COMMISSIONER OF GIFT TAX Vs. NELSON AND CO

JUDGEMENT

(1.) IT is the contention of the Revenue that the consideration for which the assets of the firm were transferred by the partners to a company in which the same partners are the shareholders and which company continues to carry on the same business that was being carried on by the erstwhile firm is not "adequate", thereby attracting the provisions of Section 4(1)(a) of the Gift-tax Act, 1958. This argument proceeds on the assumption that adequate value referred to in that statutory provision is the same as market value.

(2.) THIS court rejected that very contention in the case of CGT v. Indo Traders and Agencies (Madras) P. Ltd. [1981] 131 ITR 313. It was held therein that adequate consideration referred to in the Gift-tax Act is not the same as the market value and adequacy is to be determined with reference to all the circumstances and keeping in view the nature of the transaction whether it is bona fide and whether the consideration stated was the whole amount of the consideration.

(3.) THE question referred to us is, therefore, answered in favour of the assessee and against the Revenue. THE assessee will be entitled to costs in a sum of Rs. 1,000.