under the Gift-tax Act cannot again be subjected to capital gains tax under the Income-tax Act; capital gains must be computed only on the actual consideration received under the transfer.

---