9911796707
TMI Blog1990 (4) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... elf was sub-divided into four plots, one behind the other, the first floor being retained by the assessee, the second plot of 5.25 grounds being given to an other subsidiary on 15-7-1974, the third plot being the property in dispute and the last plot being retained by the assessee. The property in question was 10.66 grounds which was transferred by a deed dated 10-4-1975 by the assessee to the wholly owned subsidiary company for a consideration of Rs. 4,20,000. Though the document itself states that the market value according to the Government guide lines for the purposes of stamp duty was Rs. 8,48,000, no stamp duty was paid since the document was exempt under the Stamp Act being a transfer by a holding company to a wholly owned subsidiary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that since the consideration shown in the document was less than the market value according to the guidelines and the assessee and wholly owned subsidiary company were separate juridical entities, there was a transfer without adequate consideration which resulted in a deemed gift which had to be brought to tax. 4. On a consideration of the rival submissions, we are of the opinion that the assessee is entitled to succeed. Under section 4(1)(a) of the Gift-tax Act, where a 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. The Madras High Court has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understatement. But it was stated that the assessee had taken a valuer's report from a qualified architect on the basis of which the value was adopted which shows that it was a bona fide valuation, particularly when that has taken into account various distinguishing features of this land such as its being further away from Mount Road with a narrower width and also being burdened with a tenancy. These factors we consider were relevant in depressing the value. 6. There is a letter of the Central Board of Direct Taxes dated 27-2-1969 declaring that the provisions for assessing deemed gift were not intended to be applied to bona fide transactions. In this context, we may note that transfers by a holding company to a wholly owned subsidiary co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it could hardly be accepted that it could be deemed to be a gift by regarding the consideration stated as inadequate. 7. Even if any inadequacy can be imputed this is a case where it could be made up by a simple procedure of revising the consideration since it would be a mere accounting entry in the sense that that consideration would be offset by the value of the shares being allotted to the assessee, which as a holding company would always have equivalent value of the property belonging to the wholly owned subsidiary. It is also significant that in spite of the consideration being regarded as inadequate for gift-tax purposes, no proceedings were taken for acquiring the property under the relevant provisions of the Income-tax Act. All t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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