9911796707
TMI Blog1997 (12) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... x under the provisions of the Gift-tax Act, 1958 ?" The assessee is a private limited investment company. During the assessment year 1976-77, the assessee sold certain jewellery to its 12 wholly owned subsidiary companies in consideration of fully paid up shares of Rs. 100 each of these companies. The assessee did not file any gift-tax return for the assessment year 1976-77 and, therefore, a notice under section 16(1) of the Act dated March 22, 1979, was served on the assessee on March 23, 1979, pursuant to which the assessee filed a return of gift on April 9, 1979, declaring a gift of nil amount. Notice under section 15(2) was issued to the assessee in response to which replies were given on July 24, 1979, and August 17, 1979. So far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this score, the addition of Rs. 8,21,950 is hereby deleted. The Commissioner had also held that the assessee group had created numerous firms with the sole object of inflating the cost of assets at the time of capital contribution so as to either reduce the profit on the sale of those assets in the firm or to dissolve it and distribute the assets to chosen partners avoiding capital gains tax, gift-tax and the provisions of section 64 of the Income-tax Act, 1961. This finding was, however, set aside by the Tribunal and the matter in that regard was restored to the file of the Commissioner (Appeals) directing him to dispose of it afresh. The observation regarding non-existence of firms was made in the context of Unique Associates and has, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,69,400 were contributed by the assessee to a firm, Unique Associates, and on the assessee's own admission the market value of the jewellery sold to the 12 subsidiary companies was Rs. 13,91,350. It has been contended on behalf of the Revenue that, when admittedly the face value of the shares was Rs. 5,69,400 and the valuation of the jewellery was Rs. 13,91,350, the value of jewellery exceeded the value of the consideration and, therefore, the amount of difference was a deemed gift made by the transferor, i.e., the assessee to the subsidiaries within the meaning of section 4(1)(a). It was contended that the basis adopted by the Tribunal for determining the value of the shares which constituted the consideration for the jewellery sold to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction. The contention that under section 47(v), a transfer of the capital asset by a subsidiary company to the holding company is not to be regarded as a transfer, need not detain us. It is obvious that the said provisions can have no application to deemed gifts as understood by the provisions of section 4(1) of the said Act. That is a special provision enacted in the context of charging gift-tax. Section 2(xii) defines gift so as to mean the 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 or conversion of any property referred to in section 4, deemed to be a gift under that section. The definition of gift i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be ascertained at a point of time prior to the actual transfer. The provision would become meaningless if the value of the property proposed to be transferred and the value of the consideration are both to be judged from the factum of transaction itself, for, in that event, each would be said to be matching the value of the other rendering the provision redundant. In the context of the present case it would amount to saying that whatever may be the value of the jewellery should be treated as the value of the consideration, that is, the shares of the subsidiaries which were to be given by way of consideration for the purchase of jewellery. The shares which were to be passed on for the purchase of property were different and independe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, hold that the finding of the Tribunal that when the only asset of the subsidiary companies was the jewellery purchased and their capital consisted only of the shares issued to the assessee-company (for such purchase), there was no question of any deemed gift, as whatever will be the value taken for the jewellery will become the value of the fully paid up shares issued to the assessee on the break up method of valuing of shares of private limited companies, is erroneous. The decision in Motor Sales case [1990] 186 ITR 419 (All) on which reliance was placed on behalf of the assessee cannot assist the assessee because in that case the entire assets and liabilities of the firm were taken over by the company as a going concern and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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