TaxTMI 
TaxTMI 
1986 (2) TMI 116
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..... Rama Seshadri had a brother named Shri P.V. Acharya. In other words Shri Rama Seshadri and Shri P.V. Acharya were full blooded real brothers. Shri and Smt. P. Rama Seshadri, that is the assessee before us and her husband, had no issues. Shri P.V. Acharya was married to Mrs. Vishen Acharya. Mrs. Vishen Acharya had a sister, called Smt. Ram Kumari Khanna wife of Kishan Chand Khanna. They had sons ; Ramesh Khanna and Kamlesh Khanna. As on9-7-1965, they were respectively aged 27 and 18 years. On that day Smt. Vishen Acharya then shown as resident ofStation Road, Jaipur, was aged about 45 years. She was being looked after by abovenamed Khanna brothers. Therefore, out of love and affection due to services rendered by these brothers to Smt. Vishen Acharya, she made a will on9-7-1965. A copy of this will appears at page 40 of the assessee's paper book. 3. In this will, she deposed that during her lifetime she will hold ownership rights of all her immovable and movable properties but on her death the said properties shall belong to Ramesh Khanna and Kamlesh Khanna in equal shares. She further averred in this will that nobody else shall have any right whatsoever on the properties left b....
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....nnecessary litigation which was very expensive and ruinous to all concerned and in order to arrive at a settlement which is beneficial to all. It was stated in this application that the parties have entered into a family settlement and decided that the plaintiff will be content with having 45 per cent share in the properties of the deceased. Shri Ramesh Khanna, defendant No. 1, will be content with 40 per cent share and Smt. Meera Khanna, widow of Kamlesh Khanna, both for herself and as guardian of her minor son, will be content with 15 per cent share being given to her minor son, Master Himansu Khanna, defendant No. 8. TheHon'ble Courtpassed a preliminary decree accordingly through the Hon'ble Mr. Justice M.S. Joshi on20-9-1982. The assessee received some assets including jewellery which she later on sold on the basis of this settlement arrived at through the Court. 6. The assessee filed her return of income for the assessment year under appeal on16-7-1980, declaring income of Rs. 37,960 under the head 'Income from other sources' comprised of dividends, interest and income from U.T.I. During the course of the assessment proceedings, the ITO found that the assessee had sold jewe....
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....) Value as on1-1-1964 12,760 keeping in view the price of gold ----------------- &nbs....
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....ned AAC is erroneous both on facts and in law. It should, therefore, be set aside and in its place that of the ITO restored. It was contended that a family settlement can take place where a family is already the owner of the property. It was contended that in this case, the assessee claimed her right, title and interest to the properties because of her relationship with the deceased on the ground that she was entitled to succeed her under the Hindu Succession Act. The assessee had claimed, it was contended that the will dated9-7-1965was null and void. If the will was null and void then the assessee could get the properties of the deceased only by way of succession, inheritance or devolution. When the assessee went to the Court for vindication of her rights, her claim was not based upon family settlement but was on account of provisions of law of succession, applicable to Hindus inIndia. The so-called family settlement, it was argued, was settlement of a claim made and, in fact, was not a family settlement regarding properties already belonging to a family. In nut shell, it was argued that the properties received by the assessee, including the jewellery sold, devolved upon her by su....
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....-7-1965of Mrs. Vishen Acharya who was the assessee's sister-in-law. It was submitted that the will was made by Mrs. Vishen Acharya on11-7-1965when husband of the testator was alive. However, Shri P.V. Acharya, husband of Mrs. Vishen Acharya died on27-11-1966. Mrs. Vishen Acharya died on11-7-1975. Thereafter, husband of the assessee also died on10-11-1977. Thus, the assessee claimed that she was entitled to the properties left behind by Mrs. Vishen Acharya. However, her claim at this stage, was opposed by the other interested parties mentioned supra who claimed that only they were entitled to the properties as mentioned in the will dated 9-7-1965. The assessee, therefore, had no alternative but to go to the Court. The family settlement approved by the Court was to maintain peace and honour of the families concerned. Such family settlements are recognised by law. Therefore, the revenue cannot claim that the family settlement was a device or artifice envisaged with an intent to defraud the revenue. 12. The learned counsel for the assessee submitted that the Hindu Succession Act does not apply to testamentary disposition. In this case, the Court has recognised existence of the will ....
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....out a case for an interference in his order. The appeal of the revenue may be dismissed. 15. In the rejoinder, the revenue contended that it has not been established that the property was self-acquired by the assessee, that in view of challenge to the will of the deceased by the assessee, the will was not operative and the provisions of the Hindu Succession Act, sections 15 and 16 were applicable and that for purpose of family settlement the relationship of the parties must be within the ambit of section 2(41) of the Income-tax Act which is not so in this case. Hence, the AAC's order is bad in law. It may be set aside. 16. We have given careful consideration to the rival submissions. From the narration of the facts given supra, it becomes clear that the rights of the parties prior to approval of family settlement by the Court were inchoate. None of the parties could claim an absolute right, title and interest in the properties left by the deceased Mrs. Vishen Acharya due to disputes and counter claim. On the one hand, the above-named Khanna brothers were claiming that all the properties that Mrs. Vishen Acharya had left behind belonged to them. Their claim was based upon the ....
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....ly meets with the approval of the Courts and the Court always leans in favour of a transaction relating to any such arrangement as it ensures peace and goodwill among the family members. This does not rest on any special rule of Hindu law, but flows from general principles and policy of law. 20. The revenue raised a contention before us that the assessee's rights flowed from her vested interest under the provisions of the Hindu Succession Act and as such those rights could not be compromised in a family settlement. Moreover, the members who arrived at the settlement cannot be called members of a family in view of the provisions of section 2(41) of the Income-tax Act. To our mind, this approach of the revenue is not tenable because Khanna brothers with whom the settlement was arrived at are Mrs. Vishen Acharya's sister's sons. They constituted a family and apparently had antecedent rights to the properties of the deceased as the assessee was claiming right, title and interest over the properties because of her close relationship and the Khanna brothers were staking their claims on the basis of the will of the deceased dated9-7-1965. The settlement was, therefore, nothing but a fa....