BRIJ RAJ SINGH Vs. GIFT TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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Manzoor Ahmed Bakhshi, Judicial Member -
(1.) THE appeal of the assessee is directed against the order dated 30th March, 1988 of CGT(A), Rajasthan, Jaipur. Rival contentions have been heard and records perused. Relevant facts are that assessee had inherited as karta of the HUF, some movable and immovable property on the death of his father Late Highness Maharaj Sumer Singh Sahibji of Kishangarh. On 20th September, 1979, assessee made a declaration converting the land and building in question into stock-in-trade. THE value put to this property was Rs. 10 lakhs. Assessee entered into a partnership on 1st October, 1979 bringing the land and building as his capital contribution. In the books of the firm a sum of Rs. 10 lakhs was credited to the capital account of the assessee. Assessee has not filed any gift-tax return. Since the Gift-tax Officer considered the bringing of land and building into the partnership as a transfer without adequate consideration, he was of the view the assessee was liable to gift-tax on the difference between the value at which the property was brought into the books of the firm and its market value. A notice under Section 16(1) was accordingly issued to the assessee. Assessee filed a return declaring nil gift. After the issue of notice under Section 15(2) Assessing Officer completed the assessment under Section 15(3) holding that the difference between the value at which it was brought to the books of the firm and the market value of that property was deemed gift. THE contention raised on behalf of the assessee that the assessee had contributed land and building towards his capital contribution and that the valuation of partners interest was to take place only when there is a dissolution of the firm or any of the partner retires, was not accepted by the Assessing Officer. THE alternative claim of the assessee that even if the capital contribution made by the assessee is considered to be deemed gift, the same was exempt under Section 5(1)(xiv) of the Gift-tax Act, was also rejected by the Assessing Officer. On the ground that there was no business in existence before the transfer was made. THE valuation of the property had been referred to the valuation officer who has valued the same at Rs. 29,59,300 as on 31-3-1979. THE Assessing Officer accordingly valued the property as on 31-3-1980 at Rs. 32,50,000. THE difference was worked out at Rs. 22,50,000. Assessee was having 20% share in the partnership firm. His interest was excluded. 80% of the difference was accordingly calculated at Rs. 18 lakhs, which has been subjected to tax.
(2.) The claim of the assessee is two-fold. Firstly, it is claimed that the true value of the property has been disclosed by the assessee and that there was no difference which could be treated as gift. It has been brought to our notice that value of this property was assessed to wealth-tax at Rs. 3,75,000 in the immediately preceding year. As against the accepted value of Rs. 3,75,000 assessee has genuinely declared the value of Rs. 10 lakhs. The-invoking of deeming provisions, according to the assessee, was therefore arbitrary and unwarranted. Reliance has been placed on the decision of the Madras High Court in the case of CGT v. Indo Traders & Agencies (Madras) (P.) Ltd. [1981 ] 131 ITR 313 in support of the contention that Section 4(1)(a), is not attracted in the case of bona fide transactions.
Secondly, it is claimed that there is no transfer by the assessee within the meaning of Section 4(1) (a) of the Gift-tax Act and that the value of the deemed gift in any case could not be determined as there was no dissolution of the firm or retirement of any partner. Reliance was placed on the decision of the Supreme Court in the case of Sunil Siddharthbhai v. CIT  156 ITR 509.
(3.) THE claim of the Department, on the other hand, is that assessee has got the valuation of this property accepted at Rs. 3,75,000 by misrepresentation. Earlier the property was let out to tenants. Its value was accordingly calculated by applying the yield method. During the relevant assessment year the property was not let out to tenants. Assessee had wrongly represented before the authorities that the property continued to be let out which was wrongly accepted by the authorities on the basis of which yield method was accepted. THE value accepted by misrepresentation was not binding upon the Gift-tax Officer, it was contended. THE claim of the revenue is also that the value adopted by the DVO is the correct value and that the same should be adopted for the computation of the deemed gift.;
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