- (1.) This appeal filed by the assessee is directed against the judgment of the Gujarat High Court on a reference made by the Appellate Tribunal under Section 26(1) of the Gift Tax Act, 1958 (hereinafter referred to as 'the Act'). The question which was referred for opinion reads as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the difference of Rs. 8,21,950/- on the sale of the jewellery by the asseseee to its 12 wholly owned subsidiary companies was not liable to gift tax under the provisions of the Gift Tax Act, 1958." The High Court disposed of the reference by answering the question in the negative, in favour of the Revenue and against the assessee. Hence this appeal. The factual backdrop of the case relevant for the present proceeding may be stated thus:
(2.) The assessee is a private limited investment company and the assessment relates to the assessment year 1976-77. The assessee transferred jewellery to twelve private limited companies which were wholly owned subsidiary companies of the assessee and in return the twelve private limited companies transferred to the assessee fully paid equity shares of the face value of Rs. 100/- each, the face value of all the shares being Rs. 5,69,400/-. The jewellery thus transferred became the only asset of the twelve companies and the shares transferred to the assessee were the entire share holding of the twelve private limited companies. Since the assessee did not file any gift tax return, a notice under Section 16(1) of the Act was served upon the assessee pursuant to which the assessee filed a 'nil' return. Thereafter a notice under Section 15(2) of the Act was issued and the proceeding for assessment was taken up.
(3.) In the assessment proceeding the assessee took the stand that it had transferred jewellery to the twelve subsidiary companies of a book value of Rs. 5,69,400/- and received shares from those companies of the face value of Rs. 5,69,400/-, in the circumstances there was no gift involved in the transaction. The case of the Revenue, on the other hand, was that the market value of the jewellery acquired by the assessee amounted to Rs. 13,91,350/- on the date of transfer, therefore, there was a gift to the extent of the amount which exceeded the face value of the shares, i.e., Rs. 8,21,950/-.;