Owelty in family partition is not capital gains income when it merely equalises shares in allotted property.

Owelty paid to equalise unequal shares in a family partition was held to be an incident of the partition itself and part of the immovable property allotted, not a separate income or debt. Because the payment was integrally connected with the division and settlement of family assets, it did not amount to a transfer giving rise to capital gains tax. The Revenue's attempt to treat the amount as taxable compensation was rejected, and the issue was decided in favour of the assessee.

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Issues: Whether the amount of Rs. 24 crores paid in the course of partition as owelty to equalize inequalities in the division of family assets constituted income exigible to capital gains tax.

Analysis: The payment was made in the context of a family partition and settlement of disputes, and its character had to be determined by the legal incidents of owelty. Owelty represents an adjustment for unequal allotment in partition and is treated as part of the partitioned property, not as a separate income or debt. When such payment is made to equalize shares in an immovable property division, it is only a substituted form of the property allotted and does not amount to a transfer giving rise to capital gains. The tax department's contention that the amount constituted taxable compensation was rejected because the payment was integrally connected with the partition and the equitable adjustment of shares.

Conclusion: The amount paid as owelty was immovable property in the context of partition and was not income liable to capital gains tax; the question was answered against the Revenue and in favour of the assessee.

Ratio Decidendi: A payment made as owelty to equalize shares in a partition is an incident of the partition itself and, being part of the immovable property allotted, does not constitute taxable income or a transfer attracting capital gains.

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