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Section 4 of the Gift-tax Act, 1958 - Deemed gift - Assessee sold property at book value - ITO estimated fair market value at higher figure - Difference was charged as short-term capital gain and ITO, simultaneously acting as GTO, charged it as a deemed gift under Gift-tax Act - Commissioner (Appeals) deleted addition being short term capital gains - Whether in gift tax proceedings Tribunal was justified in holding that amount charged as capital gains was not assessable as deemed gift as they arose out of one and same transaction - Held, yes FACTS The assessee transferred certain properties at book value the ITO was of the view that the consideration disclosed by the assessee was much below the fair market value of the assets. He referred the matter to the Departmental Valuer who estimated the fair market value at higher figure. The difference was charged as a short-term capital gain. Simultaneously, the ITO, acting as GTO, charged it as a deemed gift under the Gift-tax Act. The Commissioner (Appeals) deleted the addition made by the ITO being the short-term capital gains. This decision was accepted by the Department. In gift-tax proceedings the Tribunal held that capital gains and gift-tax could not stand together as they arose out of one and the same transaction and, therefore, ultimately declined to make a reference to the High Court. On application under section 256(2). HELD This was not a fit case in which the Tribunal should be called upon to make a reference as proposed by the applicant, as the Tribunal had given valid reasons for rejecting that prayer. In these circumstances, the application was dismissed. Note: The case was decided in favour of the assessee. CASE REFERRED TO K.P. Varghese v. ITO [1981] 131 ITR 597 (SC). R.C. Mukati for the Applicant. JUDGMENT R.C. Mukati, counsel for the applicant, was heard on the question of admission. This is an application filed by the applicant under section 26(3) of the Gift-tax Act, 1958, calling upon the Income-tax Appellate Tribunal, Indore, to make a reference to this court on the following question of law proposed by the applicant: "Whether, on the facts and in the circumstances of the case, the Appellate…

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