Law:

Section:

Section 52 of the Income-tax Act, 1961 – Capital gains – Under statement of consideration for transfer – Assessment year 1966-67 – Whether provisions of section 52(1) and (2) are attracted only where transfer of capital asset is effected with object of avoidance or reduction of liability under section 45 and not where full value of consideration received is declared - Held, yes – Assessee purchased certain shares of a company from his brother in order to obtain controlling interest in said company and in part consideration of purchase, transferred shares of another company in favour of his brother at their face value of Rs. 10 per share – Market value of said share was Rs. 22.30 – Tribunal recorded finding of fact that transfer of shares was not effected with object of reducing tax liability under section 45 – It was not case of department that assessee had received more than what was declared by him as full value of consideration received by him – Whether advantage of controlling interest which assessee hoped to have could not be said to constitute difference between value of shares declared by him on date of transfer and fair market value and therefore, for forming opinion in accordance with requirements of section 52(2), possible controlling interest in company which assessee hoped to secure at future date, could not be taken into account -Held, yes – Whether, therefore, neither provisions of section 52(1) nor provisions of section 52(2) were applicable - Held, yes FACTS The assessee purchased shares of a company from his brother in order to obtain controlling interest in said company. The assessee paid part of the consideration by transfer of certain shares of another company at the face value of Rs. 10 per share in favour of his brother. In the return filed for the relevant assessment years, the assessee declared the capital gain on said transfer of shares. The ITO, however, having regard to fact that market value of shares was Rs. 22.30, determined capital gains at higher figure under section 52(1). The AAC held that the correct provision that should have been applied to the facts of the case was section 52(2) and not section 52(1). In that view, he…

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