TaxTMI 
TaxTMI 
1984 (2) TMI 181
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....1976. It was the assessee's case that the assessee had ceased to have any interest in the property thereafter. The ITO, however, valued the half interest released at Rs. 60,000. He accepted the consideration of balance of meher at Rs. 25,000. He, therefore, took the view that the balance of Rs. 35,000 (the difference between Rs. 60,000 and Rs. 25,000) represented gift without consideration. On this basis he included five-twelfth of 50 per cent of the income from the property purportedly under section 64(1)(iv) of the Income-tax Act, 1961 ('the Act'). The first appellate authority revalued half the portion released at Rs. 65,000 as against Rs. 60,000 adopted by the ITO and worked out that the income assessable should be four-fifth of 50 per cent of the property income. In other words, he practically enhanced the assessment. 3. The revenue has come up in appeal stating that the appeal should have been dismissed overlooking the facts that the revenue is in better position as a result of the appellate order. When this was pointed out to the learned departmental representative, it was claimed that his argument is that he is disputing the set off of meher amount of Rs. 25,000 allowed ....
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....nd not a gift. In this case also the decision went against the tax payer only because this being a sale, it required a registered instrument which is present in the assessee's case if it is a sale. If it were a sale simpliciter, the question of treating any part of the income from the said property as in the assessee's hands does not arise. However, it is certainly open to the authorities to consider the adequacy of consideration and hold that there is an element of gift to the extent of such inadequacy. If the ITO could invoke section 64 to the extent of such inadequacy even as pointed out by the Madras High Court in the case of Smt. V. Amirthan Ammal v. CIT [ 1976] 102 ITR 350, the inadequacy should be such on facts as to warrant the application of section 64. The Bombay High Court in CGT v. Cawasji Jehangir Co. (P.) Ltd. [1977] 106 ITR 390 held that though the market value of shares on the date of actual reduction of share capital as per the Court's order (the date of transfer) was more, the consideration could be taken as per date of resolution. In this context it observed as under in Cawasji Jehangir Co. (P.) Ltd.'s case : ". . . In my opinion, the expression 'adequate cons....
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.... High Court in Indo Traders & Agencies (Madras) (P.) Ltd.'s case has held that only a consideration that shocks the conscience of the Court will be considered inadequate in the following words : " The considerations which weighed with the Courts in examining the adequacy of the consideration in respect of the sale by a minor or in respect of a relief for specific performance would also apply in the examination of a transaction under section 4(1)(a). Unless the price was such as to shock the conscience of the Court that it cannot be the reasonable consideration at all, it would not be possible to hold that the transaction is otherwise than for adequate consideration. In fact, in the Full Bench judgment of the Patna High Court, it is mentioned by Chief Justice Harries, that the adequacy of consideration is a matter for the parties. (See [1941] 9 ITR 137, 148). The judgment of the Patna High Court has been approved by the Supreme Court in a later decision Tulsidas Kilachand v. CIT [1961] 42 ITR 1 (sic.). Of course it is not enough if a transfer is for 'good consideration'. It should also be for adequate consideration. Adequate consideration is not necessarily what is ultimately det....
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....we should not try to confuse the motive or the purpose of making a gift with the consideration which is the subject-matter of the gift. Love, affection, spiritual benefit and many other factors may enter in the intention of the donor to make a gift but these filial considerations cannot be called or held to, be legal considerations as understood by law. It is manifest, therefore, that the passing of monetary consideration is completely foreign to the concept of a gift having regard to the nature, character and the circumstances under which such a transfer takes place. Though the above extract from the Supreme Court decision was in relation to a different issue, it is clear that the position of law as noticed by us earlier has its support. Consideration is adequate where it is 'sufficient and valuable having regard to facts'. In the assessee's case the assessee has transferred his half interest in a property at cost to his wife. Half share in a property is valued at Rs. 25,000. Value of half share does not mean that it will be half of the market value of the building. It is because a stranger would not have paid half the market value of the property for the joint ownership with t....