Applicability of section 4(1)(a) of the Gift Tax Act, 1958. - Income Tax - 1503/CBDT

INSTRUCTION NO. 1503/CBDT Dated: March 16, 1983 Section(s) Referred: 4(1)(a) Statute: Gift Tax Act, 1958 The Board have considered the applicability of section 4(1)(a) of the Gift Tax Act, 1958 to the cases where the transferor is not able to get the full market value due to certain constraints. Section 4(1)(a) inter alia provides that- 'Where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor'. It would be seen from the above provision that before determining the value of the gift as may be found to result by virtue of the provisions of section 4(1)(a), it would be necessary for the assessing authority to determine the question as to whether the property has been transferred otherwise than for adequate consideration. 2. Normally, adequate consideration for the transfer of property would no doubt be the market value of the property at the date of transfer. But, if it could be established on the facts and circumstances of any particular case that it had not been possible for cogent and bonafide reasons to get full market value of the property, then it will not be unreasonable to hold that the property has been transferred for adequate consideration. The test would seem to be whether the consideration is such as could be reasonably expected on the facts and in the circumstances of the case. 3. However, it would be for the person claiming that it was not possible for him to obtain full market value for the transfer, to establish that fact to the satisfaction of the assessing authority. 4. These instructions may please be brought to the notice of all officers working in your charge.