V AMIRTHAM AMMAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference is under the Income-tax Act. The following question of law has been referred by the Appellate Tribunal"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the sum of Rs. 12, 650 or any part thereof is liable to be included in the total income of the assessee by the operation of section 64 (iv) of the Income-tax Act, 1961 ?" *L. G. Balakrishan, L. G. Varadarajulu and L. G. Ramamurthi are three brothers. Their respective wives are B. Sarojini, V. Amirtham Ammal and R. Sarojini. On March 31, 1963, each of the three ladies mentioned above transferred certain shares held by each of them in Messrs. Rayalaseema Passenger and Goods Transports (Private) Ltd., as follows :Tansferor Transferee Date of No. of shares Sale price Markettransfer transferred (face value valueof theshares)Rs. Rs.Smt. B. R. SumanthSarojini (Minor son ofSmt. R. Sarojini) 31-3-63 115 11, 500 46, 000Smt. V. B. VijayakumarAmirtham (Minor son ofAmmal Smt.B. Sarojini) 31-3-63 110 11, 000 44, 000Smt.R. V. SudarsanSarojini (Minor son ofSmt. V. AmirthamAmmal). 31-3-63 110 11, 000 44, 000We are concerned in this reference with party No. 2 Amirtham Ammal, who has a minor son by name Sudarsan.On a scrutiny of these transactions, the Income-tax Officer took the view that the transfers referred to above were cross-transfers hit by the provisions of section 64(iv) of the Income-tax Act. In his view the transfers were not for adequate consideration and he, therefore, included the entire dividend income of Rs. 12, 650 in respect of the shares transferred by the assessee, Amirtham Ammal, as income derived by her to him. The Appellate Assistant Commissioner, on appeal, confirmed the assessment and the matter thereafter went before the Tribunal.Before the Tribunal the contention was that the minor had paid full that, therefore, section 64(iv) was not applicable.

(2.) THE Tribunal rejected the contention and dismissed the appeal. It is against this order of the Tribunal that the present reference has arisen.THE first contention taken on behalf of the assessee before us was that the shares having been transferred at their face value, there was no transfer otherwise than for adequate consideration on the facts here. This contention has absolutely no force, as it is evident from the records that on the basis that the shares transferred were of the market value of Rs. 44, 000, the assessee herself filed a gift-tax return with reference to the extent of the difference between Rs. 44, 000 and Rs. 11, 000 and was assessed thereon. It is also evident from the records that by applying section 52 of the Income-tax Act, the capital gains tax was levied on the footing that the full value for the consideration of the transfer was Rs. 44, 000 and not Rs. 11, 000 which was actually received. THEse facts, therefore, establish that the transfer of the 110 shares for a sum of Rs. 11, 000 was not for adequate consideration. It is now well-established that "adequate consideration to the value of the assets transferred and that natural love and affection cannot constitute adequate adequate consideration." *This is just the case where the consideration is not adequate in part.THE point sought to be raised by the assessee is that in a case where the consideration has been paid at least in part, there is no question of application of section 64(iv).