Applicability of Sec.269C of Income Tax Act & 4(1)(a) of Gift Tax,1958. - Income Tax - 1663/CBDT

INSTRUCTION NO. 1663/CBDT Dated: November 22, 1985 Attention is invited to Board's Instruction No. 1558 (F.No. 326/37/83-WT) dated 21st May, 1984 on the above subject. 2. The question whether proceedings under section 269C of the Income-tax Act, 1961 and those under section 4(1)(a) of the Gift-tax Act, 1958 should be initiated simultaneously in each and every case has been reconsidered by the Board in consultation with the Ministry of Law. 3. It has been advised that for acquisition u/s.269 C of the I.T.Act, the basis is that the consideration has been under stated in the instrument of transfer with a view to evading the tax liability. The provisions of Section 4(1)(a) of the Gift-tax Act, 1958, on the other hand, enable the Gift-tax authorities to tax, as deemed gift, the difference between the stated or declared consideration and the fair market value, of an asset. 4. The proceeding under section 4(1)(a) of the Gift-tax Act, 1958 and under section 269C of the Income-tax Act, 1961 are thus mutually exclusive and proceeding under these should not be initiated every time except in cases of dispute, on protective basis. 5. There may however be situations where both proceedings under section 269C of the Income-tax Act and under section 4(1)(a) of the Gift-tax Act may be initiated. One such situation could be where declared consideration is 'A'. This consideration is less than what has actually passed i.e. 'B' and market value of the property under reference is still higher, say 'C'. In a case where there is evidence to show that 'B' is more than 'A' proceedings u/s 269C can be initiated. At the same time under section 4(1)(a) of the Gift-tax Act, gift-tax will also be leviable on the difference between 'C' and 'B'. 6. Consequently Board's earlier instruction No. 1558 dated 21st May, 1984 referred to in para (1) above is hereby withdrawn. Relevant extracts of the Ministry of Law's opinion dated 10-10-1985 in the matter are enclosed. These instructions may please be brought to the notice of all Officers working in your charge.