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TMI Blog1972 (2) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,958 as capital gains in respect of this transaction. This amount was arrived at by deducting the cost of the capital asset, namely, Rs. 64,042 from the sale consideration of Rs. 80,000 and making other permissible deductions. The Income-tax Officer, B-Ward, Tenali, issued a pre-assessment notice dated June 24, 1968, estimating the value of the building and site sold at Rs. 1,30,586, and called upon the petitioner to file his objections, if any, against the proposed valuation. The petitioner submitted that the value of the building and the site would come to Rs. 86,380 and as he had sold it for a lump sum of Rs. 80,000 the variation is very small and as he was disposing of the property as a whole, the value for which the property was sold was reasonable and fair priced. He stated that the proposed estimate of the building at Rs. 1,30,586 was uncalled for and unwarranted. The Income-tax Officer finalised the assessment of the petitioner for the year 1964-65 on the 28th September, 1968. While making the assessment he estimated the fair market value of the properties at Rs. 1,14,000 and fixed the capital gains at Rs. 44,960 after allowing initial exemption of Rs. 5,000 and levied a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and that in the order the finding to the above effect was not based upon any evidence, but on the mere ipse dixit of the officer and hence the proceedings under section 52(1) were illegal and without jurisdiction. He also contended that the said proceedings were contrary to the principles of natural justice, as the petitioner was denied the opportunity to satisfy the authorities that the requirements of section 52(1) were not fulfilled. He made a further submission which was not raised in that form in the affidavit in support of the writ petition. He submitted that the petitioner was assessed to gift-tax in respect of the transaction on the footing that the property was not transferred for adequate consideration and hence the amount by which the market value of the property exceeded the value of the consideration, namely, Rs. 1,14,000 minus Rs. 80,000=Rs. 34,000, was deemed to be a gift. Hence it was not permissible to levy tax on capital gains on the same transaction. At any rate the capital gain will have to be confined only to the extent to which the transaction was not treated as a gift under the Gift-tax Act. The learned counsel for the income-tax department besides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of the transfer. " It is clear from section 45 read with section 47(3) that no tax under the head of " Capital gains " can be levied in respect of a transfer under a gift. The expression " gift " is not defined in the Income-tax Act, but I am of the view that the expression has to be understood in the context of the Gift-tax Act. The Gift-tax Act defines " gift " as a transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer of any property deemed to be a gift under section 4. Section 4 deals with transfers which are deemed to be gifts for the purpose of the Act. Section 4(a) states that where the 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. In this case the property which is of the market value of Rs. 1,14,000 was purported to be transferred to the sons for a sum of Rs. 80,000. In view of the above provisions of the Gift-tax Act the difference between the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the Gift-tax Act was enacted-which provided that certain transactions shall be deemed to be gifts for the purpose of the Act, there is no reason why the two Acts should not be read together. It is well-known that the Income-tax Act, the Wealth-tax Act, the Gift-tax Act and the Expenditure-tax Act form different heads of an integrated system of taxation and they are all administered by the officers of the income-tax department. The imposition of tax under one head has relevancy to the liability under other heads of tax. It is, therefore, reasonable to infer that the legislature did not intend to charge income-tax on an amount which is liable to gift-tax. The above view was taken in a decision of the Kerala High Court in K. P. Varghese v. Income-tax Officer. In that case the petitioner purchased a property in 1958 for Rs. 16,500 and sold it for the same consideration in 1965 to his 5 children and daughter-in-law. The difference between the fair market value and the actual consideration received by the petitioner was treated as gift under section 4 of the Gift-tax Act and assessed under that Act. The Income-tax Officer, however, held that section 52 of the Income-tax Act also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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