TMI Blog1999 (8) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... ent the property of the Hindu Undivided Family of which the assessee was a member and as such, the only amount which could be assessed in the hands of the assessee could only be the value of the asset received as a result of family settlement and which asset and was transferred by him. The learned CIT(A) has failed to appreciate that the assessee owned only 16.23% of the aforesaid property and not 25 per cent. The learned Commissioner of Income Tax (Appeals) has thus erred in directing the Assessing Officer to compute the capital gain on the aforesaid basis. 3. That the learned Commissioner of Income-tax (Appeals) has failed to appreciate that it is admitted by the learned DCIT that a separate order under section 171 of the Income-tax Act had been passed wherein the claim of partition had been accepted and further, the aforesaid property had been the subject matter of family settlement and a decree granting family settlement was passed by the Hon'ble High Court. 4. That the conclusion of the learned Commissioner of Income-tax (Appeals) that it can be concluded, that Shri B.N. Soi had no title in the property situated at 22, Darya Ganj, Delhi is in disregard of the evidence i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide Gift Deed dated14-5-1957. Smt. Lachmi Devi subsequently filed suit for rectification of the Deed of Gift executed on14th May, 1957. The Hon'ble High Court of Calcutta vide order dated 20th December, 1961 in Suit No. 1623 of 1959, declared the said Gift Deed 14-5-1957 executed by Smt. Lachmi Devi in favour of her sons, Shri Jag Mohan Soi and Brij Mohan Soi to be void and inoperative and the same was cancelled. An award was thereafter passed by the Arbitrator on3rd April, 1965which, inter alia, provided that Shri Ashok Soi (Appellant), alone is the sole owner of the entire Kothi No. 22, Darya Ganj,Delhion 1830 sq. yds. as well as the land measuring 1917 sq. yds. all comprised in and being portion of said Kothi No. 22. It was specifically mentioned in the said Award that in spite of the consent decree dated 18-5-1960 of the Calcutta High Court in Suit No. 1623 of 1959, neither Smt. Lachmi Devi nor Shri Kanwal Kumar Soil Vinjay Kumar Soil Brijmohan Nath Soi or anyone else had or would have any right, title or interest in this property. In this Award, a reference of Deed of Dissolution of the partnership business in the name of Champion Neonsign at 16, British India Street, Calcutt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his suit was filed on or about 5th day of March, 1980. This suit was filed by Smt. Bulbul Soi W/o Sh. Ashok Soi on her own behalf as well as on behalf of her two minor sons Master Aditya Soi and Master Abhey Soi in her capacity as their guardian and next friend. The assessee, Shri Ashok Soi, Shri B.N. Soi, father of the assessee and Smt. Usha Soi W/o Mr. B.N. Soi were made defendants in the said suit. 4.6 Sometime after filing of the said suit, a joint application by the Plaintiffs and Defendants was filed in the Hon'ble High Court of Delhi which is marked as IA No. 80 of 1980 in Suit No. 180 of 1980 stating that the parties have arrived at a compromise and desired that the suit be disposed of in terms of the said compromise and a Preliminary Decree in terms thereof be passed. This joint application is dated9th October, 1980. A copy of the said joint application has been placed at pages 45 to 54 of the Paper Book. The Hon'ble High Court passed an order dated14th October, 1980by which a decree in terms of the said settlement was passed. The terms of the said settlement, inter alia, clearly provided in Clause-I that in property at 22, Darya Ganj, New Delhi, equal shares be allotted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) at page 7 of his order has observed that as per record, no separate order under section 171 is available nor any order is available with the assessee. However, in his order under section 143(3) dated26-3-1987, the Assessing Officer mentioned that order under section 171 had been passed and the partition had been accepted. A copy of the assessment order in the case of Shri Ashok Soi, HUF for Assessment Year 1981-82 passed under section 143(3) on26-3-1987has been placed at page 129 and 130 which, interalia, shows that order under section 171 has since been passed by separate order, the assessment is reframed as per directions of the AAC. The assessee has declared income from property and interest upto the date of partition i.e.14-10-1980. Since the claim of the partition has been accepted, the income of HUF was assessed upto that period i.e.14-10-1980. It is imperative to mention here that the fresh order under section 171 passed in pursuance of the directions of ld. AAC, which has a very important bearing on the points raised in the present appeal before us, was not produced by the assessee nor that was available in the records of the Assessing Officer at the time when the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable price and the sale consideration shall be divided between the parties as follows:--- 1. Plaintiff No. 1 Shri Aditya Soi 23-1/3% 2. Shri Abbey Soi (Plaintiff No. 2) 23-1/3% 3. Smt. Bulbul Soi (Plaintiff No. 3) 24-2/3% 4. Shri Ashok Soi (Defendant No. 1) 16-2/3% 5. Shri B.N. Soi (Defendant No. 2) 12% 4.12 The Hon'ble High Court ofDelhipassed an order dated28th May, 1993on the said joint application filed by the parties. The Hon'ble High Court observed that it has been prayed in the said application that since parties have compromised the matter, the suit be disposed of in terms of the compromise application. The Hon'ble High Court passed the following order after briefly narrating the fact of filing of the said joint application in its order dated 28th May, 1983:--- "I have heard learned counsel for the parties. After recording the statement of the parties, I deem it proper in the interest of justice that the Suit be disposed of in terms of the compromise application Ex. C- 1. Parties are directed to bear their own cost. Compromise application Ex. C- 1 shall form part of the decree. The Suit and all the pending IAs stand disposed of. Ordering accordingly." 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was filed by the so-called Plaintiffs and Defendants. As per information furnished, plaintiffs were Mrs. Bulbul Soi, Mr. Abhay Soi and Mr. Aditya Soi and defendants were Ashok Soi, B.N. Soi and Usha Soi. It makes it very clear that Shri B.N. Soi had not filed any suit against Mr. Ashok Soi for a share in this property. It has no locus standi to claim any share from this property. The share allotted to him was merely and merely a voluntary act on the part of Shri Ashok Soi. Thus it can be seen that Shri B.N. Soi had no overriding title to the property and it was only an application of income by an agreement between Ashok Soi and his father. The case laws filed by the assessee is of no help to the assessee as the facts of the assessee's case are totally different. All these case laws filed by the assessee say that when there is a diversion of income by overriding title, no assessment can be made in the hands of transferor. However, in the case of the assessee no diversion of income by overriding title has taken place as we have discussed earlier. On the contrary the case of the assessee is covered by decision of the Hon'ble Supreme Court in the case of V. Venugopala Varma Raja v. CAI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder which this was given to Sh. B.N. Soi was a collusive agreement and the issue beforeHon'ble Courtwas not whether Sh. B.N. Soi had an overriding title in the property. Therefore, in view of these facts it cannot be said that Shri B.N. Soi had overriding title over this property. Now coming to the alternative arguments of the assessee that compensation paid to Sh. B.N. Soi was an allowable expenditure. This argument of the assessee is also not tenable. Sh. B.N. Soi was not tenant in the property as admitted by the assessee. He was merely leaving with his son, therefore, he had absolutely no claim over the property in any manner whatsoever. It is seen that even Smt. Usha Soi who was in similar position as Late B.N. Soi and who was also a defendant in the original suit like B.N. Soi but she was not given any compensation though by the same logic she should have been given some percentage of the sale proceed as also other persons living in that house including the tenant and servant etc. In a family there are several members living together, but it does not create cross-interests individual property of each other. It has been informed by the assessee that Shri B.N. Soi has filed his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st to the Court to make them available their share of the property. Shri B.N. Soi was not the plaintiff but was made a defendant. Shri B.N. Soi had not filed any claim before the Hon'ble High Court claiming any interest in the said property. In the joint application for compromise dated 9-10-1990 it was clearly mentioned that "in the property 22, Darya Ganj, New Delhi equal shares be allotted to the petitioners 1, 2, 3, and defendant No. 1" i.e., Master Aditya Soi, Master Abhai Soi, Smt. Bulbul Soi and Shri Ashok Soi. In view of these facts it can be concluded that Shri B.N. Soi had no title in the said property situated at 22, Darya Ganj, the property was sold for Rs. 3,84,00,000 and Shri Ashok Soi, Smt. Bulbul Soi, Shri Aditya Soi and Shri Abhai Soi had title over 1/4th of the sale proceeds each. In other words Shri Ashok Soi had title over Rs. 96 lakhs of sale proceeds and he can be assessed in respect of the said income only and not Rs. 1,07,22,257. Other deductions may be allowed as per law. So far as claim of payment made to Shri B.N. Soi is concerned, it cannot be treated to be an expenditure incurred wholly and exclusively in connection with transfer of the said property. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share of assessee's father settled at 12% in the final decree granted in suit No. 180/1980 cannot be added in his hands simply because his 12% share settled by the Court was not got registered in the name of his father. The Assessing Officer has himself accepted the share belonging to Mrs. Bulbul Soi at 24-2/3%, Master Aditya Soi and Shri Abhay Soi at 23-1/3% share each as belonging to them, regardless of the fact that no registration was effected in their favour also. Shri Aggarwal submitted that section 45 of the Act does not use the expression 'transfer of Capital assets owned by the assessee' and, as such, the concept of registered owner for the purpose of section 45 of the Act cannot be applied. 4.18 Shri Aggarwal further submitted that rate of tax on capital gains in the year under consideration was a uniform rate prescribed under section 112 of Income-tax Act, 1961. The rate of tax was 20%. Therefore, it would not make any difference if the capital gains are taxed in the hands of the respective members including in the case of assessee's father. At this stage, the Bench required the ld. lawyer to state as to whether his father and other members have paid tax on capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the claim made by assessee's father in the said property was based on his resident status in the premises for last 52 years. This is evident from Clause 3 of the joint application dated9th October, 1980submitted before Hon'ble Delhi High Court. The preliminary decree passed by the Hon'ble High Court on 14th October, 1980 recognises such a right of Shri B.N. Soi in the said property for which it was agreed that he will be given one flat on the ground floor measuring 1200 sq. ft. and a further sum of Rs. 3 lakhs, by way of compensation in lieu of his rights in the said property. When the final decree was passed by the Hon'ble High Court on28th May, 1993on the basis of another joint application submitted by the parties before the Hon'ble High Court in the year 1993, the share of all the plaintiffs and defendants were modified. The share of the assessee was determined at 16-2/3% and the share of his father was determined at 12%. At the time when the capital asset was transferred, the assessee had only 16-2/3% share. Even assuming that this was not a case of family arrangement, at the most it could be treated as a gift by the HUF of Ashok Soi in favour of Shri B.N. Soi in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding title over 12% share in the said house property at 22, Darya Ganj, New Delhi, the following three aspects require examination in the light of facts, material and evidence existing on records: (a) Whether Shri B.N. Soi had any legal enforceable right, title or claim over the said property ? (b) Whether Shri B.N. Soi ever staked such a claim against the assessee ? (c) Whether there is any basis for, determination of 12% share in favour of Shri B.N. Soi ? 4.24 She submitted that Shri B.N. Soi had no antecedents legally enforceable right, title or claim over the said property. This property was an individual property belonging to Shri Ashok Soi as a result of an award dated3rd April, 1965which became the rule of the Court on17th April, 1965. A perusal of the said award clearly shows that Shri Ashok Soi (assessee) alone was and is the sole owner of entire Kothi No. 22-D, Darya Ganj,New Delhias well as the land adjacent thereto. It has further been clearly stated in the said Award that Shri Brij Nath Soi or any other person had or would have no right, title or interest in this property. This property was thrown by Shri Ashok Soi into HUF consisting of himself, his wife and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that that the assessee's counsel had argued before the lower authorities as well as before the Tribunal that since the assessee had to give the vacant possession of the property to its buyers, he had to pay Rs. 46 lakhs to Shri B.N. Soi for handing over vacant possession to the buyers. 4.25 Smt. Jain pointed out that this property was occupied by two other tenants also. A perusal of the Sale Deed at page 83 of the Paper Book, inter alia, shows that Shri Balraj Sahni was a tenant on monthly rent of Rs. 35 and another portion of the said property was in the possession of Shri Shashi Tandon on a monthly rent of Rs. 500. The buyer agreed to endorsement of their tenancy in favour of the vendee and only symbolic possession of the aforesaid portion of the said tenanted premises was handed over to the vendee. No specific portion was under occupation of Shri B.N. Soi and he was not a tenant of any portion of the said property. He was simply residing with his son in the said house, in which he had no legal right or title whatsoever. Likewise, the Court's final decree passed in the year 1993 was also passed on a joint application submitted by the plaintiff and Defendants in the said suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Abhay Soi in which he has declared 1/4th share in house property at 22, Darya Ganj, New Delhi under section 7(2) of Wealth-tax Act at Rs. 1,60,500. Likewise, Shri Ashok Soi in his Income-tax return for assessment year 1982-83 onwards has also shown 1/4th share in the rateable value of self-occupied property at 22, Darya Ganj, New Delhi. The contention of the ld. counsel that 1/4th of the rights in the property has been shown after excluding 20% share of Shri B.N. Soi is not borne out from the copies of the Income-tax and Wealth-tax returns of Shri Ashok Soi for assessment year 1982-83. 1/4th of the total rateable value of property at 22, Darya Ganj,New Delhiwithout deducting any value of share of B.N. Soi has been disclosed in the Wealth-tax and Income-tax returns of Shri Ashok Soi. She further pointed out that Shri B.N. Soi has not shown any Capital Gains liable to tax in his return of income for assessment year 1995-96. Our attention was drawn to the copy of the revised statement of assessable income of Shri B.N. Soi for assessment year 1995-96 to support this contention. The ld. D.R. contended that the ld. counsel has simply submitted that Shri B.N. Soi was residing with him but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oi from assessment year 1982-83 onwards which also show that Shri B.N. Soi has not shown his 20% share in the said property even after passing of the Preliminary decree by the Court in the year 1980. She relied upon judgments of Hon'ble Madras High Court in CIT v. Krishnaveni Ammal [1986] 158 ITR 826 and contended that the non-furnishing of the copies of the Wealth-tax returns of Shri B.N. Soi, non-production of final order under section 171 and non-disclosure of income by Shri B.N. Soi on his share in the Capital Gains in assessment year 1995-96 clearly shows that the assessee in collusion with his father has resorted to a device to avoid payment of taxation on a substantial amount of Rs. 46 lakhs given out of sale proceeds of the house to Shri B.N. Soi. Such evidence which is in the possession of the assessee and which has not been produced by them should lead to an adverse inference against the assessee by virtue of the judgment of Hon'ble Madras High Court. 4.28 The ld. D.R. further explained the facts of various cases relied upon by the ld. counsel for the assessee on the issue of diversion of income/ application of income are clearly distinguishable. This is a clear case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the various documents submitted in the compilation to which our attention was drawn during the course of hearing. We have also carefully gone through all the judgments cited by the ld. representatives of both sides. 4.32 The ld. counsel appearing on behalf of the assessee submitted that the preliminary decree passed on 14-10-1980 and the final decree passed on 28th May, 1993 read along with joint applications submitted by the Plaintiffs and Defendants in the suit for partition clearly shows that at the time when the property at 22, Darya Ganj, New Delhi was sold, the assessee had only 16-2/3% share in the said property. The share of 12% allotted to assessee's father Shri B.N. Soi does not belong to the assessee. The total partition so made between the members of the HUF of Shri Ashok Soi through the aforesaid preliminary and final decree passed by the Hon'ble Delhi High Court in terms of the settlement agreed between the parties, was in the nature of family settlement or family arrangement. The principles of law relating to family arrangement or family settlement as enunciated in the various judgments relied upon by the ld. counsel for the assessee are briefly as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bona fide disputes, present or possible which may not involve legal claims are settled by a bona fide family arrangement which is fair and equitable the family arrangement is final and binding on the parties to the settlement. Where the family arrangement was oral and the mutation petition was merely filed before the Court of the Assistant Commissioner for information and for mutation in pursuance of the compromise. Held , that the compromise was not required to be registered. Even if the family arrangement was not registered it could be used for a collateral purposes, namely, for the purpose of showing the nature and character of possession of the parties in pursuance of the family settlement. Special Appeal No. 640 of 1965, dated17-5-1966 (All), Reversed. AIR 1973 All 382, Approved. Held further (Sarkaria J. reserving opinion) that assuming, that the said document was compulsorily registrable the family arrangement being binding on the parties to it would operate as an estoppel by preventing the parties after having taken advantage under the arrangement to resile from the same or try to revoke it." 4.34 The various other judgments cited by the ld. counsel on the princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in 1961. In event of an outgoing partner, other partners had option to purchase his/her share with retirement of a partner and death of another partner a new partnership was formed on 1-4-1975 providing, inter alia, that a sum representing 25% of profit would be charged to Profit Loss Account towards rights of M who by her actions allowed herself to keep out of partnership. Whether amount so credited to account of M was an overriding charge on Profit of assessee firm and was therefore not assessable in assessee hand - Held yes." 4.36 The ld. D.R. also relied on various judgments relating to the principles of diversion of income by overriding title application of income. The Assessing Officer has also relied upon the judgments of Hon'ble Supreme Court in K.A. Ramachar's case and Venugopala Varma Rajah's case. The headnote of the judgment in the case of K.A. Ramachar is reproduced hereunder :--- "The assessee, who was a partner in a firm, executed three irrevocable deeds of settlement on September 22, 1947, in favour of his wife, a married daughter and a minor daughter, assigning to each of them one-fourth of his share of the profits in the firm (but not losses) payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied." 4.38 In the case of V. Venugopala Varma Rajah the Hon'ble Supreme Court explained the decisions on the aforesaid point of law relating to diversion of income by overriding title laid down in the earlier judgments in the case of Raja Bejoy Singh Dudhuria v. CIT [1933] 1 ITR 135 (PC) and Sitaldas Tirathdas case. It also considered the law laid down in the case of P. C. Mullick v. CIT [1938] 6 ITR 206 (PC) and CIT v. Ratilal Nathalal [1954] 25 ITR 426 (SC). In order to appreciate the thin but subtle distinction between the diversion of income by an overriding title and application of income, it may be imperative to reproduce the findings given by the Hon'ble Supreme Court at pages 472 to 475 :--- "At first sight some of the decided cases on the subject appear to speak in conflicting voices. But, on a careful examination, it is possible to find out the divid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a testator had by his will appointed the appellant his executors and had directed them to pay Rs. 10,000 out of the income of his property on the occasion of his addya sradh for expenses in connection therewith to the person who was entitled to perform the sradh. He had also directed them to pay out of the income of his property the costs of taking out probate of his will. During the year of account the executors had paid Rs. 5,537 for expenses in connection with the addya sradh and a sum of Rs. 1,25,000 for probate duty. The question arose whether those payments were deductible in computing the chargeable income. The Judicial Committee held, affirming the judgment of the Calcutta High Court, that the payments made for the sradh expenses and the costs of probate could not be excluded in computing the chargeable income. Those were payments made out of the income of the estate coming to the hands of the appellants as executors and in pursuance of obligation imposed by the testator. Their Lordships were of opinion that it was not a case in which a portion of the income was by an overriding title diverted from the person who would otherwise have received it as in Bejoy Singh Dudhuria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the assessee, who even if he were to collect it, does so, not as part of his income, but for on behalf of the person to whom it is payable." Counsel for the assessee tried to lay stress on the observation of this court that the income should reach the hands of the assessee before it can be considered as his income. According to him in the case before us, the income in dispute never reached the hands of the assessee. We are unable to accept this contention as correct. The income is the income of the family. It reached the hands of the family as soon as it reached the hands of any of the members of the family who were entitled to receive it on behalf of the family. The members of the family received that income on behalf of the family, and applied the same in discharge of an obligation of the family. When this court spoke of the income reaching the hands of the assessee, it did not refer to any physical act. It was dealing with a legal concept-a receipt in law. Viewed that way, it is quite clear that the income with which we are concerned in this case was received by the family." 4.39 We may now examine the facts of the present case in the light of the principles of law laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by virtue of his resident status in the premises for the last 52 years, has agreed to a compensation (subject to all taxes payable in respect thereof) of one flat on the ground floor measuring 1200 sq. ft. In addition thereto, the defendant No. 2 shall be given on the completion and occupation of the building a sum of Rs. 3 lakhs in cash. It is agreed by the said defendant No. 2 that out of the said sum of Rs. 3 lakhs all taxes that may become payable by the plaintiffs and defendant No. 1 on the sale of any floor space in the building undertaken to raise the cash to make him this payment shall be payable by defendant No. 2. Therefore, this sum of Rs. 3 lakhs after deducting therefrom all tax liabilities by way of capital gains etc., it any, payable by the plaintiffs and the defendant No. 1 shall be paid by dependent No. 2." 4.43 The aforesaid Clause indicates that it was inter alia agreed between the parties that all tax liabilities by way of Capital Gains etc., if any, payable by the Plaintiffs (Smt. Bulbul Soi, assessee's wife, Shri Abhai Soi, son and Aditya Soi, son) and the liability of Defendant No. 1, namely, the assessee, shall be paid by Defendant No. 2 (Shri B.N. Soi, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell the said property was sought from the said court, it was provided in the final decree dated28th May, 1993to inter alia give 12 per cent share out of the sale consideration of the said property to Shri B.N. Soi. The remaining terms of the Preliminary Decree dated14-10-1980so far as those were contained in Clauses 1 and 3 of Preliminary Decree dated14-10-1980remained unaltered and those were modified only to the extent of specification of the manner and ratio in which the sale consideration was to be divided. 4.46 The house property No. 22, Darya Ganj, New Delhi was sold vide Registered Sale Deed dated 30th May, 1994 for a total consideration of Rs. 3,84,00,000. In the said Sale Deed, Shri Ashok Soi, his two sons and his wife have been shown as vendors. Shri B.N. Soi, assessee's father has not been described as one of the vendors but be has been made only a confirming party. This property was sold to M/s. P. Tax Builders Pvt. Ltd. The sale consideration was paid in the manner indicated in the Sale Deed to all the 4 vendors and to the confirming party. The amount of sale proceeds divided between the vendors and confirming party was as under: -- 1. Ashok Soi 16-2/3% Rs. 63,97 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 by virtue of his resident status in the premises for last 52 years made in the said suit was against the Plaintiffs and it Was not against Defendant No. 1, i.e. the assessee. There is no material on record to indicate that the assessee's father had any differences or dispute nor there was any possibility of any disputes between the assessee and his father, Shri B.N. Soi. Shri B.N. Soi never made a claim against the assessee in relation to the said property. The property at 22, Darya Ganj,New Delhi, after it was thrown into the HUF belongs to Shri Ashok Soi, HUF of which there were only 4 members, namely, assessee, his wife and two sons. On a partition of the said HUF property, all the four members had equal share i.e., 1/4th each. The assessee's father was not a member of the said HUF. Like assessee's father, his mother, Smt. Usha Soi w/o Shri B.N. Soi was also residing in the same house along with the assessee for last number of years. She was also made one of the defendants in the said suit for partition. However, no share in the sale proceeds of the house property was claimed or given to assessee's mother. 4.49 The Hon'ble Supreme Court in the case of Kale has clearly laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creating any charge over the disputed house property and without assigning any specific share in the title/ownership of the said house property. Therefore, the principles of law as held by the Hon'ble Supreme Court in the case of Sitaldas Tirathdas which has been relied upon in the decision of the Hon'ble Supreme Court in the case of K.A. Ramachar relied upon by the ITO in the assessment order are applicable on the facts and circumstances of the present case. In that case also, the assessee sought to deduct amounts paid by him as maintenance to his wife and children under a decree of Court passed by consent in a suit. The Hon'ble Supreme Court held that the case is not that of diversion of income by an overriding title but it is a case of application of a portion of the income. In the present case, the allotment of 12% share out of the sale proceed of the house property to Shri B.N. Soi was also a case of application of a portion of the sale proceeds of the house by virtue of a compromise decree passed in the suit for partition in accordance with the terms agreed between the Plaintiffs and Defendants. Shri Ashok Soi has surrendered his share to the extent of 8-1/3% in the said hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any kind of right or title was enjoyed by him over the said property. Like Shri B.N. Soi, his wife Smt. Usha Soi was also residing in the same house for last number of years. No amount has been paid to Smt. Usha Soi. The deduction claimed by the assessee under section 48 of the Act is also, therefore, not allowable. 4.51 We may also now refer to the facts relating to recognition of partition by the Assessing Officer under section 17l of I.T. Act, 1961. The ld. counsel of the assessee in his letter dated 3-9-1998 submitted before the CIT (copy at page 33 of the P.B.), inter alia submitted that the order under section 171 passed subsequent to the order of the AAC setting aside the earlier order under section 171, was not made available to the assessee though income was assessed on substantive basis in the hands of the various members of the HUF individually after its partition. The assessee, therefore, expressed his inability to supply the copy of the order passed under section 171 of the Act in which the claim for partition is said to have been finally accepted. The assessee, therefore, requested the CIT to summon the records of the HUF. The CIT(A) on page 7 of his order has obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting value was determined at Rs. 12,367. The 1/4th share of assessee was worked out at Rs. 3,092 from which statutory deductions of 1/2 for self-occupied property and 1/4th for repairs were claimed as deduction. It is thus clear that the assessee in his return of income for Assessment Year 1982-83 had shown his share of 1/4th in the house property at 22, Darya Ganj,New Delhiwithout deducting any share of Shri B.N. Soi. In similar manner, Shri Ashok Soi had disclosed his income from the said self-occupied property at 1/4th share. Copies of the statement of his assessable income for Assessment Years 1982-83 and 1983-84 have been submitted at pages 137 to 143 of the Paper Book. 4.53 Shri Abhai Soi son of the assessee, in his Wealth-tax Return for Assessment Year 1992-93 had also shown value of 1/4th share in property No. 22, Darya Ganj, New Delhi SOP under section 7(2) at Rs. 1,60,500. This return nowhere indicates that value of his 1/4th share has been determined after excluding the share of Shri B.N. Soi. Shri Aditya Soi has also filed his Wealth Tax Return for Assessment Year 1993-94 showing value of his 1/4th share in property No. 22, Darya Ganj, New Delhi at Rs. 1,60,500 in si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. B.N. Soi has not been offered to tax." 4.57 The ld. CIT(A) at page 8 of his order has observed as under:--- "In the course of appeal it also transpired that Smt. Bulbul Soi, Sh. Aditya Soi and Sh. Abhai Soi have not filed any returns of income for assessment year 1995-96 showing income under the head capital gains. The Assessing Officer is advised to take necessary action as per law. In case the Assessing Officer does not have jurisdiction over other members of the erstwhile HUF necessary intimation may be passed on to the concerned Assessing Officer." 4.58 The assessee in the written submissions submitted before the CIT(A) vide letter dated 7-3-1998 has, inter alia, stated as under (page 3 of the Paper Book) :--- "The learned DCIT further noted in the impugned order that 'other person' who have also received the sale proceeds has filed their separate return of income in respect whereof and the assessee had duly filed copies of the acknowledgement of filing Return of Income for the assessment year 1997-98 of such persons." 4.59 Again, the assessee vide his written submissions dated 18-7-1998, to the CIT(A) has, inter alia, submitted as under (page 27 of the P.B.):--- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Shri B.N. Soi. 4.61 The sale deed executed on 30-5-1994 by which the house was sold for Rs. 3.84 crores shows that only four persons, namely, Shri Ashok Soi (son), Smt. Bulbul Soi (wife), Shri Aditya Soi (son) and Shri Abhay Soi were shown as vendors. Shri B.N. Soi was not one of the vendors but he was made only a confirming party. The four vendors have been referred to as "Vendors - Party No. 1" in the Sale Deed. Shri B.N. Soi has been separately described as "Confirming Party". The relevant extracts from the Preamble and some Clauses of the said Sale Deed are reproduced hereunder :--- From Page 74 of the Paper Book : "AND WHEREAS on account of certain disputes arising amongst the member of the family of Shri Ashok Soi - A suit for the partition of the said Property No. 22 and other Property No. 23, Darya Ganj, New Delhi, was filed in the High Court of Delhi being Suit No 180/80 and by a Decree dated 14th October. 1980, passed by the Delhi High Court, it was declared that along with Shri Ashok Soi, his wife Mrs. Bulbul Soi and their two sons, namely Mr. Aditya Soi and Mr. Abhey Soi were equal owners each having an equal 1/4th Undivided Share and interest inter alia in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Section 269UC(1) of I.T. Act provides that notwithstanding anything contained in the Transfer of Property Act, 1882 or in any other law for the time being in force, no transfer of immovable property exceeding prescribed limits (which in the present case was Rs. 10 lakhs) shall be effected without complying with the requirements of Chapter XX-C of I.T. Act. In case Shri B.N. Soi would have any share in the title of the property, which is claimed at 12%, he was under a legal obligation to obtain necessary clearance certificate under the said Chapter. The mere fact that the vendee directly paid 12% share of sale proceeds to Shri B.N. Soi cannot create any antecedent title over 12% portion of the said property. The property, after its partition, by virtue of Preliminary and Final Decree, legally belonged to four separated members of the family having 1/4th share each. The assessee is, therefore, clearly liable to pay Capital Gains on his 1/4th legal share in the title over the said property. The assessee, his wife and two sons were legally entitled to receive 1/4th share of the sale proceeds, as each one of them were the legal owner of 1/4th share in the ownership of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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