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TMI Blog1991 (4) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 52(2) of the Income-tax Act, 1961, to the conveyance of property executed by the assessee to his wife and brought to tax capital gains on the basis of the fair market value of such property as on the date of the conveyance and not on the basis of the actual consideration received by the assessee from his wife, it will not be open to the Department to invoke the provisions of section 64(1)(iii) of the Act to include in the total income of the assessee after such conveyance two-thirds of the income from such property ?" Some time during the accounting period relevant to the assessment year 1968-69, to be precise on February 24, 1966, the assessee sold an item of property to his wife for a consideration of Rs. 48,000. It is common gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the fair market value of the property as consideration, so that the assessee's case would not fall within the mischief of section 64(iii). Accordingly, he directed the Income-tax Officer to exclude from the assessee's total income, the income from the property transferred by the assessee to his wife. The Tribunal dismissed the departmental appeals more or less for the reasons given by the Appellate Assistant Commissioner. In particular, the Tribunal observed that section 52(2) created a legal fiction as to the fair market value of the property transferred. The effect of the legal fiction was, as had been considered by the Supreme Court in State of Bombay v. Pandurang Vinayak [1953] SCR 773, 778, that the assessee had received adequate con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in respect of the transfer by not less than 15 per cent. of the value so declared, the full value of the consideration shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be the fair market value on the date of the transfer. In any event, it has been laid down by the Supreme Court in the case of CIT v. Vadilal Lallubhai [1972] 86 ITR 2, that legal fictions are only for a definite purpose. They are limited to the purpose for which they are created and should not be extended beyond their legitimate field. In the circumstances, even if it is assumed for the sake of argument that section 52(2) created some legal fiction, we hold that the fiction is limited to the purport and scope of section 52 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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