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Issues involved:
The issues involved in the judgment are whether the provisions of section 4(1)(a) of the Gift-tax Act were correctly applied and whether the transfer of shares standing in the name of the minor son should be considered in determining the taxable gift. Summary: Issue 1: Application of section 4(1)(a) of the Gift-tax Act The deceased-assessee owned shares in two tea estate companies, and family arrangements were made to transfer shares among family members due to disputes. The Gift-tax Officer found the consideration for the transfer of shares to be inadequate compared to market value. The Tribunal held that the transfer constituted a deemed gift under section 4(1)(a) of the Gift-tax Act, emphasizing that adequacy of consideration is based on money value, not sentimental value. However, the High Court disagreed, stating that the transfers were part of family arrangements to settle disputes, not transfers for inadequate consideration. Citing Supreme Court precedents, the High Court concluded that the transactions were not transfers but family settlements, thus section 4(1)(a) was not applicable, and there was no deemed gift. Issue 2: Consideration of shares transferred to minor son The Tribunal rejected the argument that shares transferred to the minor son should be considered in determining the taxable gift. The High Court upheld this decision, stating that the transaction involving the transfer of 425 shares to the son for inadequate consideration should not be conflated with other transactions involving different family members. The High Court emphasized that the transaction was specific to the deceased-assessee and his son, and the income from those shares was included in the assessee's hands due to legal provisions. Therefore, the High Court ruled in favor of the assessee, stating that section 4(1)(a) of the Gift-tax Act was not applicable, and there was no taxable deemed gift. The second question did not arise due to the negative answer to the first question.
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