Bona fide family settlement and daughter's coparcenary rights exclude property allotment from gift-tax

A bona fide family settlement that reallocates joint family property to resolve possible disputes and recognises antecedent claims does not amount to a transfer for gift-tax purposes. Where a daughter receives property under such an arrangement, and the later Stridhan arrangement merely gives effect to that prior settlement, the allotment remains consistent with her coparcenary rights under the amended Hindu Succession law in Tamil Nadu. The property therefore falls outside the charge of gift-tax and is not treated as a taxable gift.

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Issues: Whether the property allotted to a daughter under a family settlement and Stridhan arrangement was liable to gift-tax.

Analysis: The family settlement was entered into to resolve possible disputes and reallocate joint family properties among members. The daughter had been allotted the property under the settlement, and the subsequent Stridhan arrangement at marriage was treated as giving effect to that earlier family arrangement. The amended Hindu Succession law in Tamil Nadu conferred coparcenary rights on daughters in Mitakshara joint family property, and the arrangement was consistent with those rights. A bona fide family arrangement recognising antecedent claims and effecting realignment of family property does not amount to a transfer for gift-tax purposes.

Conclusion: The property allotment did not constitute a gift and was not exigible to gift-tax; the finding was in favour of the assessee.

Final Conclusion: The Revenue's challenge failed because the impugned allotment was treated as a valid family arrangement implemented in accordance with the daughter's coparcenary entitlement and therefore outside the charge of gift-tax.

Ratio Decidendi: A bona fide family arrangement, made to preserve family peace and recognise antecedent rights, and effecting an allotment consistent with the statutory coparcenary rights of a daughter, does not amount to a taxable gift.

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