TMI Blog2003 (11) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 4(2) of the GT Act which deals with gift to include certain types of transfer is attracted, holding that the assessee is liable to gift-tax in respect of conversion of individual property into HUF property. The Arbitration Award was given on 30-3-1995. The Assessing Officer adopted the market value of each plot at Rs. 1,80,99,105 as on 30-3-1995 and computed the total gift of Rs. 3,61,98,210. In the wealth-tax assessments also for assessment years 1991-92 to 1994-95 the Assessing Officer included the value of two vacant sub-plots as "urban land" within the meaning of WT Act. In wealth-tax assessments, the Assessing Officer valued the bungalow on sub-plot No. 417/1/1 as per Schedule III of the WT Act and rejected the plea of the assessee that sub-plot Nos. 417/1/2 and 417/1/4 be treated as "land appurtenant" to the bungalow constructed on sub-plot No. 417/ 1/1. 3. Aggrieved by the order of the Assessing Officer, the assessee filed the wealth-tax appeals in respect of assessment years 1991-92 to 1994-95 as well as the gift-tax appeal against the gift-tax assessment for assessment year 1995-96. The learned First Appellate Authority upheld the action of the Assessing Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding Mohan Nivas and its surrounding land. One of the members of HUF of Dr. K.M. Shah took the objection that the property known as Mohan Nivas and surrounding lands belongs to HUF of Dr. Kantilal M. Shah and not only his individual property and objected to sign the papers etc. The matter was carried to Court by one of the member of HUF Dr. K.M. Shah namely Bhadresh K. Shah son of Dr. K.M. Shah. The Hon'ble Judge of City Civil Court had admitted the suit bearing civil suit No. 5332 of 1994 and after hearing the parties the Hon'ble Court had appointed an arbitrator Mr. S.N. Soparkar by an order dated 25-10-1994 to collect the necessary evidence and documents etc. and to arrive at the legal ownership of properties belongs to Individual or HUF or Dr. K.M. Shah. Mr. Soparkar thereafter proceeded on the matter and held the conferences on various dates with plaintiff and defendants. He had collected all necessary documents and evidences regarding the disputed properties right from the very beginning of the plot purchased. After scrutinising all such original documents and evidences Mr. Soparkar hold in issue No. 2 that the properties described in Schedule No. 1 belongs to HUF property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Dr. K.M. Shah. In view of the above, a further letter dated 20-3-1998 issued to the assessee to furnish the following details : (a) Date of acquisition of property known as Mohan Nivas and its adjacent land. (b) Source of acquisition of property. Please clarify it was inherited or acquired by you. (c) Copies of documents submitted by you before arbitrator Shri S.N. Soparkar in arbitration proceedings. (d) Reason for your agreement to the proposition that property belongs to HUF. (e) Reason for your agreement to the proposal of arbitrator to pronounce his award without giving reason in support of award. The assessee vide his letter dated 24-3-1998 submitted that so far as knowledge the property Mohan Nivas and adjoining land was purchased on 6-1-1954 and to the best of his knowledge and belief, it was acquired out of fund available from the ancestor property. However, he further stated that he is trying to collect the details and shall submit the same as soon as he will gather it. As regards the query No. B2E the assessee submitted that Shri Soparkar is expert in legal matter and therefore his award was accepted. He requested for further time to collect the document fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in respect of 2/3rd of the property. 8. Aggrieved by the order of the CGT(A), the assessee is in appeal before us and has raised the following grounds : (1) That the learned CGT(A) ought to have held that the property in question belonging to "HUF" of Dr. K.M. Shah and not to him as "Individual". (2) Alleged gift not falling within period of assessment year 1995-96, entire order is illegal and bad in law. (3) The award ought to have been accepted and could not have been termed as collusive and unenforceable on any count, especially when learned Assessing Officer has adopted date of "award" as date of "Gift". (4) That impressing individual property as of HUF property could only be in the year 1954 and/or 1968 when the Bungalow was constructed and the relevant amendment in section 4(2) of the Act having been brought on statute book only from 1-4-1972, no gift-tax could have been levied on the said count. (5) That on facts of the case the decree of the Court is neither collusive nor unenforceable but can be said to be resultant into family arrangement as per tenor of award. (6) That the land in question standing in the name of two Sons right from 1954 and having execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the valuation should be done under section 7 read with Schedule III of the WT Act, according to which the valuation of whole property could be only Rs. 22,593. 10. On the other hand, the learned DR, supported the orders of the authorities below. He submitted that from records, it can be seen that the Arbitrator has not given any basis or any finding for holding that the property belonging to HUF of Dr. K.M. Shah. The Assessing Officer issued a letter dated 20-3-1998 wherein he asked the assessee to furnish various details and same were not furnished. The assessee has also filed statement of wealth as well as assessment orders for assessment years 1988-89 to 1994-95 (pages 1 to 27 of the paper book) from which it can be seen that the property in question was declared by the assessee as individual property. The assessee has also shown liability to Dr. K.M. Shah (bigger HUF) in the wealth-tax returns for assessment years 1988-89 to 1991-92. The liability amounts shown are Rs. 1,23,249 in assessment year 1988-89; Rs. 8,53,249 in assessment year 1989-90; Rs. 1,57,249 in assessment year 1990-91 and Rs. 1,58,849 in assessment year 1991-92. Not only this, in the wealth-tax ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer in the wealth-tax assessment valued this house as per Schedule III. The Assessing Officer has held that remaining two plots i.e., sub-plot Nos. 417/1/2 and 417/1/4 fall under the category of "Urban Land". The assessee vide letter dated 13-3-1996 which is appearing at page 30 of paper book filed by the assessee pointed out that the assessee has not shown in the return of wealth two vacant sub-plots i.e., sub-plot Nos. 417/1/2 and 417/1/4. These two vacant plots are required to be valued as per Rule 8 of Schedule III of the WT Act. The property in question did not belong to the HUF as held by this Tribunal in WTA Nos. 55 to 58/Ahd./99 for assessment years 1991-92 to 1994-95 vide order dated 9-1-2001. The learned DR also relied on the order of this Tribunal dated 25-5-2001 on Miscellaneous Application of the assessee being MA No. 13/Ahd./01 wherein it has been stated that the following additional ground was not pressed by the assessee during the course of hearing of wealth-tax appeals relating to assessment years 1991-92 to 1994-95: "That learned CIT(A) erred in holding that the property in question belonged to Dr. K.M. Shah as an individual and not to his HUF consisti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escalation in dispute which already existed. The counsel of the assessee also relied on the definition of "donee", "donor" and "gift" as contained in section 2 of the GT Act and contended that on consideration of various definitions of the Act, it is clear that the gift for the purpose of Act means transfer of any property made voluntarily and, without consideration by one person to another. Here the dispute was already in existence and in future there was every possibility of escalation of the said dispute. For this reason the assessee agreed for arbitration and Arbitration Award is binding. The assessee agreed for arbitration stances and with a view to obtain whatever money he can get at this old age. Since the assessee agreed for arbitration proceedings for a consideration i.e., both sons of the assessee will agree to sign the sale deed of property. Therefore there is no gift made by the assessee. The counsel of the assessee accordingly concluded that on this ground alone the gift tax assessment framed by the Assessing Officer be quashed/cancelled. 12. After hearing both sides, we have carefully gone through the orders of the authorities below. Rival submissions were also con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant amendment to section 4(2) of the Act were brought on statute book from 1-4-1972. This plea of the assessee also could not be accepted because conduct of the assessee in subsequent years i.e., assessment years 1973-74 onwards reveals that the assessee was disclosing this property as belonging to individual. Regarding the ULC proceedings also we found that in ULC proceedings, Hon'ble High Court in decision delivered on 27-1-1995 in Spl. Civil Application No 3949 of 1998 has stated that father of two petitioners purchased the land in the names of his two sons. This clearly indicates that real owner was assessee. Moreover in ULC proceedings the concerned authorities did not examine the income-tax and wealth-tax records of the assessee. 14. In the impugned order the learned CIT(A) recorded the following reasons for holding that the property in question belonged to Dr. K.M. Shah in his individual capacity : (i) As regards the sources of funds for investment in the property way back in 1954, there is nothing to suggest that the property was purchased out of the HUF funds of the appellant. The fact that the property was purchased in the names of 2 minor sons by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave entered into an agreement of sales within 2 days of the award. (ix) There was no HUF of Dr. K.M. Shah in existence prior to the award and there were no assets, properties or sources of income belonging to such an HUF. The point as to from where or which source the HUF could have acquired the movable assets viz, shares and debentures of various companies, which have been declared to be belonging to the HUF seems to have been totally overlooked by the Arbitrator. (x) The Arbitrator has exceeded his authority inasmuch as he has relocated even sub-plot No. 417/1/3 belonging to the 3 daughters of Dr. K.M. Shah, when the property in dispute comprised of only sub-plot No. 417/1/1, 417/1/2 and 417/1/4. How such an award would become acceptable to the 3 co-owners of sub-plot No. 417/1/3 is not known. Such a thing is possible only in a collusive deal when all the effected parties are in agreement. (xi) Dr K.M. Shah and his sons Dr. Mrugesh K. Shah and Bhadresh K. Shah had taken an entirely different stand before the Urban Land Ceiling Act authority inasmuch as they all claimed ownership of the property to avoid action under the Urban Land Ceiling Act. (xii) The movable assets com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or converting property has taken place immediately after such conversion. The valuation of property converted has to be done as per Schedule II as provided in section 6(1) of GT Act which in turn adopted Schedule III of the WT Act, 1957. In the case of Bharat Hari Singhania v. CWT [1994] 207 ITR 1 the Apex Court held that rule regarding valuation are mandatory. In the gift tax assessment order the Assessing Officer valued two plots at market value ignoring the DVO Report as 31-3-1994, who valued these two vacant plots at Rs. 2,21,22,000. No other expert Report on the date of Gift is available. The assessee has converted Mohan Niwas a residential house as well as two vacant plots the value of which as adopted by the WTO as on 31-3-1994 relevant to assessment year 1994-95 in the wealth tax assessment year is Rs. 2,24,55,420. Out of this the assessee is entitled to 1/3rd. The deemed gift under section 4(2) is only in respect of 2/3rd of the total value of the property converted. After allowing basic exemption under section 5(2) of the GT Act taxable gift works out to Rs. 1,49,40,280 as under as against Rs. 3,61,68,210 computed by the Assessing Officer in the assessment order : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two minors. 2.3 On 26-9-1997 the Ahmedabad Municipal Corporation approved the plan of lay out of final plot No. 417/1 into 4 sub-plots being 417/1/1,417/ 1/2,417/1/3 and 417/1/4. 2.4 On 30-7-1968 the two sons of the assessee, Bhadresh and Mrugesh executed gift deed in relation to land measuring 604 sq. yds. i.e., 505 sq. mtrs. of plot No. 417/1/3 in favour of their three sisters, Dr. Giraben, Linaben and Dinaben. The gift deed is placed in the paper book at pages 83 to 93. On behalf of the owners, the deed has been executed by Mrugesh Kantilal Shah and on behalf of the Bhadresh Kantilal Shah, who was a minor, the deed has been executed through his father and legal heir, the assessee. 2.5 On 4-9-1976 Shri Bhadresh Kantilal Shah, son of the assessee filed Form No. 1 under section 6(1) of the Urban Land Ceiling Act making a family statement that final plot No. 417/1 does not have any excess land. In this statement, persons holding ownership of the land have been shown as Bhadresh, Mrugesh, the assessee, his wife Chandrakanta and three daughters, Giraben, Linaben, Dinaben. The family statement has been filed under the signature of Bhadresh, son of the assessee. 2.6 On 18-12-198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1988-89 onwards are placed in the paper book from pages 1 to 27. These returns filed by the assessee have been heavily relied upon by the revenue authorities in support of the conclusion that the Mohan Niwas property situated at 417/1 plot belong to the assessee in his individual capacity. 4. In the backdrop of the aforementioned factual perspective, the Assessing Officer initiated gift tax proceedings on the ground that the assessee is liable to be assessed for the deemed gift made during the assessment year 1995-96 under the provisions of section 4(2) of the Gift Tax Act. Before the Assessing Officer, the assessee explained that the Mohan Niwas property all along stood in the name of his two sons, namely Bhadresh and Mrugesh, right since 1954 and that the gift deed in favour of assessee's daughters in 1967 was executed by the two sons as donors. According to the assessee, even in the Urban Land Ceiling Act proceeding, the High Court upheld the claim of ownership of the property vesting in the two sons and, therefore, there was no question of the assessee making any gift of his individual property to the HUF. According to the assessee, since he intended to sell the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd makes the same as the basis for invoking the provisions of section 4(2) for the assessment year 1995-96 under reference. According to the Ld. counsel, an arbitration award given by an arbitrator is open to challenge by the either party to the dispute and such an award would not by itself convert individual property into HUF property. Ld. counsel further contended that it was only on 18-7-1995 that the said Civil Court passed consent decree in terms of arbitration award with the consent of parties to the dispute. Ld. counsel pleaded that if the award and the suit are to be the basis for invoking the provisions of section 4 (2) of the Gift-tax Act, the relevant assessment year for action under the Gift-tax Act shall be the assessment year 1996-97 and not 1995-96. 8. Secondly, Shri Patel argued that even if the arbitration award is to be construed as a form of family settlement or family arrangement, section 4(2) would not apply inasmuch as there was no transfer of property involved within the meaning of section 2 (xxiv) of the G.T. Act under the family arrangement and hence there was no liability to gift tax under section 4(2) of the Gift-Tax Act. In support of his contentions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... title of ownership over the property is without any basis. 9. The ld.DR, on the other hand, placed reliance on the order of the Tribunal dated 25-5-2001 in WTA No. 55 to 58/1999 whereby the property in question has been held as belonging to the assessee as his individual property for wealth tax purposes for assessment years 1991 -92 to 1994-95. Ld. DR argued that the issue is thus concluded by the earlier order of the Tribunal and the impugned gift tax assessment sustained by the ld. CGTA deserves to be upheld. 10. The ld. Judicial Member in the proposed order has approved and endorsed the reasoning and conclusions of the ld. CGT(A) holding that provisions of section 4(2) of the Gift-Tax Act are applicable and the property has been converted into the HUF property by the assessee during the assessment year 1995-96. Ld. Judicial Member, in upholding the impugned assessment, has further observed that the arbitration award as well as the consent decree of the Civil Court are collusive and the individual property of the assessee has been converted by him as the HUF property during the period relevant for assessment year 1995-96 thus, bringing the case within the mischief of deemed g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of their three sisters, Dr. Giraben, Linaben and Dinaben. Furthermore, even before the Urban Land Ceiling authorities, the property has been shown as owned by two sons of the assessee. In these circumstances, I feel that there is absolutely no justification for the revenue authorities to conclude that the assessee having undisputed title of ownership over the property converted the same into the HUF property through collusive award or collusive suit. Insofar as legal ownership of the property is concerned, at the most what the assessee can claim is that his two sons, Bhadresh and Mrugesh, were his benamidars in the purchase of the property in January, 1954. In that situation, Benami Transactions (prohibition) Act, 1988, would come into play which would seriously jeopardize the title of ownership vesting with the assessee. Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 clearly provides that no suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property has been held or against any other person shall lie, by or on behalf of a person claiming to be the real owner. This naturally relates to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and patience for protracted litigation with his sons. It was in these circumstances that the assessee was possibly driven to enter into compromise over the issue of ownership with his two sons. In my opinion, there is, therefore, no justification whatsoever to say that the consent decree of the Civil Court or the arbitration award were collusive and made up affairs. Ld. CGT(A) has construed the arbitration award as a sort of family arrangement and the ld. Judicial Member has concurred with the view. When parties enter into a family arrangement, the validity of the family arrangement is not to be adjudged with reference to whether the parties who raised disputes or rights or claims in certain properties had in law any such right or not. The members of a joint family may, in order to maintain peace and bring about harmony in the family enter into a family arrangement and if the arrangement is entered into bona fide and the terms thereof are fair, courts will normally give assent to such an 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 ack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace which may be liable to be assessed as deemed gift under section 4(2) of the Gift-tax Act. Section 4(2) reads as under (relevant portion for our purposes taken) :- "Where, in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family. "... the individual shall be deemed to have made a gift of so much of the converted property as the members of the Hindu undivided family other than such individual would be entitled to, if a partition of the converted property had taken place immediately after such conversion." The section envisages a deliberate and conscious act on the part of the assessee where under the individual property is converted into the HUF property or is thrown into the common stock. The act of the individual should be voluntary, of its own volition and without consideration. Viewed in the backdrop of the aforesaid provision in the Gift-tax Act, I do not see a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax the deemed gift is sustainable in the facts and circumstances of the case ?" ORDER UNDER SECTION 23(11) OF THE G.T. ACT, 1958 READ WITH SECTION 255(4) OF THE LT. ACT, 1961 Per Shri T.K. Sharma, J.M. - In this appeal there is difference of opinion between the Members. I have carefully gone through the separate order of ld. Accountant Member as well as question referred by him to Hon'ble President under section 23(11) of the G.T. Act. In my opinion, in addition to the question referred by learned Accountant Member, following further issues are also required to be referred and therefore hereby referred :- (1) Whether on the facts and circumstances of the case, learned Accountant Member is correct in taking the view in para 13 of separate order that on 18-7-1995 property in question was held to be HUF which falls in the assessment year 1996-97 particularly when : (i) Arbitrator in his award dated 30-3-1995 held that the property in question if of HUF and in this award itself the arbitrator made complete partition of the property. (ii) On the valuation date 31-3-1995 relevant to the assessment year 1995-96 assessee Dr. K.M. Shah, individual did not declare the same in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this award itself the arbitrator made complete partition of the property. (ii) On the valuation date 31-3-1995 relevant to the assessment year 1995-96 assessee Dr. K.M. Shah, individual did not declare the same in his individual return of wealth on the basis of arbitration award given by Shri S.N. Soparkar on 30-3-1995 and two sons of the assessee declared the property allocated by Arbitrator in their returns of wealth for the assessment year 1995-96 and subsequent years. (iii) On 1-4-1995 assessee and his two sons and three daughters without waiting for decree of Court on arbitration award entered into an agreement for sale of the property in question namely; "Mohan Niwas" in Final Plot No. 417/1. (iv) In view of the finding given by ITAT in assessee's own case in WTA Nos. 55 to 58/Ahd./99 for the assessment years 1991-92 to 1994-95 and M.A. No. 31/Ahd./02 of the assessee dismissed vide order dated 25-5-2001. (2) Whether the decision of Hon'ble Madras High Court in the case of R. Ponnammal is applicable to the facts of the assessee's case when the first test laid down by Hon'ble Madras High Court is that "the family settlement must be bona fide one" (Please see pg. 712 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family (such property being hereafter in this sub-section referred to as the converted property), then, notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, for the purpose of computation of the taxable gifts made by the individual, the individual shall be deemed to have made a gift of so much of the converted property as the members of the Hindu undivided family other than such individual would be entitled to, if a partition of undivided family property had taken place immediately after such conversion." 6. On a perusal of this sub-section, it is evident that it deems the individual to have made a gift of so much amount of the converted property as the member of HUF other than such individual would be entitled to, if a partition of the converted property had tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of provisions of section 14 of the Hindu Succession Act the property became absolute property of the assessee at the time of family arrangement. In these circumstances, it was contended by the Revenue that there was no necessity for the assessee to part with her property and if she had under the family arrangement parted with some property, that would clearly result in transfer of property as contemplated under section 2(xxiv) of the Act. This argument was rejected by the court by stating that it ignored the settled law, that when parties enter into a family arrangement, the validity of the family arrangement is not to be judged with reference to the way the party who raised disputes or rights or claimed rights in certain properties had in law any such right or not. If the assessee found it worthwhile to settle the dispute between herself, her sons and daughters by making the family arrangement as contained in the document, that family arrangement cannot be ignored by tax authorities. The court, accordingly, upheld the order of the Tribunal in holding that the documents constituted a valid arrangement and there was no transfer of property involved within the meaning of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) The fourth position taken is by Bhadresh in 1994, when he filed a suit in the City Civil Court against the assessee and his second son Mrugesh claiming one-third share in the property. 9. Can, therefore, on these facts, it be said that the property was of the assessee alone; or it was joint property of two sons; or two sons and three daughters; or the assessee and his two sons and three daughters or the assessee and his two sons or the assessee, his wife, two sons and three daughters? It is not necessary also for disposal of these appeals to determine as to who really owns the property in the eye of law. For the purpose of making a settlement by way of a family arrangement, the possibility of a dispute as to ownership or title to the property itself is sufficient and there need not be a real dispute or an effective one in the eye of law. The sons of the assessee have openly challenged the sole ownership of the assessee. The property even though it was being shown in the return of income-tax and wealth-tax, in fact, stood in the name of the two sons and three daughters. On these facts, in my opinion it would not be correct to say that the property belonged to the assessee abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch decision in the case of R. Rajagopal Reddy v. Padmini Chandrasekharan [1995] 213 ITR 340 (SC) wherein the court observed, "the plaintiff's right to that effect is sought to be taken away and any suit to enforce such a right after coming into force of section 4(1) i.e., 19th May, 1988" shall not lie. The Full Bench also observed, "the view expressed by Division Bench in the case of Mithilesh Kumari that section 4(1) would apply even to pending suits which were already filed and entertained prior to the date when the section came into force and it has the effect of destroying the then existing rights of the plaintiff in connection with the suit property cannot be sustained in face of the clear language of section 4(1). On the express language of section 4(1) any right inheriting in real owner in respect of any property held benami would be affected once section 4(1) operates, even if such transactions had been entered into prior to the coming into operation of section 4(1) and hence once section 4(1) applies, no suit can lie in respect of such a past benami transaction. To that extent, the section may be retro-active. The next step that, therefore, then existing rights can be des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands appurtenant thereto and was used by Dr. K.M. Shah, his wife and two sons and unmarried daughters as a single unit and as such was exempted under section 5(1)(iv) and/or (vi) of the W.T. Act. 2. The learned CIT(A) failed to see that apart from the bungalow erected on sub-plots 417/1/2 and 417/1/4 as part of the construction of the bungalow for the purpose of using the same as a single unit by the entire family of Dr. K.M. Shah and used as such. 3. That the learned CIT(A) wrongly highlighted certain points in para 8.3 of her order as the same were not conclusive nor indicative of the other sub-plots being vacant urban lands and, therefore, subject to wealth-tax. 4. That the remaining adopted by the CIT in this behalf is totally untenable and the assessee's case fully falls within the principles laid down by the Madras High Court (227 ITR 733) and the Andhra Pradesh High Court (151 ITR 320). 5. That the decision of the CIT(A) holding the two sub-plots as vacant urban land is wholly untenable and unsupportable on the evidence on record, especially in absence of any proof in rebuttal. 6. That the learned CIT(A), therefore, erred in coming to the conclusion that the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individually to the assessee. In my opinion, rightly so, as the question was not in dispute before the Tribunal and that fact is further evident by the order in MA No. 13/Ahd./2001 dated 25-4-2001 wherein it is specifically stated that the issue was though raised before the Tribunal by way of additional ground but was not pressed. 15. Let me examine the effect of the above 12 point finding of the CWT (A): (i) The first point only suggests that there was no evidence as to the fact that the property was purchased out of HUF funds. It does not suggest that the sources were of the Individual either. (ii) The second point is that the gift made by the assessee could not have been made by him as karta if that was an HUF property. Gift was made in 1968 when Mrugesh was major and, therefore, the gift deed was signed by him along with the assessee who signed the deed as guardian of Bhadresh. This fact as stated above, does not suggest that it was individual property of the assessee. On the contrary, it may suggest that it could be the property of Mrugesh and Bhadresh. (iii) The third point is that the assessee had been showing the property in his individual return as his property but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e award was pre-determined. By the very existence of the agreement by way of settlement, the outcome of the award was naturally to follow. No inference therefrom can be drawn this way or that way and surely not an adverse one. (ix) The ninth point states that there was no HUF in existence prior to the award, in absence of any asset, property or sources of income and, therefore, as to wherefrom it could acquire movable properties was a fact overlooked by the arbitrator. When the award is made a rule of the court, it is binding not only on the parties but even to the third parties as well except only in those cases where it is reopened in accordance with the procedure laid down in the law. Again, as aforesaid, it could only be a ground for saying that the movable assets were not the property of the HUF for which there is no dispute either in the wealth-tax proceedings or these gift-tax proceedings. (x) The tenth point is that the arbitrator has exceeded his jurisdiction as he has reallocated even the gifted property to the three daughters of the assessee which could happen only in case of a collusive deal. Firstly, when the parties have agreed by way of a family settlement and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed in the paper book as a deed of partition. The Court held that the compromise entered into by the parties to the previous suit and embodied in the decree was in substance a family arrangement and, therefore, binding on all the parties to it. It observed that courts give effect to a family settlement upon the broad and general ground that its object is to settle existing or future disputes regarding property amongst members of a family. The consideration for a family settlement is expectation that such a settlement will result in establishing or ensuring amity and goodwill amongst the relations. That consideration having passed by each of the "disputants" the settlement consisting of recognition of the right asserted by each other cannot be impeached thereafter. It was also held that the transaction of a family settlement 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 a 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. If she was absolutely certain that her marriage had taken place in 1955 she would not have agreed to the terms at all. On the other hand if she thought that she might not be able to prove that her marriage took place in 1955 and if it was shown that she had married before 1955 then she would be completely disinherited and would get nothing at all with the result that the appellant Kale would get the entire property. On the other hand the appellant must have similarly thought that a bird in hand is worth two in the bush. So long as Ram Pyari was alive he would not be able to enjoy the property and would have to wait till her death. It was, therefore, better to take half of the property immediately as a permanent tenure holder and give the half to the daughters of Lachman, namely, Har Pyari and Ram Pyari. Thus under the terms of the compromise both the parties got substantial benefits and it was on the whole a very fair and equitable bargain. In these circumstances, therefore, the parties struck a just balance and a fair and beneficial settlement which put an end to their disputes." 20. A similar situation was appearing in this case before the family settlement. The assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, hence, the Tribunal was right in its view that 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." 22. I am, therefore, of the opinion that it was bona fide case of family settlement and, therefore, does not amount to transfer and consequently the provisions of section 4(2) of the Gift-tax Act, 1958 would not be applicable. 23. The second issue made out by the learned Accountant Member is that the assessment is to be quashed even on the ground that the gift in any case did not take place in the year under consideration in view of the consent given by the assessee to the award and decree passed by the court on 18-7-1995 which conclusively determines the rights of the parties. The learned Judicial Member has not given any specific finding on this. However, as he has upheld the assessment order levying of gift-tax for assessment year 1995-96, it gives rise to a difference as to whether the gift-tax if leviable at all, is le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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