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TMI Blog1973 (2) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ction was properly subjected to gift-tax under section 4(1)(a) of the Gift-tax Act ? (2) Whether, on the facts and circumstances of the case, the transaction was liable to be taxed under section 52(1) of the Income-tax Act? (3) Whether, on the facts and circumstances of the case, the transaction was liable to simultaneous taxation to gift-tax as well as to tax on capital gains? " The facts leading to these references briefly are that for the assessment year 1965-66, i.e., during the year ending 31st March, 1965, Sardarni Ahilya Raghbir Singh of Raja Sansi, Amritsar (hereinafter referred to as " the assessee "), transferred 100 shares of Simbhaoli Sugar Mills Private Ltd. of which she was the owner, to her step-son, S.B.S. Harinder Singh. These shares had the face value of Rs. 1,000 each and the sale price was also the same. Similarly, another 100 shares were transferred by her to Sardarni Bhajan Kaur, wife of the aforesaid Harinder Singh, for the same consideration. The paid-up value of these shares was Rs. 800 per share and that was " the cost price " for the purpose of capital gain and as the shares were sold for Rs. 1,000 each, the assessee declared a capital gain of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, however, referred the three questions mentioned above. The learned counsel for the assessee tried to argue before us the question of valuation as well as the question of intention. He tried to take shelter behind the words " properly subjected to gift-tax " as incorporated in question No. 1 and urged that he should be allowed to argue that the proper market value of each share did not exceed Rs. 1,000, because it was a private limited company in which shares could not be transferred to anybody that the holder liked and that the shares could be transferred only with the permission or consent of the directors. We are afraid, we cannot allow this to be done, because of a clear finding of the Tribunal, reproduced above, that no question of law arises either with regard to the question of valuation or with regard to the question of intention and the assessee felt satisfied and did not come to this court for mandamus to be issued to the Tribunal to refer these questions also. We must, therefore, proceed on the basis that the market value of each share was Rs. 2,450 on the date of the transfer and also that the intention of the assessee in making such transfers was " avoidance or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et value, can this transaction be treated as a transaction of gift under section 4 of the Gift-tax Act? Relevant part of section 4 runs as under: 4. (1) For the purposes of this Act,- (a) 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....... No doubt the transaction, as it originally stood, on the face of it, was not for adequate consideration. However, by the operation of subsection (1) of section 52 of the Income-tax Act, the consideration for the transfer has been " taken to be the fair market value of the capital asset " so transferred. That being the case, the property cannot be deemed to have been transferred "otherwise than for adequate consideration ". The argument of the learned counsel for the revenue was that, in fact, the transfer was not for full consideration, it is only deemed to be for full consideration under section 52(1) of the Income-tax Act and, for the purpose of the Gift-tax Act, it cannot be said that the consideration was fair market value of the asset. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the transaction is " taken to be " for full consideration and that being the case, the transfer, as taken by the Income-tax Officer, cannot be treated to be one for inadequate consideration. The learned counsel for the revenue referred to Stevens,(Suyveyor of Taxes) v. Durban-Roodepoort Gold Mining Company Ltd. This was a case where an English company, carrying on a gold mining business in Transvaal, paid a tax in Transvaal at 10 per cent. on the net produce obtained from working the mines. This was a tax which was paid in the third year for the three years of which average income was to be taken for the purpose of tax according to the statute. It was held that, in arriving at the liability of the company, the tax paid in Transvaal should be deducted from the profits of the year to which it related before arriving at the average. All that the learned counsel wanted to refer was to the following observations made by the learned judge at 407 of the report:" "There could be double taxation if the legislature distinctly enacted it, but upon general words of taxation, and when you have to interpret a taxing Act, you cannot so interpret it as to tax the subject twice over to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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