TMI Blog1984 (3) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees have foregone their share to an extent of 30 per cent in favour of the married female members and in view of the same there was an element of deemed gift under section 4(1) of the Gift-tax Act, 1958 ('the Act'). The plea of the assessee before the GTO was that there was no element of gift and whatever share was foregone, that was in accordance with certain family settlement. This plea was not accepted and, consequently, the value of 30 per cent of share in each of the assessee's case was worked out and after giving the basic exemption the balance thereof was taxed by treating the same as deemed gift under section 4(1). 3. Aggrieved, the assessees filed appeals before the AAC contending that there was no element of gift and whatever share was foregone in favour of the married female members of the assessee-families that was in accordance with certain family settlement executed on 31-3-1979. As such, the inference so drawn by treating the surrender of share as a deemed gift was stated to be bad in law. It was also submitted that whatever family arrangement was made, that was based on pre-existing right of the parties who were connected with the said agreement and whatever t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily of B. Venkataraju on the ground that whatever share was given to them was not reasonable and on the contrary it was on the lower side compared to the share to which they were entitled. On account of this the members of the family appears to have threatened the karta, B. Audinarayana, as also the members of B. Venkataraju's family. They also threatened to take this matter to Court and file certain suits in this regard. With a view to avoid litigation and preserve family peace and happiness and with a view to avoid differences and disputes among the family members, certain family settlement was entered into which was executed on 31-3-1979. As a result to this family settlement, the share of the different members of the assessee-families in the ancestral property and also in the property acquired subsequently with the aid of the ancestral nucleus were reallocated or redefined and it is on account of this some members of the assessee-families have foregone their share in favour of the donees. 6. Details of the shares that were foregone by the assessee-families in favour of the donees were compiled and filed by the learned departmental representative and they are furnished as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Bh. Venkataraju 4. Bh. Krishnarao One-fourth 1. Bh. Audinarayana share in son of Venkataraju Veerabhadra Iron Foundry 2. Bh. Koteswararao Rs. 32,833 3. Bh. Venkataraju 4. Bh. Krishnarao One-sixth share 1. Bh. Krishnarao in Guest House Rs. 10, 167 8. B. Koteswara Rao 72,414 12 1/2 per cent 1. Bh. Audinarayana share in Veera- son of Kondaiah bhadra Picture Palace 2. Bh. Veerabhad- Rs. 64,789 rarao 3. Bh. Prasada Rao One-eighth 1. Bh. Krishnarao share in Guest House Rs. 7,625 9. B. Krishnarao 64,788 12 1/2 per cent 1. Bh. Audinarayana share in Veera- son of Kondaiah bhadra Picture Palace 2. Bh. Veerabhad- rarao 3. Bh. Prasada Rao 10. S. Malleswari 36,400 10 per cent 1. Bh. Audinarayana share in son of Venkataraju Malleswari Picture Palace 2. Bh. Koteswararao 3. Bh. Venkataraju 4. Bh. Krishnarao 11. V. Mangatharayamma 36,400 10 per cent 1. Bh. Audinarayana share in Malleswari Picture Palace 2. Bh. Koteswararao 3. Bh. Venkataraju 4. Bh. Krishnarao 12. Y. Krishnakumari 36,400 10 per cent 1. Bh. Audinarayana share in son of Venkatara- Malleswari yudu Picture Palace 2. Bh. Koteswararao 3. Bh. Venkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting right of the parties who were connected with the said agreement and whatever they received was in view of their pre-existing right and by this agreement dated 31-3-1979 they have merely acknowledged and defined such rights. It was also submitted that even if the family arrangement resulted in certain transfer, such transfer was based on sufficient consideration in the mutual adjustment of the respective shares of the members in the joint family. Therefore, according to the learned counsel appearing for the assessee, there is no element of deemed gift as contemplated under section 4(1). 8. The learned departmental representative relied upon a decision of the Madras High Court in the case of K.V.K. Veerappa Chettiar. That was a case where a father executed settlement deeds in favour of his son and daughter. On facts, the Madras High Court found that there was a division of the joint family and the settlement in favour of son was not one in favour of the coparcener so as to be affected by any prohibition under the Hindu law, because the father has already made a declaration before the authorised officer appointed under the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entered into by the parties who are members of a family bona fide to put an end to the dispute among themselves, is not a transfer. It is not also the creation of an interest. For, in a family settlement each party takes a share in the property by virtue of the independent title which is admitted to that extent by the other parties. Every party who takes benefit under it need not necessarily be shown to have, under the law, a claim to a share in the property. All that is necessary to show is that the parties are related to each other in some way and have a possible claim to the property or a claim or even a semblance of a claim on some other ground as, say, affection." In arriving at this conclusion, the Supreme Court relied upon the decisions in Mt. Hiran Bibi v. Mt. Sohan Bibi AIR 1914 PC 44, Khunni Lal v. Gobind Krishna Narain ILR 33 All. 356 (PC) and Rangaswami Gounden v. Nachlappa Gounden AIR 1918 PC 196. The Supreme Court also considered the decision in Sureshwar Misser v. Maheshrani Misrain AIR 1921 PC 107. 11. The learned counsel appearing for the assessee also relied on a decision of the Supreme Court in the case of Maturi Pullaiah v. Maturi Narasimham AIR 1966 SC 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not hit this ; " Lastly, the learned counsel appearing for the assessee brought to our notice a judgment of the Madras High Court as in the case of Pappathi Anni. According to the facts in that case : " S and his son, T, effected a partition of the ancestral properties between themselves on April 8, 1953. On the death of S, intestate, on December 14, 1953, his widow and his son, T, applied for and obtained succession certificates. On November 12, 1959, a deed styled as a deed of partition was drawn up between S's widow and her son, T, under which there was an equal division of the properties left by S. The widow and her son, T, also effected settlements jointly of some of the lands obtained by them under the said deed. The High Court in CIT v. S.S. Thiagarajan [1963] 49 ITR 581 (Mad.) held that the properties left by S were taken by his widow entirely to the exclusion of T. Consequent on the decision of the High Court, the GTO initiated reassessment proceedings for the assessment year 1960-61, and held that the properties allotted to T in the partition between himself and his mother was liable to gift-tax in the hands of the mother." On these facts, the Madras High Court hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The difference sought to be suggested could well be attributed to the vagaries involved in the valuation of the immovable properties located in different places, especially when valuation of interest in co-owned property was even less capable of precision. This apart, the decided cases on the issue had made it clear that there could be no gift in a family arrangement, especially when, on facts, the title to the claim was not only 'legal' but also undisputed as in this case. The assessees were, therefore, entitled to succeed merely on the ground that the family arrangement was bonafide." This view was also reiterated by the Tribunal in the case of GTO v. Smt. Chinthamani Achi [1983] 4 ITD 237 (Mad.). There also the Tribunal held that in a family arrangement no transfer is involved and, therefore, there was no deemed gift liable to tax under section 4(1). 13. Thus, we have seen that Courts have given effect to a family settlement upon the broad and general ground that the object is to settle existing or future disputes regarding property amongst members of a family. A family settlement entered into by the parties who are members of a family bonafide to put an end to disputes among ..... X X X X Extracts X X X X X X X X Extracts X X X X
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