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TMI Blog1973 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... the site as well as the building constructed thereon came to Rs. 64,042. For purposes of construction of the buildings the petitioner borrowed Rs. 50,206.49 from his divided sons and Messrs. B. Satyanarayanamurthy and Sons, Guntur. For the discharge of these debts the petitioner sold the said site and the structures thereon for a total consideration of Rs. 80,000. The sale deed was executed on April 15, 1963, in favour of his divided sons. He contended that the sale value mentioned in the sale deed is the actual consideration received by him. The transaction was real and genuine, effected with the object of discharging the debts. While so, the Income-tax Officer, Tenali, issued a notice to the petitioner on June 24, 1968, asking the petitioner to value the site and buildings which he sold to his sons. The petitioner filed his objections. He mentioned the value of the buildings and the site as Rs. 86,380. The variation in his opinion was small. He (the assessee), therefore, said that the reassessment would not be warranted. The Income-tax Officer finalised the assessment of the petitioner for the year 1964-65 on September 28, 1968. He estimated the market value at Rs. 1,14,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction gift-tax was levied under the Gift-tax Act, then capital gains tax cannot be levied on such a transaction. We find it difficult to accept this approach as correct. Section 45 of the Income-tax Act relates to " capital gains ". According to that section " any profits or gains arising from the transfer of a capital asset effected in the previous year shall............ be chargeable to income-tax under the head capital gains " and shall be deemed to be the income of the previous year in which the transfer took place. Even a cursory reading of that section would indicate that some profits or gains must have arisen from transfer of the capital asset and it is this profit or gain that is considered to be income of the previous year and is made chargeable to tax as capital gains. Section 47 however, exempts from the operation of section 45 " any transfer of a capital asset under a gift ". In other words, section 45 would not apply to any transfer of a capital asset under gift. Section 45, therefore, must apply to a transfer which is not a gift in order to attract tax on capital gains. In this case, as seen from the facts narrated in the writ petition itself, there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market value of the property so transferred. The learned judge, however, has erred in assuming that the taxable amount under both the Acts is Rs. 34,000. For the purpose of the Gift-tax Act, it was Rs. 34,000 but for the purpose of the Income-tax Act, the difference between the actual cost, i.e., Rs. 64,042, and the market value, i.e., Rs. 1,14,000, was Rs. 44,960. That being the capital gains, the tax was levied on that amount. There is thus no question of treating the same amount " as a gift and as a transfer resulting in a capital gain ". We are unable to understand how because of this deeming provision made exclusively for the purpose of the Gift-tax Act, it can be imported for the purpose of understanding the word " gift " employed under section 47(iii) of the Income-tax Act. The scope of the two Acts is entirely different. One taxes the income and the other taxes the gifts or deemed gifts. The legislative programme in regard to these two enactments materially differs. There is no justification for contending that since the two Acts form parts of an integrated system of taxation and as both the Acts are administered by the same officers, the two Acts must be read together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but uses the language of the 1922 Act. It rules out the possibility of an intendment to import the artificial meaning to the word " gift ". The language is plain. The meaning we are giving does not do any violence to the object or purpose of the Income-tax Act. It would not, therefore, be proper to import an artificial definition of another Act to define the word "gift " used in section 47(iii) of the Income-tax Act. Assuming without so holding that section 47(iii) should not be understood in a broad sense and the word " gift " should be given a narrow interpretation, even then we fail to see how the sale deed, which has been executed in this case, can escape capital gains tax. Whether the word " gift " is to be given a wider meaning, as we have said it ought to be given or whether it is to be given a narrow meaning, as is canvassed before us, what would be exempted from the operation of section 45 of the Income-tax Act nevertheless would be only a gift and not a deemed gift and in no case a sale. Merely because it is a deemed gift for the purpose of section 2(xii) read with section 4 of the Gift-tax Act, it is beyond our comprehension as to how that deeming clause would exempt t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is very clear. Section 52 itself says that : " Where the person who acquires a capital asset from an assessee is directly or indirectly connected with the assessee and the Income-tax Officer has reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under section 45, the full value of the consideration for the transfer shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be the fair market value of the capital asset on the date of the transfer. " In order to attract section 52, therefore, two things must co-exist. Firstly, the person who acquired a capital asset from the assessee must be directly or indirectly connected with the assessee. Secondly, the Income-tax Officer must have reason to believe that the transfer was effected with the object of avoidance or reduction of liability of the assessee under section 45 of the Act. It is already seen that section 45 applies to transfers excluding gifts and other transfers mentioned in section 47. If that is so, then section 52 must necessarily apply only to such transfers covered by section 45 and which are not excluded by sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held the view that section 2(xii) read with section 4 of the Gift-tax Act can be combinedly read with sections 45, 47 and 52 of the Income-tax Act and stated that when once gift-tax is levied, capital gains tax cannot be levied, that the present petition is filed with the hope that the High Court would interfere in spite of the fact that the statutory remedy available to the petitioner has not been availed of and there has been unexplained enormous delay of more than two years in filing the writ petition in this court. We are not satisfied that there were proper reasons for the petitioner for not filing the appeal ; nor are we satisfied that there has been sufficient cause for coming to this court late. On the other hand, we have every reason to believe that the petitioner was satisfied that the Income-tax Officer had decided the primary questions correctly and after assuming the jurisdiction under section 52 passed the assessment order validly. In no other way, the petitioner's conduct as mentioned above can be explained. We are, therefore, not inclined to go into this question now to find out whether the jurisdictional fact was properly decided by the Income-tax Officer. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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