2005 (2) TMI 89 - HC - Income Tax

Gift Tax Act 1958 deemed gift - 1. Whether on the facts and in the circumstances of the case the Tribunal was legally correct in holding that the rules framed under the Stamp Act are not conclusive of determination of market value of properties? 2. Whether on the facts and in the circumstances of the case the Tribunal was legally correct in holding that there was no deemed gift in the case? - We are of the considered opinion that the rules framed under the Stamp Act cannot be pressed into service for determining the market value of the property and therefore there is no deemed gift in the present case.

Summary

Issues:
1. Interpretation of rules framed under the Stamp Act for determining market value of properties.
2. Existence of a deemed gift based on valuation discrepancies.

Issue 1: Interpretation of Stamp Act rules for market value determination
The case involved a dispute regarding the market value of properties for the assessment year 1981-82. The Gift-tax Officer imposed a tax on the difference between the sale consideration in sales deeds and the value assessed by registration authorities for stamp duty. The Appellate Tribunal overturned this decision, stating that Stamp Act rules are not conclusive for determining market value. They emphasized that market value fluctuates and is not bound by stamp duty values. The Tribunal held that without evidence of understated sale consideration, there was no deemed gift. The High Court supported this view, citing precedents like Jawajee Nagnatham v. Revenue Divisional Officer and Dinesh Kumar Mittal v. ITO to emphasize that stamp duty values do not necessarily reflect actual sale consideration.

Issue 2: Existence of a deemed gift based on valuation discrepancies
The Revenue argued that since stamp duty was paid on a higher value, the Gift-tax Officer rightly treated the difference as a deemed gift. However, the respondent's counsel contended that the actual sale consideration was lower, and stamp duty values are not determinative of market value. The High Court observed that the properties were sold for Rs. 1,25,000 but valued at Rs. 1,79,000 for stamp duty. Noting the absence of a provision like section 50C of the Income-tax Act during the relevant period, which deems stamp duty values as full consideration, the court held that stamp valuation rules cannot determine market value. Consequently, they ruled in favor of the assessee, negating the existence of a deemed gift. The High Court answered both questions in favor of the assessee, concluding that there was no deemed gift in this case.