TMI Blog2015 (10) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... te that the original borrowings were used by the assessee for the purpose of his business. Hence, the interest paid by the assessee on borrowings which were utilized by repaying the old business borrowings is squarely allowable as deduction. Accordingly, we direct the ld. AO to allow the sum towards interest paid on loan. - Decided in favour of assessee. - ITA No.675/Kol/2013 - - - Dated:- 7-9-2015 - Hon ble Shri S.V.Mehrotra, AM Shri Mahavir Singh, JM For the Appellant: Shri S.M.Surana, Advocate For the Respondent: Shri Subhrajyoti Bhattacharjee, JCIT,Sr.DR ORDER Per Shri Mahavir Singh, JM This appeal of assessee arises out of the order of ld. CIT(A) -XIV, Kolkata in Appeal No.420/CIT(A) -XIV/Kol/08-09 dated 22.01.2013. Assessment was framed by I.T.O., Ward-23(2) , Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the act ) for A.Yr. 2006-07 vide its order dated 26.12.2008. 2. The first issue to be decided in this case is as to whether the ld. CIT(A) is right in confirming the addition made in the sum of ₹ 2,12,78,361/- towards Long Term Capital Gain assessable in the hands of the assessee on sale of property situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee to his mother and wife pursuant to the family arrangement. The subject mentioned property was also leased out by the ladies namely his mother and wife to a third party and the lease deed was executed by them pursuant to the coownership vested in the hands of the ladies by family arrangement and Arbitration Award later blessed by the Hon ble Calcutta High Court. The rental income derived thereon from the subject mentioned property were duly offered by the ladies in their respective returns and taxed accordingly. (4) The mother (Smt. Gulab Kanwar Bhandari) and wife of the assessee (Smt.Pushpa Bhandari) actually sold the property for ₹ 2,41,30,000/- during A.Y.2006-07, but the sale deed for the same was executed by the assessee herein i.e. Shri Kamal Bhandari. This was done because in the records of the Delhi Development Authority, the subject mentioned property was not mutated in the name of assessee s mother and assessee s wife. The sale proceeds were received by the assessee herein and the same were invested in mutual funds and the redemption proceeds were duly handed over by the assessee to the ladies on 29.03.2006 in line with the directions of the family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A) erred in holding that the transfer of property through family settlement is not recognized as transfer for the purpose of Income Tax Act, 1961. 7. Shri S.M.Surana, Advocate, the ld. AR appeared on behalf of the assessee and Shri Subhrajyoti Bhatacharjee, JCIT, the ld. DR appeared on behalf of the revenue. 8. The ld. AR argued that the entire addition of long term capital gain on sale of the subject mentioned property was made by the assessee disbelieving the existence of family arrangement entered into by the assessee which was later subjected to an Award passed by Arbitrator and which was later blessed by the order of Hon ble Calcutta High Court on 10.08.2001. He argued that the assessee had handed over the possession of the subject mentioned property to the ladies pursuant to the family arrangement along with other movable and immovable assets as contemplated in family arrangement. He further argued that the ladies namely mother and wife of the assessee had independently entered into a lease deed to lease out the subject mentioned property to an outsider and derived rental income thereon and which was duly offered to tax in the returns of the ladies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject mentioned property is again taxed in the hands of the assessee, then it would only result in double taxation for a single sale of the property. He further argued that the copy of the Hon ble High Court order was very much on record before the ld. AO and there is no good reason for him to doubt the genuineness of the same while framing the assessment. Accordingly, he pleaded for the deletion of long term capital gain in the hands of the assessee in the sum of ₹ 2,12,78,361/- added in the hands of the assessee. 9. In response to this, the ld. DR vehemently supported the orders of the lower authorities. 10. We have heard the rival submissions and perused the materials available on record. We have also gone through the paper book filed by the assessee numbering from pages 1 to 303 comprising of various documents such as copy of the memorandum of family arrangement, copy of Arbitration Award, copy of order of the Hon ble Calcutta High Court, copy of Income Tax returns filed by the assessee together with the balance sheets as well as by the ladies i.e. mother and wife of the assessee from A.Y.2001-02 to 2006-07, copy of lease deed entered by the ladies on 01.04.2003 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein have been duly offered to tax by the ladies in their respective returns to the deed of sale and the ladies have also duly disclosed the capital gains on sale of the subject mentioned property i.e. sale deed dated 04.01.2006 in their returns for A.Y.2006-07. Hence, we find lot of force in the arguments of the ld. AR that the capital gains if added in the hands of the assessee will only result in double taxation. We also find lot of force in the arguments of the ld. AR that the genuineness of the family settlement deed cannot be doubted or disputed since the same was duly acted upon and accepted by the department from the A.Y.2002-03 to 2005-06 wherein the respective parties owned the property allotted to them (i.e. mother and wife of the assessee) in these years, income there from duly taxed by the department in their respective years. To this extent the observations of the ld. AO for justifying the long term capital gain addition in the hands of the assessee are not justified. It is also seen from the ld. CIT(A) s order that he had concluded to justify the disallowance on the ground that the family arrangement is not recognized under the Income Tax Act. We find that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and bad blood between the various members of the family. Today when we are striving to build up an egalitarian society and are trying for a complete reconstruction of the society, to maintain and uphold the unity and homogeneity of the family which ultimately results in the unification of the society and, therefore, of the entire country, is the prime need of the hour. A family arrangement by which the property is equitably divided between the various contenders so as to achieve an equal distribution of wealth instead of concentrating the same in the hands of a few is undoubtedly a milestone in the administration of social justice. That is why the term family has to be understood in a wider sense so as to include within its fold not only close relations or legal heirs but even those persons who may have some sort of antecedent title, a semblance of a claim or even if they have a spes successionis so that future disputes are sealed forever and the family instead of fighting claims inter se and wasting time, money and energy on such fruitless or futile litigation is able to devote its attention to more constructive work in the larger interest of the country. The courts have, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and therefore does not require registration u/s 17(1) (b) of the Registration Act. 5. The members being parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property, which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld and the courts will find no difficulty in giving assent to the same. 6. Even if 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. It is for this reason that a family arrangement by which each party takes a share ..... X X X X Extracts X X X X X X X X Extracts X X X X
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