Law:

Section:

Section 4(1) of the Gift-tax Act, 1958 - Deemed gift - Assessment year 1960-61 - Deceased -assessee owned 425 shares of a company in his own name - Hundred shares of said company stood in name of his minor son - Later, pursuant to a family settlement, said 425 shares were transferred to children at a consideration of Rs. 3,00,050 - GTO found that consideration for which said shares had been transferred by assessee was much smaller than market value of those shares and accordingly, held that difference between market value of shares and value at which actual transfer was made represented deemed gifts in hands of assessee - Whether since allocation of shares in question was by way of family settlement and had been made bona fide to put an end to dispute amongst members of family of deceased-assessee, said transaction did not amount to transfer and hence section 4(1)(a) was not applicable - Held, yes FACTS The deceased-assessee owned 425 shares of a company in his own name. In year 1959, certain family arrangements were devised as a result of which certain shares were transferred by the assessee and his children to other children at an agreed consideration. 425 shares belonging to the assessee were transferred for consideration of Rs. 3,00,050. The GTO found that the consideration for which 425 shares had been transferred by the assessee was much smaller than the market value of those shares on the date of the transfer. The GTO 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. The GTO 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 AAC though he reduced the quantum of gift by taking a smaller market value of the shares. On further appeal, it was argued before the Tribunal that there was no element of gift in the transfers which had to be made under force of…

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