TMI Blog2018 (4) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... /2017 - - - Dated:- 28-2-2018 - Sri Mahavir Singh, Judicial Member Assessee by : Dr. K. Shivaram, AR Neelam C Jadha v, AR Revenue by : N. Hemala tha, DR ORDER Per Mahavir Singh, JM This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-42, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-42/IT-99/14-15 dated 30-06-2017. The Assessment was framed by the Income Tax Officer, ward 31(2)(2), Mumbai (in short ITO) for the assessment year 2012-13 vide order dated 27-03-2015 under section 143(3) of the Income Tax Act, 1961(hereinafter the Act ). 2. The only issue remains for adjudication in this appeal of assessee is whether the property acquired by assessee through memorandum of family arrangement cum compromise deed dated 03-6-2004 is to be accepted as genuine, so as to adopt the cost of acquisition as on 01-04- 1981 for the purpose of computation of long term capital gain and consequently the income is to be assessed under long term capital gain or to be taxed under the head of income from other sources. The assessee has revised the grounds and following ground Nos. 2, 3 and 4 reads as under: - II. Disallowing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re CIT(A). The CIT(A) after considering the submissions of the assessee treated the entire consideration of his share of ₹ 3.15 Crores as income from other sources by observing in Para 6.8 to 6.11 as under: - 6.8 The above facts of the case are carefully considered. It is noted that the claim of the assessee that he had acquired 30/ right over the consideration received in respect of Ram Kutir due to a family arrangement is a wrong statement. A family arrangement is a transaction between members of the same family which is for the benefit of the family generally. It is an arrangement between member of a family descending from a common ancestor or near relation trying to sink their differences and disputes, settle and solve their conflicting claims once and for all to buy peace of mind by an equitable distribution or allotment of assets and properties amongst the member of the family. The object is to preserve the property and the good name of the family by recognizing that it is not in the good interest of the family or the members to engage in fights or disputes. For a family arrangement to be valid there must he a common property or joint property. Individual or self-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of a predeceased son of a predeceased son; and widow of a predeceased son of a predeceased son. The grandson is not a Class I heir if the father is alive at the time of death of the grandfather. As long as the Class I heirs are available there is no necessity to look for the rights of any other legal heirs. It is also required to be noted that in the present case there was a 'Will' properly executed by Late Shri Balakram Kamal and the same has also been subject of a Probate by the High Court of Bombay. Therefore, there was no necessity by law to infer that the rights in the property would extend to persons other than those mentioned in the 'Will'. It is noted that by virtue of the Family Settlement the assessee along with his brother and father have merely agreed that for all practical purposes the Ram Kutir property shall be held in the name of Shri Rajesh Gupta only in all the records of the concerned authorities and it is only when Shri Rajesh Gupta seeks to sell the property or dispose off the property that the assessee and his brother would get 30% share each of the consideration. This means that the assessee and his brother have not crafted any right in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 3,15,00,000/- from his father after the sale of Ram Kutir. Therefore, this amount cannot be held eligible for the purposes of section 54 of the Act. The amount received is not held to be received on account of a transfer of a residential house belonging to the assessee. The amount was also not received in connection with any transfer of any asset. The assessee has also not parted with any tangible or intangible asset or property to get hold of the same. Therefore, the amount of ₹ 3,15,00,000/- is held taxable as 'Income from Other Sources' of the assesse and no deduction under section 54 is available to the assessee. For the same reason, the assessee cannot claim any deduction for any indexed cost of acquisition u's 54 of the Act. The ground of appeal no: 2 of the assessee is dismissed. Aggrie ved, no w assessee is in second appeal bef ore Trib unal. 4. I have heard the rival contentions and gone through the facts and circumstances of the case. Before me, the learned Counsel for the assessee explained the facts that during the year under consideration the assessee has declared receipt of 30% of share of sale consideration in respect of property Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y after due deliberation and discussions an arrangement was arrived at and the same was made binding upon all the parties hereto for all time to come. Further, to settle this dispute the understanding was recorded for dividing the property vide clause 5 as under:- 5. In case Shri Rajesh Gupta, with the consent of the party of the other part, decide to dispose off/ sale or otherwise deal with or development of the said property in any manner, the total realization amount of the said property being the amount of consideration the same shall be distributed as under: Rajesh B. Gupta 40% Vishal Rajesh Gutpa 30% Kunal Rajesh Gupta30% It is clearly understood and agreed that for all practical purpose though the house property held in the name of Late Shri Balakram Kamal shall remain in the name of Rajesh B. Gupta in all the relevant records of the concerned authorities, Shri Rajesh Gupta Shall pay/ or arrange to pay the respective shares as mentioned above in clause above as if they are entitled to the same in terms of the Family Arrangement cum compromise since inception of the said property. 6. In view of the above, the learned Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in the case of Maturi Pullaiah v. Maturi Narasimham, AIR 1966 SC 1836 (SC), wherein Hon ble Court as under:- 17. Briefly stated, though conflict of legal claims in present or in future is generally a condition for the validity of a family arrangement, it is not necessarily so. Even bona fide disputes, present or possible, which may not involve legal claims will suffice. Members of a joint Hindu family may, to maintain peace or to bring about harmony in the family, enter into such a family arrangement. If such an arrangement is entered into bona fide and the terms thereof are fair in the circumstances of a particular case, Courts will more readily give assent to such an arrangement than to avoid it. (p. 1841) 9. From the above judgment of Hon ble Supreme Court, it is clear that even the conflict of legal claims in present or future is a condition for validity of family arrangement, it is not necessary so. Even future dispute if any possible that can be the reasons for family settling the property by way of family arrangement. Even, Hon ble Supreme Court in the case of Kale vs. Deputy Director of Consolidation, AIR 1976 (SC) 807, as laid down the principles which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no transfer of property was involved within the meaning of section 2(xxiv) of the Gift-tax Act and, hence, there was no liability to gift- tax either under section 4(1)(a) or under section 4(2) and consequently no question of inclusion of the income of the minor in the hands of the assessee would also arise. (p. 707) 11. From the above facts of the present case and the proposition of law discussed above through various case laws, I am of the view that it is settled law that when parties entered into family arrangement, the validity of the family arrangement is not to be judged with reference to whether the parties who raised disputes or rights or claimed rights to certain properties had in law any such right or not. A perusal of the record in the present case before me, establishes that a dispute was there in the family as per memorandum of family arrangement cum compromised deed and family arrangement was arrived at was documented much prior to the sale of the property in 2011. The family arrangement was made in 2004. In view of these, I treat the family arrangement as genuine and distribution of sale consideration according to the same is to be assessed as capital gains. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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