Bona fide family settlement excluded from deemed gift treatment where evidence showed genuine co-owner arrangement and no rebuttal by Revenue.

A bona fide family settlement among related co-owners, made to avoid present or future disputes and preserve family harmony, was not treated as a deemed gift under section 4(1)(c) of the Gift-tax Act. The affidavits of the co-sharers and an independent witness, together with the memorandum of agreement, supported the genuineness of the arrangement, and no contrary material was produced to discredit that evidence. Applying the principle that the apparent state of affairs must be accepted unless rebutted, the arrangement was upheld as a genuine family settlement outside the charging provision, and the addition treating the surrender as a deemed gift was deleted.

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Issues: Whether the relinquishment of the assessee's share in co-owned properties under the family arrangement amounted to a deemed gift under section 4(1)(c) of the Gift-tax Act, 1958, or whether the arrangement was a bona fide family settlement outside the charging provision.

Analysis: The evidence consisted of detailed affidavits of the co-sharers and an outsider, all consistently stating that the arrangement was made at the time of the kirya ceremony to avoid future disputes and preserve family harmony. The memorandum of agreement also recorded the same arrangement, and no material was brought by the tax authorities to discredit the affidavits or to show that the memorandum was not genuine. The principle applied was that the apparent state of affairs must be accepted unless rebutted by contrary evidence. On the facts, the arrangement was treated as a genuine family settlement supported by independent title recognition among related parties.

Conclusion: Section 4(1)(c) was held not to be attracted, and the addition treating the surrender as a deemed gift was deleted.

Ratio Decidendi: A bona fide family settlement entered into to avoid present or future disputes among related co-owners does not constitute a deemed gift where the surrounding evidence supports genuineness and the Revenue fails to rebut the apparent state of affairs.

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