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Commissioner of Income-tax Vs. Smt. Ushabai S. Dhanwatay, Nagpur - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 391 of 1980
Judge
Reported in(1983)36CTR(Bom)198; [1984]147ITR455(Bom)
ActsIncome Tax Act, 1961 - Sections 52(1) and (2)
AppellantCommissioner of Income-tax
RespondentSmt. Ushabai S. Dhanwatay, Nagpur
Excerpt:
.....- sections 52 (1) and 52 (2) of income tax act, 1961 - assessee was co-owner of building - assessee transferred certain part of building in favour of her son in exchange of another premise - department took action under section 52 (2) against assessee on grounds that difference between fair market value of property and actual consideration disclosed by assessee more than 15% of value declared by assessee - in appeal before tribunal it was declared that provisions of section 52 (2) not applicable to assessee to assess gains from transaction - reference made by department against decision of tribunal - transaction of transfer in favour of son connected with assessee - condition in section 52 (1) that transfer effected with object of avoidance or reduction of liability of assessee..........in ramdaspeth at nagpur, which was to be transferred in favour of the assess. the value of one anna share was determined by the assessee at rs. 85,000 and the ramdaspeth house which was to be transferred to the assessee was valued at rs. 1,10,000. thus, the assessee made a payment of rs. 25,000 in cash to amrut.2. the ito got the crystal building valued by the district valuation officer and the market value as on march 31, 1972, was determined at rs. 59,64,000. the value of the assessee's share of 3 1/2 annas came to rs. 11,74,162. the value of one anna share came to rs. 3,35,475.3. the ito invoked the provisions of s. 52(1) and s. 52(2), but finally held that the case was fully covered by s. 52(1) and determined the assessee's share in the property at rs. 3,35,475, and proceeded to.....
Judgment:

Chandurkar, J.

1. The assessee in this reference was a co-owner of 'Crystal Building' bearing Plot No. 79 of Scheme No. 58 of Worli Estate of the municipal corporation of Greater Bombay. Her share was 3 1/2 annas in a rupee. By sale deed dated March 1, 1972, she sold one anna out of her share of 3 1/2 annas to her son Amrut in exchange for a house in Ramdaspeth at Nagpur, which was to be transferred in favour of the assess. The value of one anna share was determined by the assessee at Rs. 85,000 and the Ramdaspeth house which was to be transferred to the assessee was valued at Rs. 1,10,000. Thus, the assessee made a payment of Rs. 25,000 in cash to Amrut.

2. The ITO got the Crystal Building valued by the District Valuation Officer and the market value as on March 31, 1972, was determined at Rs. 59,64,000. The value of the assessee's share of 3 1/2 annas came to Rs. 11,74,162. The value of one anna share came to Rs. 3,35,475.

3. The ITO invoked the provisions of s. 52(1) and s. 52(2), but finally held that the case was fully covered by s. 52(1) and determined the assessee's share in the property at Rs. 3,35,475, and proceeded to determine the long-term capital gains. He also justified his action under s. 52(2) on the ground that the difference between the fair market value of the property and the actual consideration disclosed by the assessee was more than 15% of the value declared by the assessee.

4. In appeal filed by the assessee, the AAC, relying mainly on the decision of this court in Babubhai M. Sanghvi v. CIT : [1974]97ITR213(Bom) , took the view that the ITO had failed to establish that the assessee had received anything more than Rs. 85,000 from the purchaser by way of consideration for her one anna share and, therefore, the provisions of s. 52(1) had no application. The AAC also negatived the applicability of s. 52(2). This view of the AAC has been upheld by the Income-tax Appellate Tribunal, while dismissing the appeal field by the department. Arising out of this order of the tribunal, the following question has been referred under s. 256(1) of the I.T. Act at the instance of the Department :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the provisions of section 52(2) or s. 52(2) were not applicable to assess the gains stated to have arisen from the aforesaid transaction ?'

5. It was difficult for the learned counsel for the Department to challenge the view taken by the AAC and the Tribunal, in view of the statement of the law made by the Supreme Court in K. P.Varghese v. ITO : [1981]131ITR597(SC) with regard to the requirements of ss. 52(1) and 52(2) of the I.T. Act. It was been pointed Supreme Court that one of the conditions required to be satisfied for the applicability of s. 52(1) is that there has to be an understatement of the consideration in respect of the transfer because it is only by showing the consideration in respect of the transfer because it is only by showing the consideration for the transfer at a lesser figure than that actually received by the assessee that the assessee can achieve the object of avoiding or reducing his liability to tax on capital gains. It is no doubt true that the transfree of one anna share was the son of the assessee and was, therefore, connected with the assessee. But the second condition in s. 52(1) that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under s. 45 has not been satisfied as found, and, in our opinion, rightly, by the AAC and the Income-tax Appellate Tribunal.

6. So far as s. 52(2) is concerned, it is difficult for us to see how the Revenue can rely upon that provision because it has not been established that the consideration received by the assessee was more than what was declared or disclosed. In our view, the Tribunal and the AAC were right in holding that neither the provisions of s. 52(1) nor s. 52(2) were attracted to the facts of the present case. Consequently, the question referred has to be answered in the affirmative and in favour of the assessee. The assessee to get the costs of this reference.


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