TaxTMI 
TaxTMI 
2001 (5) TMI 49
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....n law in coming to the conclusion that the difference of Rs. 8,21,950 on the sale of the jewellery by the assessee to its 12 wholly owned subsidiary companies was not liable to gift-tax under the provisions of the Gift-tax Act, 1958 ?" The High Court disposed of the reference by answering the question in the negative, in favour of the Revenue, and against the assessee. Hence, this appeal. The factual backdrop of the case relevant for the present proceeding may be stated thus: The assessee is a private limited investment company and the assessment relates to the assessment year 1976-77. The assessee transferred jewellery to twelve private limited companies which were wholly owned subsidiary companies of the assessee and in return the twel....
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....inasmuch as the jewellery is the only asset of the subsidiary companies, the value of the consideration was the value of the jewellery and no "deemed gift" can be attributed. The appellate authority set aside the order of the Gift-tax Officer. Both the assessee and the Revenue filed appeals before the Tribunal. The Tribunal upheld the conclusion of the appellate authority and held that when the only asset of the purchasing companies is jewellery purchased and their capital consists only of the shares issued to the assessee-company, there is no question of any "deemed gift", as whatever will be the value taken for the jewellery will become the value of the fully paid up shares issued to the assessee on the break up method of valuing of shar....
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....y and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section." The expression "taxable gifts" is defined under section 2(xxiii) to mean "gifts chargeable to gift tax under the Act". Section 3 which is the charging section lays down that "subject to the other provisions contained in the Act, there shall be charged for every assessment year commencing on and from the 1st day of April, 1958, a tax referred to as gift tax in respect of the gifts made by a person during the previous year at the rate or rates specified in Schedule 1. Section 4 makes provisions for gifts to include some transfers. Sub-section (1), clause (a), which i....
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....her the consideration is adequate. It is necessary for the Assessing Officer to show that the property has been transferred otherwise than for adequate consideration. The finding as to inadequacy of the consideration is the essential sine qua non for application of the provisions of "deemed gift". The provision is to be construed in a broad commercial sense and not in a narrow sense. In order to hold that a particular transfer is not for adequate consideration the difference between the true value of the property transferred and the consideration that passed for the same must be appreciated in the context of the facts of the particular case. If the transaction involves transfer of certain property in lieu of certain other property received ....
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....was drawn. In the case of Bireswar Sarhar v. (ITO [1997] 223 ITR 404 (Cal), the High Court allowed the writ petition and quashed the notice under section 16 of the Act, inter alia, on the ground that as far as the question of inadequacy of the consideration is concerned no answer could be given by the respondent authorities as to the adoption of different standards for the purpose of evaluating the value of the assets transferred and for evaluating the consideration received. The Madras High Court in the case of CGT v. Indo Traders and Agencies (Madras) P. Ltd. [1981] 131 ITR 313, observed that the provision is design ed to check evasion of tax by persons transferring properties for inadequate consideration ; if a person had effected a gif....