TMI Blog2010 (8) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... ng total income of ₹ 6,16,316/-. The assessment was completed on 23rd December, 2008 under section 143(3) at a total income of ₹ 19,16,320/-. It was noticed that the assessee had deposited ₹ 13,00,000/- in TNMB Limited. This was claimed having been received for himself and his minor children, namely, M. Sri Sai Ram and M. Kruthinga under the terms of a deed of Memorandum of family arrangement on 11.4.2005 and was treated as non-taxable. But the A.O. was not agreeable. The relevant portion of this family arrangement is as under:- Whereas, one of the daughters, namely Vimala (wife of the Party of the Second Part) died on 18.11.1997, leaving behind her husband, the Party of the Second Part and here minor children, namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- is a result of relinquishment of a right over a capital asset, so this amount has to be taxed as per law. According to A.O., in case this assessee would have received possession of the capital asset it (its value) would have been credited in the Balance-Sheet as capital, and as and when it would have been sold capital gains would be sale-proceeds minus its cost, which would have been taxable. Because the assessee has directly received money in lieu of the capital asset, it is still taxable in the same manner. To substantiate his above epilogue he has taken shelter of a decision of Hon'ble jurisdictional High Court rendered in the case of CIT v. Shanthi Chandran (2000) 241 ITR 371 (Mad). The ratio of this decision is that when an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant and his son and daughter is liable to be taxed as Long Term Capital Gains is erroneous in law and the facts and circumstances of the case. 2. The Commissioner (Appeals) erred in holding that the appellant and his children received the amount for relinquishing their 1/5th interest in the property obtained by Late Smt. Vimala wife of the appellant, by virtue of Will left by her Grandfather and that the transaction amounted to transfer within the meaning of section 2(47)(i) of the Act. 3. The Commissioner (Appeals) failed to appreciate that it is settled law that a family arrangement is realignment of interest among the family members and would not amount to transfer and cannot give rise to capital gains under the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not taxable in view of this decision which was rendered in the case of CIT v. KAY ARR Enterprises And Others (2008) 299 ITR 348 (Mad) wherein it has been held that such an amount received as a result of a family settlement is not taxable in the hands of the assessee, at all, because it is not to be treated as a capital gain and the reason for the same being that there is no transfer which is a pre-requisite condition to charge capital gain in such circumstances. 7. On the other hand, the learned D.R. has strongly opposed the contention of the assessee and has further placed reliance on the order of the ld. CIT(Appeals) and has particularly relied on the definition of the term transfer as given in section 2(47)(i) of the Act in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion that the family arrangement among the assesses did not amount to any transfer and hence was not exigible to capital gains tax . 10. Moreover, the Chennai Bench C in which one of us (myself was a party constituting the Bench) while deciding appeal in I.T.A. No. 2162/Mds/2008 for the assessment year 1999-2000 in the case of Ms. A. Santha v. ITO vide order dated 29th May, 2009, has come to same and similar conclusion on almost identical facts. For ready reference, to understand the reasons given for the decision and the facts of that case, we are reproducing para Nos. 4, 5, 6 and 7 of that order:- 4. As per admitted facts of the case, the joint property was valued at ₹ 19,05,496.20. In the absence of any share specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement rather than avoid it. Even if a party to the settlement has no title under the arrangement but 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. 7. Even if for argument sake it is construed that assessee has been given the benefit of the entire joint property by the sister free of cost, it will at best be a gift and that is construed as a transaction not in the nature of transfer as per Section 47(iii) of the Income Tax Act. Moreover, in the light of above case law, the plea that there was family arrangement under which the exchange between the assessee and her sister ..... X X X X Extracts X X X X X X X X Extracts X X X X
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