Decided on August 05,1975



Pathak, C.J - (1.) THE following two questions cf law have been referred by the Income-tax Appellate Tribunal as arising out of the Tribunal's order in G.T.A. No. 7 (Gauhati) of 1968-69, dated April 24, 1972, under Section 26 of the Gift-tax Act: "(1) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the provisions of Section 4(1)(a) of the Gift-tax Act, 1958, were attracted and that there was a deemed gift taxable in the hands of the assessee ? (2) Whether, on the facts, the Tribunal was correct in law in holding that in considering the quantum of taxable gift under Section 4(a) of the Gift-tax Act, 1958, the transfer of shares standing in the name of his minor son was not to be considered ?."
(2.) THE following facts appear from the statement of the case. The assessment year involved is 1960-61. The deceased-assessee, late A1-Haj J. Ahmed, owned 425 shares of Khanikar Tea Estate (P.) Ltd. in his own name. Hundred shares of the said company stood in the name of his minor son, Samiruddin Ahmed. Besides these, there were other shares owned by his wife and the other sons and daughters from different wives. The deceased assessee and his children and wife also owned certain shares of Ahmed Tea Company (P.) Ltd. The children of different wives were not having good relations and there were family quarrels. When the matter took a serious turn in 1959, certain family arrangements were devised as a result of which certain shares were transferred by the assessee and his children to other children. The first group of children led by M. A. Rahman got all the shares of Khanikar Tea Estates (P.) Ltd. Another group got the shares in Ahmed Tea Company (P.) Ltd. As a result of certain arbitration the shares were transferred at an agreed consideration. Hares belonging to the deceased assessee were transferred for consideration of Rs. 3,00,050. The consideration for a set of 100 sHares owned by the other children was fixed at Rs, 2,00,000. The Gift-tax Officer found that the consideration for which Hares had been transferred by the assessee was much smaller than the market value of those sHares on the date of the transfer. The Gift-tax Officer further found that the consideration was lower than even the face value of those sHares. He further took note of the fact that the consideration for the other sHares of the same company belonging to the minor son and other children of the assessee was much more than the market value of those sHares.
(3.) ON the above facts, in the income-tax assessments, the provisions of the proviso to Section 12B(2) were applied and some capital gains were worked out in the hands of the assessee. At the same time, in the gift-tax proceedings the Gift-tax Officer held that the difference between the market value of the shares and the value at which the actual transfer was made represented deemed gifts in the hands of the assessee. This order was confirmed by the Appellate Assistant Commissioner though he reduced the quantum of gift by taking a smaller market value of the shares. In appeal against the income-tax assessment the Tribunal held that the proviso to Section 12B(2) was not applicable as the object of the transfer was not to avoid capital gains tax. However, in appeal against the gift-tax assessment, it was argued before the Tribunal that there was no element of gift in the transfers which had to be made under force of circumstances by the assessee. Alternatively, it was argued that the sale of 100 shares belonging to the minor son which were transferred at a price much more than the market price should have been taken into consideration while computing the quantum of the taxable gift. The Tribunal rejected the contention of the assessee and held that the assessee was chargeable to deemed gift under Section 4(1)(a) of the Gift-tax Act, 1958.;

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