TaxTMI 
TaxTMI 
2006 (10) TMI 229
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....der of this Court dated 10-8-1998, namely issues relating:- "(a)The portion of the Golf Links property which was in the possession of N.N. Nanda. (b)Modification of the Division Bench order so that it is stated, that the company shall challenge the imposition of capital gains tax, if any provided funds for that purpose are furnished by the appellants." 2. To appreciate the background in which the two aforesaid issues arise, it is necessary to refer to the factual background of the case. The relevant facts are really not in dispute. The Respondent No. 1-Company, namely - Kidarsons Industries Pvt. Ltd. is a Private Limited Company closely held by the Nanda family. Except for a few shares held by their relatives and friends the entire shareholding of the Company is that of the members of the Nanda family. Appellant No. 2 before us is Shri Narendra Nath Nanda. His three brothers namely, Mohinder Nath, Varinder Nath and Rajinder Nath were the respondents in the High Court along with their mother, who is no more. 3. The main source of income of Respondent No. 1-Company was the commission earned from the agency business of Thyssen Sthal Union of Germany ('Thyssen'). Dispute....
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....88. 14. Shri Narendra Nath Nanda will continue to occupy the portion of the property of the company in which he is at present residing as deemed owner/owner, and the value of such portion will be taken into account for evaluating the assets of the company. The value of such part of the property as is occupied by Shri Narendra Nath Nanda will be adjusted in the value of his share. 16. That for the purpose of valuation of share of Shri Narendra Nath Nanda Group, the property No. K-72, Udyog Nagar, Rohtak Road, Delhi will be treated as the property of the company. 19. This agreement will be filed in the Suit No. 1310 of 1988 and C.P. No. 28 of 1988, and appropriate orders will be passed in the suit." 6. Justice P.N. Khanna acting as the Commissioner allotted the Golf Links property to the group of appellant No. 2 even though he found that appellant No. 2 and his group were entitled to get assets worth Rs. 1.10 crores whereas the value of the property was Rs. 1.82 crores. However, since further disputes arose between the parties the matter came up before the Court and it was agreed by the parties that the valuation of the shares of Respondent No. 1-Company namely, Kidarsons....
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....rties. In the instant case, it has not been argued by anyone that the terms of settlement with which we are concerned are either illegal as being opposed to any statute or that it is hit by impossibility of performance and, therefore cannot be performed or that the settlement was not reached bona fide. Learned counsel appearing on behalf of the appellants submitted that Clause 14 of the settlement in clear terms provided that appellant No. 2 was to continue to occupy the portion of the Golf Links property of the Company in which he was residing as deemed owner/owner, and that the value of such portion shall be taken into account for evaluating the assets of the Company. The value of such part of the property as was occupied by Shri Narendra Nath Nanda was to be adjusted in the value of his share. He submitted that the parties clearly agreed that Shri Narendra Nath Nanda, appellant No. 2 will be allotted the portion of Golf Links property occupied by him on the date of settlement and that the value of the portion occupied by him shall be adjusted against the value of his share. It was submitted before us that in case anything more has to be paid that will be paid by Shri Narendra Na....
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....r problems, if any, and learn to live peacefully in the premises. On the other hand, counsel for the respondent submitted that this was really a case of family settlement and the learned Judges have taken the broadest view of the matter with a view to give effect to the settlement reached between the parties. It is submitted that the overall intention was to give respondent No. 1-Company to the contesting respondents and by compensating the appellants who are entitled to their 30.14 per cent share in specie and the agency business of Thyssen. If the dominating intention of the parties has been effected minor issues like the one raised by the appellants should not defeat the settlement reached between the parties. It is submitted that a little ironing out of creases in family settlements must be permitted. It is therefore, submitted that the finding of the High Court on this aspect of the matter required no interference. 11. Learned counsel for the respondents has brought to our notice a decision of the this Court in Kale v. Deputy Director of Consolidation [1976] 3 SCC 119 laying down the approach of the Court in giving effect to a bona fide family arrangement entered into betwe....
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.... the courts find that the family arrangement suffers from a legal lacuna or a formal defect the rule of estoppel is pressed into service and is applied to shut out plea of the person who being a party to family arrangement seeks to unsettle a settled dispute and claims to revoke the family arrangement under which he has himself enjoyed some material benefits. The principles were concretized and succinctly reduced to the following propositions :- "(1)The family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family; (2)The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence; (3)The family arrangement may be even oral in which case no registration is necessary; (4)It is well-settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already ....
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.... basis that the appellants and the respondents cannot peacefully live in the same premises. The High Court has, therefore, not favoured allotment of a portion of the house in favour of appellant No. 2 and has approved the allotment of the house to the respondents who owned the majority shares in the respondent No. 1-Company. This was done with a view to ensure that the parties live separately but in peace and harmony. We cannot find fault with the concern shown by the High Court, but the problem which arises in the instant case is that the High Court was not considering a matter in which it could have exercised its discretion to make allotment one way or the other as in a case of family partition. The decree of the Court is based upon a settlement reached between the parties. Even at the time when the settlement was reached the parties were well aware of the strained relationship which existed and the unfortunate events that occurred between the branch of appellant No. 2 and the remaining members of the family. Despite this, it was agreed by all of them that the portion in occupation of appellant No. 2 shall be allotted to him and the value thereof adjusted against his share. The r....
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....capital gains tax liability from the total value of assets. 19. Before us learned counsel for the respondent did not want to join issue on this question and left it to us to pass an appropriate order. Learned counsel for the appellants argued before us that no capital gains tax is payable in the instant case because the transfers are by virtue of an order of the Court and, therefore, sections 100 to 104 of the Companies Act are attracted. There is in reality no transfer or sale that may attract capital gains tax, in view of the pre-existing right and title of the parties which gets crystallised under a family arrangement. He further submitted that so far as respondent-company is concerned it does not get any consideration and, therefore, there is no question of any capital gains tax liability so far as respondent-company is concerned. In any event even if the capital gains tax liability is imposed that will be the liability of the appellants herein, and they will be obliged to discharge that liability in accordance with law. Learned counsel for the appellant made a clear and categoric statement before us that if any liability arises out of the valuation of the assets or capital ....