V. Ramaswami, J.
1. The assessee is a registered firm of partnership consisting of four partners. Their names and the different shares held by them are given below :
1. Dhuraji Khusalji ... 12/28 share2. Rikadas Dhuraji ... 5/28 share3. Devichand Dharmachand ... 4/28 share4. Chaganlal Kesarimal ... 7/28 share
The firm had purchased a house property bearing No. 34, Perumal Mudali Street, Madras, on November 21, 1947, for Rs. 36,000. It had effected some improvements and the total cost as per accounts as on November 1, 1962, amounted to Rs. 63,327. This sum stood to the debit of the property account in the books of the firm. The income from this property was returned by the firm from the date of its purchase. On November 1, 1962, the 1st, 3rd and 4th partners executed what is styled as release deed by which they had released all their rights and interests in the said property in favour of the second partner. This deed also was registered under the Registration Act. The value of the property as per the release deed was Rs. 64,000. In the accounts of the partnership the book value of the property, namely, Rs. 63,327, was transferred to the debit of the second partner with the following narration:
'Cost of Daya Sadan purchased from M/s. Dhuraji Khusalji & Co. on November 1, 1962.'
2. For the assessment year 1964-65, corresponding to the year ending October 17, 1963, the assessee-firm filed a return in which under the heading 'Capital gains' a sum of Rs. 18,353 was shown. This had been done by arriving at the net annual value of the property as Rs. 4,084 and determining the market value at 20 times the annual value. From the resultant figure of Rs. 81,680 it had deducted a sum of Rs. 63,327 which is the value of the property as per books, and arrived at the capital gain of Rs. 18,353. After making certain enquiries and considering the market condition and the rent the property fetched, the Income-tax Officer, with the approval of the Inspecting Assistant Commissioner, determined the market value at Rs. 1,05,000. He took the cost at a round figure of Rs. 64,000 and thus computed the capital gain at Rs. 41,000.
3. For the same assessment year 1964-65, corresponding to the year ending October 17, 1963, in the individual assessment of the second partner, Rikadas Dhuraji, the Income-tax Officer added a sum of Rs. 7,321 as his share of the capital gains. The assessee-firm and the individual, Rikadas Dhuraji, filed appeals before the Appellate Assistant Commissioner. In the appeal, the assessee-firm contended that there was neither a sale nor a transfer of the property by the firm to one of the partners and that the release deed did not amount to a sale or transfer and that, therefore, no question of assessment to capital gains arose, though they themselves had voluntarily filed a return showing the transaction as sale and a capital gain of Rs. 18,353. The Appellate Assistant Commissioner accepted this contention and held that there was no sale by the firm and that the release deed dated November 1, 1962, would not constitute a sale by the firm to a partner. In this view, the appeal was allowed and the Income-tax Officer was directed to modify the assessment. Consequently, the appeal filed by the individual partner in respect of the assessment of his share of capital gain was also allowed. The department filed two appeals to the Tribunal which were heard and disposed of together. The Tribunal dismissed the appeals. The view of the Tribunal on the point raised in their own words may be set out here as some arguments were advanced as to what exactly was the decision of the Tribunal. That passage reads as follows :
'9. The point for consideration is whether there was a transfer by the firm in favour of one of the partners so as to attract capital gains. The department have proceeded on the assumption that a market value of the property transferred had to be adopted. There is no warrant for this. There is no finding that the transfer was to reduce tax liability. The property had been transferred only at book cost. Therefore, there is no question of any capital gains arising at all. Moreover, the property belonged to the firm and if there was to be a sale, it can only be by the firm as such or by one of the partners acting on behalf of others. Apart from the entry there is no document evidencing the transfer. In the case of immovable properties mere book entries would not operate to effect a transfer. Moreover, it would appear to be open to the partner to agree to confer exclusive right in favour of any one partner in respect of any property belonging to the firm. This is what has been done under the release deed. Having regard to all the facts of the case, we have to hold that there has been no sale by the firm so as to attract capital gains. We uphold the decision of the Appellate Assistant Commissioner and dismiss the appeal.'
4. At the instance of the revenue, the following two questions have been referred in the matter relating to the firm's assessment:
'1. Whether, on the facts and in the circumstances of the case, there was a transfer of the house property by the assessee-firm to a partner of the firm ?
2. Whether, on the facts and in the circumstances of the case, capital gains was chargeable on the basis of the fair market value of the property as on the date of the transaction ?'
5. In the case of the individual assessment of the partner, the following question also has been referred at the instance of the revenue :
'Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee's share of capital gains of Rs. 7,321 from the firm of M/s. Sanghvi Dhuraji Khusalji & Co. for the assessment year 1964-65 is not assessable in his hands ?'
6. The learned counsel for the revenue contended that the property was that of the partnership and the parties intended to transfer the same to the individual partners. Having regard to this intention and the fact that actually the property was shown later in the accounts of the firm as having been transferred to the individual partner and the individual partner had become the owner of the same, the deed dated November 1, 1962, has to be construed as a deed of conveyance though styled as a release deed. In support of his contention that the document will have to be construed with reference to the intention of the parties, he also relied on Thayyil Mammo v. Kottiath Ramunni, : AIR1966SC337 and Kuppuswami Chettiar v. Arumugam Chettiar, : 1SCR275 . The learned counsel for the assessee, on the other hand, argued that there was nothing to show that the three partners who executed the document acted for and on behalf of the firm. On the other hand, the use of the words 'releasors', 'co-owners' and 'released all their right, title and interest in the said property' indicate that they were executing the document in their individual capacity and not for the firm. In other words, the releasors were not the firm, but the individual partners. The further submission was that since the property belonged to the firm, the individual partners had no right over it and that, therefore, the document was ineffective as a transfer. The question of intention, therefore; does not arise. In this connection, he distinguished the Supreme Court cases referred to above on the ground that in those cases there was no dispute about the capacity of the executant to execute and convey the property. Alternatively, the learned counsel argued that, if it was construed that the property had just prior to the execution of the document become the joint property of the four individuals who are partners, then they might have the capacity to execute the document, but the assessment will have to be in their individual capacity but not on the firm.
7. The deed dated November 1, 1962, is styled as a deed of release and executed by three persons described as releasors in favour of another who was described as releasee. The material portion of the document reads as follows:
'Whereas the releasors and releasee are carrying on business in partnership under the name and style of Sanghvi Dhuraji Khusalji & Co. at Madras, and whereas the house, ground and premises bearing door No. 34, Perumal Mudali Street, and 1/23, 2/23, and 3/33, Audiappa Naick Street, G.T., Madras, more particularly described in the Schedule hereto, and hereinafter referred to as the said property, was purchased by the said firm under a deed of sale dated November 21, 1947, from R. Seshagiri Rao and others, and as such the releasors and the releasee are the co-owners of the said property and are in possession and enjoyment of the same as such and whereas the releasors at the request of the releasee, have agreed to release all their right, title and interest in the said property in favour of the releasee.
Now this deed witnesseth that in pursuance of the said agreement, the releasors hereby jointly and severally release all their right and interest in the said property in favour of the releasee, and hereby declare that as and from this date, the releasee shall own, possess and enjoy the said property as his own property free from the claims of the releasors or any person or persons claiming through or under, all or any of the releasors.'
8. The property is described in the schedule and its value shown as Rs. 64,000.
9. In Thayyil Mammo v. Kottiath Ramunni, the Supreme Court had held that a registered instrument, though styled as release deed, releasing the right, title and interest of the executant in a property in favour of the releasee for valuable consideration, may operate as a conveyance, if it clearly discloses an intention to effect a transfer. It was also held that the nomenclature of a deed and the amount of the stamp paid on it, though relevant, are not conclusive on the question of construction. A deed of release can by using the words of sufficient amplitude transfer the title to one having no title before the transfer. Again, the Supreme Court, in Kuppuswami Chettiar v. Arumugam Chettiar, held that even if there was no consideration paid, a registered instrument styled as a release deed releasing the right, title and interest of the releasor, may operate as a transfer by way of gift when the document clearly showed an intention to effect a transfer and is signed by or on behalf of the releasor and attested by at least two witnesses. Thus, the document will have to be construed with reference to all the circumstances and the intention of the parties to the document. In this case, the property dealt with under the release deed belonged to the partnership firm. The value of the same was entered in the property account in the books of the firm. Subsequent to the execution of the deed dated November 1, 1962, it ceased to be the property of the firm. The cost of the property was debited to the individual account of Rikadas Dhuraji and the entry was to the effect that lie had purchased the property from the partnership firm on November 1, 1962. Thus, the property which was once that of the firm had ceased to be its property immediately after the transfer. It had become the property of the individual partner. Surely, therefore, the intention of the firm was to convey or transfer the property which belonged to it, to the individual partner.
10. It is true that the executants were described as the releasors but not as partners representing the partnership firm. But the document recites that the releasors and the releasee were carrying on business in partnership, that the property was purchased by the partnership firm under the deed dated November 21, 1947, and as such the releasors and the releasee are the co-owners of the said property. The use of the words 'as such' conjoint with the recitals of their relationship as partners and the fact that the property was purchased by the partnership clearly show that the releasors referred to their right as partners in the partnership property and were releasing their right as partners in the property in favour of the releasee who was again one of the partners. The entries in the accounts of the partnership which were referred to earlier also show that the firm was transferring the property to the individual partner. In the return filed also the firm has disclosed the capital gain on the basis that there was a sale by the firm to the individual partner. These circumstances clearly show that, though the executants described themselves as releasors without any reference to the firm, they were in fact acting for and on behalf of the firm and executing the document in their Capacity as partners. They have no separate right in the property of the firm. They conveyed only the right of the firm in the property to the individual partner. Since the transfer is in favour of one of the partners, the transferee was not shown as a releasor. Further, the entry in the account books showed that the total value of the property was debited to the individual partner's account and not the value of the share of the three executant-partners alone. These circumstances, in our opinion, clearly show that it was the firm which was conveying the property to the individual partner and that there was an effective and valid conveyance of the entirety of the interest in the property in favour of the individual partner. That leads us to the consideration of the next question.
11. Now, under Section 45 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), any profit or gains arising from the transfer of a capital asset would be chargeable to income-tax under the heading 'capital gains'. The mode of computation of the capital gains is contained in Section 48, which reads as follows :
'48. Mode of computation and deductions.--The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts namely :--
(i) expenditure incurred wholly and exclusively in connection with such transfer ;
(ii) the cost of acquisition of the capital asset and the cost of any improvement thereto.'
12. The 'full value of the consideration received' by the partnership firm as a result of the transfer in this case was Rs. 63,327.
13. Relying on Section 52, the revenue sought to take 'the fair market value' of the property as 'the full value of the consideration received' in determining the capital gains chargeable. The question for consideration is whether the revenue had the power under Section 52(1) to substitute the fair market value for 'the full value of the consideration received or accruing as a result of the transfer' in computing the capital gains under Section 48.
14. There was some discussion at the Bar as to whether Section 52(2) could not have been invoked in this case by the revenue. One of the requirements for the applicability of Section 52(1) is that the Income-tax Officer shall have reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under Section 45. The Tribunal pointed out in the passages extracted above that there was no finding that the transfer was to reduce any tax liability. This could only be a reference to Section 52(1). In fact, learned counsel for the revenue contended, as against this statement, that there was an implied finding in the order of assessment that the transfer was to reduce tax liability. Therefore, we are satisfied that Section 52(1) alone was invoked by the assessing officer and considered by the Tribunal and, therefore, the applicability of Section 52(2) does not arise for consideration in this reference.
15. Section 52(1) reads as follows :
'Where the person who acquires a capital asset from an assessee is directly or indirectly connected with the assessee and the Income-tax Officer has reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under Section 45, the full value of the consideration for the transfer shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be the fair market value of the capital asset on the date of the transfer.'
16. Learned counsel for the revenue argued that while Section 45 and the computation provision under Section 48 deal with the actual gain, Section 52(1) brings in a fictional gain. If the conditions prescribed under Section 52(1) are satisfied, the full value of the consideration for the transfer for the purpose of computation of the capital gain under Section 48 shall be taken to be the fair market value of the capital asset on the date of transfer. According to the learned counsel, the words 'full Value of the consideration for the transfer' in Section 52(1) mean 'full value of the consideration received or accruing as a result of the transfer' and the omission in Section 52(1) of the words 'received or accruing as a result of the transfer' which find a place in Section 48, makes no difference as, according to him, consideration is either received or accrued and there is no consideration which is not either received or accrued. In fact, the argument of the learned counsel was that the use of the words 'received or accruing as a result of' in Section 48 is redundant and even without those words the section would have been effective. Learned counsel also contended that any other construction of Section 52(1) will not give effect to the intention of Parliament and will make the provision ineffective and inoperative. Having given our anxious consideration, we are unable to agree with this contention of the learned counsel. Now, undoubtedly, Section 52(1), subject to the condition specified therein, deems the market value of the capital asset on the date of transfer as the full value of the consideration for the transfer. The result of it is that by this fiction not only the consideration agreed to between the parties but the difference between that amount and the fair market value shall be deemed to be the consideration for the transfer. Now, therefore, this deemed consideration, which is the fair market value, consists of the consideration which was actually received or accruing and the consideration which was not in fact received or accruing. While the section deemed that portion of the consideration which was not received or accruing also to be included in the full value of the consideration for the transfer, it did not deem it to have been received or accruing though it was not received or accrued. If the difference between the fair market value and full value of the consideration received or accruing as a result of the transfer shall also be taken into consideration in computing the capital gains, that portion should also have been deemed as having been received or accrued as a result of the transfer which the section failed to do. We cannot also accept the contention that the consideration is always either received or accrued and there is no consideration which is not either received or accrued. The words 'full value of the consideration' referred to in Section 48, in our opinion, relate to the factual receipt of the consideration and have no reference to the adequacy or inadequacy of the consideration. In the case of a transaction for inadequate consideration, the difference between the adequate consideration and the consideration actually received or accrued, though not received or accrued, is deemed by Section 52 as consideration. Section 4 of the Gift-tax Act, 1958, treats that portion as a gift. In other words, a person may transfer his property for less than adequate consideration instead of writing two separate documents, one for adequate consideration and the other as a gift. So far as the portion of the gift is concerned, no consideration is received or accrued. We are also unable to agree with the learned counsel that the words 'received or accruing as a result of the transfer' in Section 48 are redundant. We cannot read a section, omitting certain words used therein or inserting certain words which are not found there. That is what the learned counsel for the revenue would suggest. He would require us either to drop the words 'received or accruing as a result of the transfer' in Section 48 or to incorporate those words in Section 52. That, in our opinion, would amount to amending the provisions which we are not entitled to do. A reference to the earlier provisions in the old Act also confirm our view. A different language had been used in Section 12B(2) of the old Act to bring in such deemed capital gain. The Law Commission also, in their twelfth report, had used language similar to the one in Section 12B(2); but in the Bill and the Act the language had been changed. In support of his contention that we have to construe the provision to give effect to the intention of Parliament, the learned counsel for the revenue referred us to the decision in Seaford Court Estates Ltd. v. Asker,  2 All ER 155, and, in particular, to the following passage therein :
'Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsmen. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give 'force and life' to the intention of the legislature. That was clearly laid down 3 Co. Rep 7b by the resolution of the judges [Sir Roger Manwood C.B. and other barons of the Exchequer] in Heydon's case,  3 Co. Rep. 7b, and it is the safest guide today. Good practical advice on the subject was given about the same time by Plowden in his note (2 Plowd. 465) to Eyston v. Studd,  2 Plowd 463. Put into homely metaphor it is this : A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases.'
17. It is not necessary for us to refer to those catena of cases where it was held that in taxing statutes we have to construe a provision with reference to the language employed and not with reference to the supposed indentions of Parliament of any presumptions or assumptions. The decision referred to by the learned counsel does not in any way propound a different principle. The question there for consideration was as to the meaning to be given to the word 'burden' appearing in, Section 2(3) of the Increase of Rent and Mortgage Interest Restrictions Act, 1920. Having regard to the governing principles embodied in the legislature, the learned judges held that contingent burden was not included within the meaning of 'burden' in that provision. We are of the view that the provisions creating fictions will have to be construed strictly and unless clear terms are employed, we cannot construe the provision with the supposed intentions of Parliament.
18. Thus, on a plain reading of the section, we are of the view that the difference between the fair market value and the full value of the consideration received or accruing as a result of the transfer could not be taken into account as consideration deemed to have been received in computing the capital gain under Section 48. Our view also finds support in the dissenting judgment of the learned Chief Justice of the Kerala High Court in Income-tax Officer v. K.P. Varghese, : 91ITR49(Ker) , where he had held :
'There is nothing in the language of these two sub-sections to show that the full value of the consideration for the transfer of the capital asset appearing in Section 52 should be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. If the legislature wanted to have that effect, it could have easily used the expression 'the full value of the consideration received or accruing' in Section 52. Since this has not been done, there is no justification for holding that the full value of the consideration which is deemed to be the fair market value of the capital asset, in Section 52, is the full value of the consideration received or accruing; if it is so held, what is being done is ignoring the expression 'received or accruing' in Section 48. I reiterate that what is chargeable to income-tax as 'capital gains' under Section 45 is only the profits or gains arising from the transfer of a capital asset.'
19. We are not persuaded to agree with the view of the majority in that decision on the reasonings given therein.
20. We have also another reason to come to this conclusion. This court, in Sundaram Industries Private Ltd. v. Commissioner of Income-tax, : 74ITR243(Mad) , in regard to the scope of the corresponding provisions in the Indian Income-tax Act, 1922, observed:
'The proviso to Section 12(B)(2) does not discourage or avoid honest transactions made out of love and affection or for other conceivable reasons on pain of being hauled up for having attempted to avoid or reduce the tax liability and on that basis made liable to tax on the difference between the consideration for the transaction and the fair market value nor does it treat what is not an actual capital gain as a deemed capital gain but it must be limited to escaped capital gain, which is so in truth and in fact, and is not intended to bring about a fictional gain on an assumption and charge the same.'
21. Thus, Section 52 applies to cases of under-statement of consideration where the consideration received is more and not to cases of bona fide transfers were nothing more is received than that recited in the document itself. This was also one of the reasons given by the learned Chief Justice in his dissenting judgment in Income-tax Officer v. Varghese. A similar view was taken by the Mysore High Court in Additional Commissioner of Income-tax v. Ranga Pai, Since reported in : 100ITR413(KAR) (unreported judgment in I.T.R.C. 30/1973/dated January 2, 1975), and by the learned single judge who decided the case reported in K.P. Varghese v. Income-tax Officer, : 77ITR719(Ker) , and whose decision was the subject-matter of consideration by the Full Bench in Income-tax Officer v. Varghese above referred to. The Delhi High Court in Shiv Shankar Lal v. Commissioner of Income-tax, : 94ITR433(Delhi) , and the Andhra Pradesh High Court in Buragadda Satyanarayana Murthi v. Income-tax Officer, : 96ITR57(AP) had also held that Section 52(1) would not be applicable to bona fide transactions, on the ground that the difference in value between the fair market value and the actual consideration received or accruing would amount to a gift and such gifts are to be excluded from the income chargeable under the head 'capital gains' in view of Section 47(iii) of the Act. For taking this view, the learned judges held that the definition given for 'gift' in the Gift-tax Act would be applicable in construing the provision of Section 47(iii). Though each of the courts has given different reasonings, except the majority in Income-tax Officer v. Varghese, the other learned judges are in agreement in holding that in a case where there is no under-statement of the value merely on the ground that there is a difference between the fair market value and the full value of the consideration received or accruing, such difference cannot be brought to capital gains on the basis of Section 52.
22. In the foregoing circumstances, we answer the first question referred in T.C. No. 168 of 1969 in the affirmative and against the assessee, and the second question in the negative and against the revenue.
23. In view of our answers to the questions referred in T.C. No. 168 of1969, we have to answer the question referred in T.C. No. 166 of 1969 inthe affirmative and in favour of the assessee.
24. The assessee will be entitled to his costs in both these references.Counsel's fee in each Rs. 150.