COMMISSIONER OF INCOME TAX Vs. M NATH

JUDGEMENT

(1.) This is a reference under Section 256(2) of the Income-tax Act, 1961. This reference relates to the assessment year 1964-65.

(2.) On appeal, before the Appellate Assistant Commissioner, it was urged that no intention to avoid or reduce the appellant's tax liability was made out in this case. The transfer was made merely for the purpose of benefiting the lady and it was an honest transaction entered into out of love and affection. It was urged that the Income-tax Officer was wrong in coming to the conclusion that the transfer was made with the object of avoidance of liability under Section 45. The Appellate Assistant Commissioner agreed with this argument and observed that the Income-tax Officer had brought on record no material to substantiate that the transaction was effected with the object of avoidance or reduction of liability under Section 45. He, therefore, cancelled the Income-tax Officer's order in respect of capital gains.

(3.) Before the Tribunal, no serious argument was made in regard to the applicability of Section 52(1) of the Act. The Tribunal held that in the absence of any evidence to show that the transfer was made with the object of avoidance or reduction of tax liability in relation to the assets, Section 52(1) would not apply. The main argument of the Department before the Tribunal was that Section 52(2) applied to this case and on this basis, the order of the Income-tax Officer should have been sustained.