Andhra Pradesh H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of s. 4(1)(a) of the GT Act were not attracted in respect of sales made by the assessee to Smt. Dhanamma, his wife, Sri C. S. Krishna Murthy and Sri C. Subbarao, minor sons, on September 16, 1969, of an aggregate area of ac. 4-171/1 cents, for an aggregate consideration of Rs. 14,500 ?

Counsel Appeared

M. Suryanarayana Murthy, for the Revenue : S. Dasaratharama Reddy, for the Assessee

Y.V. ANJANEYULU, J.:

This is a reference arising under the GT Act. The CIT sought reference of the following question for the consideration of this Court in connection with the asst. yr. 1970-71 :

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of s. 4(1)(a) of the GT Act were not attracted in respect of sales made by the assessee to Smt. Dhanamma, his wife, Sri C. S. Krishna Murthy and Sri C. Subbarao, minor sons, on September 16, 1969, of an aggregate area of ac. 4-171/1 cents, for an aggregate consideration of Rs. 14,500 ?”

2. The assessee purchased ac. 4-52 cents of land in the year 1964 together with a building for a consideration of Rs. 35,000. The value of the land was found to be Rs. 15,000 and the value of the building Rs. 20,000. The land was transferred by the assessee in favour of his wife and his two minor children in the year 1969. The consideration specified in the deed of sale was Rs. 14,500. The GTO initiated proceedings for the purpose of levying gift-tax under s. 4(1)(a) of the GT Act (“the Act “, for short). According to the GTO, the value of the land when it was sold in the year 1969 was not less than Rs. 1,00,200 and the transfer of the same for a consideration of Rs. 14,500 attracted the application of the provisions of s. 4(1)(a) of the Act, as the property was transferred for inadequate consideration. The difference between the market value of the lands sold and the actual sale price was deemed to be a ” gift “, within the meaning of s. 4(1)(a) of the Act, and assessed accordingly for the asst. yr. 1970-71. The market value of the land sold by the assessee in the year 1969 was determined at Rs. 1,00,200 with reference to certain comparable sales and also taking into consideration certain information contained in the report of the approved valuer.

3. The assessee challenged the correctness of the assessment on the basic ground that the lands were sold for adequate consideration. The appeal before the first appellate authority having been dismissed, a second appeal was carried to the Tribunal. The Tribunal went into the legal implications of s. 4(1)(a) of the Act. According to the Tribunal, the provisions of s. 4(1)(a) of the Act are not applicable and accordingly it quashed the assessment. The CIT is in reference, being aggrieved by the decision of the Tribunal.

4. Sec. 4(1)(a) of the Act provides that where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor. The ingredients of this provision are, therefore, clear. It must be shown that the market value of the property at the time of transfer was greater than the value specified in the instrument of transfer. The market value has to be determined by the GTO with reference to relevant evidence. Once the market value is fixed on proper and relevant data, the GTO has no further choice in the matter except to deem the difference between the market value and the consideration specified in the instrument of transfer as a gift and tax it accordingly. No further consideration shall prevail. In the present case, the market value of the land sold was taken by the GTO at Rs. 1,00,200. The Tribunal went into the exercise of examining the provisions of the Act without applying itself first to the question whether the market value adopted by the GTO was properly determined or not. It was open to the Tribunal to consider all the relevant evidence and come to an appropriate decision regarding the extent of the market value of the property transferred. If, after such examination, the Tribunal comes to the conclusion that the market value of the property is not greater than the consideration specified in the instrument of sale, then there could be little dispute that the provisions of s. 4(1)(a) of the Act would not come into operation. Without, however, determining the market value on the basis of proper data” it is not open to the Tribunal to come to a conclusion that the provisions of s. 4(1)(a) of the Act are not attracted. We notice that the Tribunal had referred to the purchase of the land for Rs. 15,000 in the year 1964 and the sale thereof by the assessee in favour of his wife and minor children for Rs. 14,500 in 1969. The Tribunal proceeds to observe from the aforesaid facts that the sale consideration specified in the instrument of sale in the year 1969 is not such that ” it would shock the conscience of the Court “. We do not understand the relevancy of this observation. The question is not whether the consideration for which the property is shown to have been sold is such that it would shock the conscience of the Court. The real question is whether the consideration specified in the instrument of transfer fell short of the real market value of the property. We may refer to the decision of the Madras High Court on which considerable reliance was placed by learned counsel for the assessee and that is the decision in CGT vs. Indo Traders and Agencies (Madras) P. Ltd. (1981) 131 ITR 313. At page 322, the High Court has made the following observations : ” The relevancy of the market price as shown by the provision is only to fix the quantum of the value of the gift after it is found that the transaction was for inadequate consideration. When once the GTO assumes jurisdiction and is in a position to establish that the property has been transferred otherwise than for adequate consideration, then there is no option for him but to take the market value of the property as on the date of the transfer and compare it with the value of the consideration as shown by the parties. The difference will be deemed to be a gift made by the transferor.”

5. We are in respectful agreement with the above observations. What the Tribunal should have done in this case was to determine the market value upon relevant data, compare it with the sale consideration specified in the sale deed and then come to a proper conclusion whether there was inadequate consideration so that the provisions of s. 4(1)(a) of the Act are applicable. Unfortunately, the Tribunal did not go into this exercise and did not record any finding regarding the adequacy or otherwise of the market value estimated by the GTO at Rs. 1,00,200. In the absence of any such finding, we are not in a position to answer the question referred to this Court for consideration. We return the reference case with a direction to the Tribunal to go into the aforesaid question, determine the market value of the property upon proper and relevant data and then come to a finding whether there is inadequacy of consideration for purposes of s. 4(1)(a) of the Act. This the Tribunal may do while passing an order conformably to the judgment of this Court, bearing in mind the legal principles enunciated in the judgment of this Court. Both sides may be given necessary opportunity for the purpose.

6. The reference is accordingly returned unanswered.

[Citation : 171 ITR 310]