1981 (8) TMI 102 - AT - Income Tax

Summary

Issues:
1. Adequacy of consideration for transfer of property to wife.
2. Interpretation of fair market value for tax assessment purposes.
3. Application of section 64(1)(iv) in determining income arising from transferred property.

Detailed Analysis:
1. The main issue in this case was the adequacy of consideration for the transfer of one-fourth interest in an immovable property to the assessee's wife. The Income Tax Officer (ITO) contended that the transfer was for inadequate consideration as the capital value of the transferred property was higher than the amount paid by the wife. The Appellate Assistant Commissioner (AAC) disagreed, stating that the consideration was fixed based on the market value of the property, supported by a solicitor's certificate from a previous auction. The revenue appealed this decision, arguing that the consideration was inadequate.

2. The interpretation of fair market value was crucial in this case, with the departmental representative emphasizing the rising property values and disputing the adequacy of the consideration paid for the transfer. The departmental representative pointed out previous assessments and transactions to challenge the valuation provided by the assessee. The counsel for the assessee argued that the consideration received was adequate based on previous assessments and the circumstances surrounding the transfer.

3. The application of section 64(1)(iv) was a key aspect of the judgment, as it pertained to the inclusion of income arising from the transferred property in the hands of the assessee's wife. The Tribunal analyzed the events surrounding the transfer, including a public auction where the property was sold to the assessee's son for a specific amount. The Tribunal found that the consideration paid by the son was reflective of the fair market value at the time of the transfer, considering the economic conditions of the city in 1970. Ultimately, the Tribunal upheld the AAC's decision, dismissing the revenue's appeal and confirming that the consideration was adequate, thus rejecting the application of section 64(1)(iv) in this case.