COMMISSIONER OF INCOME TAX Vs. KOTHARI G R

JUDGEMENT

(1.) THE following two questions have been referred to this Court by the Tribunal under S. 256(1) of the IT Act, 1961 :

(2.) THE assessee had transferred 50 shares in a company during the financial year 1971 72 in favour of his two sons at the rate of Rs. 1,600 per share. The fair market value of the said shares on the date of the transfer was assessed by the assessee at Rs. 1,941 per share. The price difference in respect of those shares was returned by the assessee for gift tax purposes and gift tax was accordingly charged by the GTO. The ITO deemed it fit to apply the provisions of S. 52(2) of the IT Act and computed long term capital gains. The ITO also rejected the contention raised on behalf of the assessee that the provisions of S. 47(iii) were attracted and, therefore, capital gains were not chargeable in respect of the said difference.

(3.) AGGRIEVED by that order, the Department filed an appeal before the Tribunal. Though the Tribunal did not agree with the reasoning of the AAC, it agreed with the conclusion that the provisions of S. 52(2) would not apply to such cases as there was no material to show that the object of the assessee was to avoid or reduce the tax liability. The Revenue, therefore, sought a reference of the abovestated two questions to this Court.