TaxTMI 
TaxTMI 
2006 (7) TMI 293
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....raisamy and Shri C. Krishnan were brothers born to Shri M. Chinnappa Gounder and wife Smt. C. Elayammal and the family tree is as under :- Shri M. Chinnappa Gounder and wife C. Elayammal (Parents) C. Doraisamy C. Krishnan D. Kavery-wife K. Susheela-wife K. Hamsavalli (married daughter) K. Balasubramaniam D. Venkateswaran K. Karthikeyan D. Janaki K. Bharani D. Shanmugasundaram. 4. Shri C. Duraisamy passed away on 29-1-1987 leaving behind legal heirs of the family being wife, one married daughter, one unmarried daughter and two sons. Shri C. Duraisamy and Shri C. Krishnan were residing together in their house at 74, Park Road, Erode and after the death of Shri C. Duraisamy, Shri C. Krishnan took over the af....
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....rty mentioned above. However, this settlement is also towards satisfying the claim of Smt. D. Janaki regarding her right over the property of the family since she was unmarried at that time and even as per amended provisions of the Hindu Succession (Tamilnadu Amendment) Act, 1989 any unmarried daughter has a right over the properties of the joint family. 6. The Assessing Officer, during the course of income-tax proceedings, in the case of these assessees found that there is an audit objection proposing to treat the above family arrangement regarding transfer of this property i.e, Godown building by these co-owners without consideration as gift. Accordingly, the Assessing Officer proposed to issue notice under section 16 of the Gift-tax Act, 1958 and wanted to assess the gift to tax. The Assessing Officer started the proceedings and assessed the gift to tax as the transfer is without consideration. Aggrieved the assessees preferred an appeal before the CGT(A). 7. The CGT(A) after examining the issue held that the property bequeathed on Smt. D. Janaki by these assessees in view of the family settlement deed and Stridhan settlement dated 8-11-1989 cannot be treated as gift. Acco....
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....spite of issue of notice of hearing, the assessee shows remain absent on the date of hearing of these appeals. Hence, we proceed to decide these appeals on merits after hearing the ld. Departmental Representative. 10. We have heard the ld. Departmental Representative. A careful perusal of the judgment of the Hon'ble Apex Court in the case of S. Sai Reddy v. S. Narayana Reddy [1991] 3 SCC 647 reveals that what has been considered by the Hon'ble Apex Court is the amendment by introduction of section 29A in Hindu Succession Act, 1956 as amended by the State Legislature by Hindu Succession (A.P. Amendment) Act, 1986. Similar is the amendment of the Hindu Succession (Tamilnadu Amendment) Act, 1989 as per Chapter IT-A, succession by survivorship. The Hon'ble Apex Court has laid down the principle regarding the concept of partition that the Legislature has in mind cannot be equated with a mere severance of the status of the joint family which can be effected by an expression of a mere desire by a family member to do so. The partition that the Legislature has in mind is a partition complete in all respects which has brought about an irreversible situation. If a partition of the property....
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....) shall be held by her with the intidents of coparcenary ownership and shall be regarded, notwithstanding anything contained in this Act or any other law for the time being in force, as property capable of being disposed of by her by will or other testamentary disposition; (iv) nothing in clause (ii) shall apply to a daughter married prior to or to a partition which had been effected before the commencement of the Hindu Succession (Andhra Pradesh Amendment) Act, 1986." 12. The Hon'ble Apex Court has considered the issue regarding the preliminary decree which has already been passed prior to the amended provisions and the High Court committed an error in directing the trial court to allot shares to the unmarried daughters. This was pleaded before the Hon'ble Apex Court. The Hon'ble Apex Court has admitted that under the unamended Act, unmarried daughters of a Hindu Mitakshara family were not entitled to any share in the joint family property. But the State of Andhra Pradesh removed the injustice to the daughters so far as that State was covered by newly introduced section 29A in the Act and the Hon'ble Apex Court has held in para 6 that by way of amendment, the daughter is con....
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....amily settlement, by a registered instrument of partition, by oral arrangement by the parties, or by a decree of the court. When a suit for partition is filed in a court, a preliminary decree is passed determining shares of the members of the family. The final decree follows, thereafter, allotting specific properties and directing the partition of the immovable properties by metes and bounds. Unless and until the final decree is passed and the allottees of the shares are put in possession of the respective property, the partition is not complete. The preliminary decree which determines shares does not bring about the final partition. For, pending the final decree the shares themselves are liable to be varied on account of the intervening events. In the instant case, there is no dispute that only a preliminary decree had been passed and before the final decree could be passed the amending Act came into force as a result of which clause (ii) of section 29A of the Act became applicable. This intervening event which gave shares to respondents 2 to 5 had the effect of varying shares of the parties like any supervening development. Since the legislation is beneficial and placed on the st....
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....of the partition shall be allotted to the surviving child of such pre-deceased son or of such pre-deceased daughter: Provided further that the share allottable to the pre-deceased child of a pre-deceased son or of a pre-deceased daughter, if such child had been alive at the time of the partition, shall be allotted to the child of such pre-deceased, child of the pre-deceased son or of the pre-deceased daughter, as the case may be; (iii) any property to which a female Hindu becomes entitled by virtue of the provisions of clause (i) shall be held by her with the incidents of coparcenary ownership and shall be regarded, notwithstanding anything contained in this Act or any other law for the time being in force, as property capable of being disposed of by her by will or other testamentary disposition; (iv) nothing in this Chapter shall apply to a daughter married before the date of the commencement of the Hindu Succession (Tamilnadu Amendment) Act, 1989; (v) nothing in clause (ii) shall apply to a partition which had been effected before the date of the commencement of the Hindu Succession (Tamilnadu Amendment) Act, 1989. 29B. Interest to devolve by survivorship on death.....
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....cordingly we find no infirmity in the Stridhan settlement deed dated 8-11-1989 by virtue of that Smt. D. Janaki was assigned a share in the property of Joint Hindu Family. This is in accordance with the family settlement deed dated 4-8-1988 and further this is in accordance with Hindu Succession (T.N. Amendment) Act, 1989. In view of this we hold that the property given to Smt. D. Janaki will not attract Gift-tax as it is not a gift rather the property was divested in view of the amended provisions of Hindu Succession (T.N. Amendment) Act, 1989. Even otherwise Smt. D. Janaki can have a claim in the joint family property as given to her in view of the family settlement deed and Stridhan settlement deed dated 8-11-1989. Accordingly Commissioner of Gift-tax(A) has rightly held that the same will not attract the provisions of Gift-tax so as to bring into the ambit of Gift-tax Act, 1958. 15. Even otherwise the assessee's claim is that, whether property divested on Smt. D. Janaki by way Stridhan settlement deed dated 8-11-1989 on the basis of family settlement dated 4-111989 will not attract capital gain or not. 16. The brief facts are that the family settlement deed dated 4-81988 ....
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....ions for their validity is found in Halsbury's Laws of England 3rd Edn., Vol. 17 at pp. 215-26 'A family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour. The agreement may be implied from a long course of dealing, but it is more usual to embody or to effectuate the agreement in a deed to which the term "family arrangement" applied.' The principles of the Courts should beat in mind in appreciating the scope of such family arrangement are stated thus: 'Family arrangements are governed by principles which are not applicable to dealings between strangers. The Court, when deciding the rights of parties under family arrangements or claims to upset such arrangements, considers what in the broadest view of the matter is most for the interest of families, and has regard to consideration which, in dealing with transactions between persons not members of the same family, would not be taken into account. Matters which would b....
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....strangers, do not equally apply to the case of compromises in the nature of family arrangements. Family arrangements are governed by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties, originating in mistake or ignorance of fact as to what their rights actually are, or of the points on which their rights actually depend.' The object of the arrangement is to protect the family from long drawn litigation or perpetual strifes which mar the unity and solidarity of the family and create hatred and bad blood between the various members of the family. To-day when we are striving to build up an egalitarian society and are trying for a complete reconstruction of the society, to maintain and uphold the unity and homogeneity of the family which ultimately results in the unification of the society and therefore, of the entire country, is the prime need of the hour. A family arrangement by which the property is equitably divided between the various contenders so as to achieve an equal distribution of wealth instead of concentrating the same in the hands of a few is ....
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....the record or for information of the Court for making necessary mutation. In such a case, the memorandum itself does not create or extinguish any rights in immovable properties and therefore does not fall within the mischief of section 17(2) (sic) section 17 (1)(b) of the Registration Act and is therefore not compulsorily registrable. (5) The members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is acknowledge by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner then the antecedent title must be assumed and family arrangement will be upheld and the Courts will be upheld and the Courts will find no difficulty in giving assent to the same. (6) Even if bona fide disputes, present or possible, which may not involve legal claims or settled by a bona fide family arrangement which is fair and equitable the family arrangement is final and binding on the parties to the settlement. The Hon'ble Apex Court rely....
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....assessee claimed that the agreements dated August 19, 1980, and June 20, 1981, were in pursuance of a family arrangement and, hence, the capital gains from these transactions could not be assessed to capital gains tax. The Income-tax Officer took the view that the transactions amounted to transfer of title in respect of which capital gains was exigible to tax. The Tribunal came to the conclusion that the transaction was a family arrangement and did not involve any transfer of title of properties. On a reference: Held, that the dispute arose in the family and the family arrangement was arrived at in consultation with the panchayatdars and, accordingly, re-alignment of interest in several properties resulted. The family arrangement was arrived at in order to avoid continuous friction and to maintain peace among the family members. The family arrangement was governed by the Principles which were not applicable to dealings between strangers. So such re-alignment of interest by way of effecting family arrangements among the family members would not amount to transfer. The Tribunal found that the family arrangement was a bona fide one inasmuch as it was made voluntarily and not induce....