1988 (6) TMI 68 - AT - Income Tax

Summary

Issues Involved:
1. Valuation of the gift of leasehold rights.
2. Applicability of the case of Smt. Promila Bali.
3. Deduction of unearned increase in value.
4. Deduction of stamp duty paid on the gift deed.

Issue-wise Detailed Analysis:

1. Valuation of the Gift of Leasehold Rights:
The appellant contested the valuation of the gift made of rights as a sub-lessee of a residential plot of land, arguing that it should be valued at Rs. 22,625, the amount of contributions paid by the assessee to the cooperative society. The Gift-tax Officer valued the gift at Rs. 4,92,000, taking the fair market value of the plot at Rs. 1,000 per sq. yd. due to its location in a posh colony. The Commissioner of Gift-tax (Appeals) reduced this to Rs. 600 per sq. yd., considering a government circular showing the land rate at Rs. 786 per sq. yd. The Tribunal upheld this valuation, noting that the initial investment could not determine the land's value at the time of the gift.

2. Applicability of the Case of Smt. Promila Bali:
The assessee relied on the Delhi High Court decision in the case of Smt. Promila Bali, where the value of a plot was taken as the contributions made due to a total ban on transfer. The Tribunal found this case inapplicable because, in the present case, there was no total prohibition on transfer, only certain restrictions. The Third Member, however, found the facts of the present case identical to Smt. Promila Bali, as both involved severe restrictions on transfer and a prohibition on sale to non-members. Thus, the value should be Rs. 22,625, as held by the Accountant Member.

3. Deduction of Unearned Increase in Value:
The assessee contended that the 50% unearned increase in the value of the plot should be deducted from the valuation. The Tribunal agreed, directing that the unearned increase should be deducted while determining the value of the taxable gift, in line with the proviso in clause 6 of the sub-lease deed and supported by the Supreme Court decision in CWT v. P. N. Sikand.

4. Deduction of Stamp Duty Paid on the Gift Deed:
The assessee claimed a deduction of Rs. 1,821 for stamp duty paid on the gift deed under section 18A of the Gift-tax Act. The Tribunal noted that there was insufficient discussion on this issue in the lower authorities' orders. The Gift-tax Officer was directed to ascertain from the record whether the expenditure was incurred by the assessee. If not, the claim would be without basis.

Conclusion:
The appeal was allowed in part, with the valuation of the plot being a point of contention. The Third Member concluded that the value should be Rs. 22,625, aligning with the Accountant Member's view, given the identical nature of the facts with the Smt. Promila Bali case. The matter was referred back to the regular Bench for final disposal according to the majority opinion.