TaxTMI 
TaxTMI 
2015 (10) TMI 943
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....,41,30,000/- in the following manner :- Ground Floor to Arpit Realtors Pvt.Ltd. for Rs.85,10,000/ First Floor to Sturn Collection Agents Pvt. Ltd. for Rs.75,10,000/ and Second Floor to Shiv Kripa Agencies Pvt.Ltd. for Rs.81,10,000/ Rs.2,41,30,000/ It is pertinent to note that the assessee had executed the sale deed dated 04.01.2006 in his individual capacity for 50% share and has acted as Power of Attorney of Smt. Kankawari Nahata for the balance 50% share. It is relevant to get into the factual matrix of this case for proper disposal of this appeal. (1) The assessee obtained the property situated at Delhi (herein after referred to as the subject mentioned property) to the extent of 50% share pursuant to a Will executed by his father in the year 1987. The balance 50% share of the subject mentioned property was given to Smt. Kankawari Nahata pursuant to the Will. The assessee obtained the possession of balance 50% share of the subject mentioned property from Smt.Kankawari Nahata on 21.06.1993 for Rs. 7,00,000/-. However, no sale deed was executed by Smt.Kankawari Nahata in favour of assessee. By this process the assessee became the abso....
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.... and the redemption proceeds of mutual funds were handed over to the ladies on 29.03.2006 by the assessee. The profits derived from the mutual funds were duly offered to tax by the assessee in his return of income for A.Y.2006-07. 4. The ld. AO has added back the entire Long Term Capital Gain on sale of the subject mentioned property at Delhi in the hands of the assessee on the ground that the assessee failed to file the following documents such as :- certified copy of the Award given by the Arbitrator, certified copy of the Execution Petition, certified copy of the High Court order in confirmation with the Xerox copy of order submitted and application mentioning (a) and (b) in terms of column 10 of the Tabular Statement in original. The ld. AO further commented that the assessee failed to prove the genuineness of the alleged deed i.e. family arrangement deed. 5. Aggrieved, the assessee challenged this issue before the ld. CIT(A) , who upheld the findings of the ld. AO on the ground that the sale proceeds of the property were deposited into the bank account of the assessee and the transfer of the property by the assessee to the ladies i.e. mother and wife of the assessee purs....
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....n the balance sheet of Shri Kamal Bhandari, the assessee herein, as on 31.03.2002, the subject mentioned property at Delhi is not reflected due to the transfer of possession to the ladies i.e. mother and wife of the assessee pursuant to the family arrangement. The ld. AR further argued that the subject mentioned property at Delhi had been duly reflected in the balance sheet of the ladies upto 31.03.2005 as the property owned and possessed by them. However, the property document was remaining in the name of the assessee and not mutated in the name of assessee's mother and wife in the records of Delhi Development Authority, due to which the assessee had to execute the sale deed on 04.01.2006 in favour of Arpit Realtors Pvt. Ltd., Sturn Collection Agencies Pvt.Ltd and Shiv Kripa Agencies Pvt. Ltd. The ld. AR further argued that the assessee having executed the sale deed in the representative capacity, received the sale proceeds and deposited the same in his bank account and invested the same for a short span of time by investing in mutual funds and derived profits thereon. The profits derived from mutual funds were duly offered to tax by the assessee in his hands. On 29.03.2006 the as....
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....e said family arrangement, the assessee Shri Kamal Bhandari apart from other assets had to hand over the possession of the land and building situated at Delhi to his mother and wife which was accordingly done by him. This fact is evident from the fact that the land and building situated at Delhi (the subject mentioned property) is not reflected in the balance sheet as on 31.03.2002 of the assessee. It is also seen in the balance sheet of Smt. Gulab Kunwar Bhandari (mother) and Smt.Pushpa Bhandari (wife) as on 31.03.2002, the subject mentioned property at Delhi has been reflected in their respective balance sheets pursuant to the family arrangement. However, it is also seen that in the records of Delhi Development Authority the property namw was not mutated in the names of assessee's mother and wife which led the assessee to execute the sale deed on 04.01.2006 in favour of a third party for the purpose of convenience. In other words, the assessee stepped into to execute the sale deed only to avoid explaining the complete background for family arrangement vis-à-vis the total assets to be distributed among the family members which was also later approved by the Hon'ble Calcutta....
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....y arrangement wherein it was held that : "As regards first aspect, it needs to be noted that the family arrangement is a typical legal phenomena that does not fit into those which are specifically recognized under law. The transfer of immovable or movable property, as the case may be, does take place under the arrangement, but it is substantially different from the one that is contemplated under the Transfer of Property Act or the Sale of Goods Act. No formal registered document is executed and the nature of consideration is not amenable to any legal analysis." By virtue of a family settlement or arrangement members of a family descending from a common ancestor or a near relation seek to sink their differences and disputes, settle and resolve their conflicting claims or disputed titles once for all in order to buy peace of mind and bring about complete harmony and goodwill in the family. The family arrangements are governed by a special equity peculiar to themselves and would be enforced if honestly made. In this connection, Kerr in his valuable treatise Kerr on Fraud at p.364 makes the following pertinent observations regarding the nature of the family arrangement which may ....
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....ettled dispute and claims to revoke the family arrangement under which he has himself enjoyed some material benefits. The contemporary social scientists or those who claim to be so have to reconsider their approach towards the expressions like egalitarian society or social justice, if they happen to understand the message contained in the famous judgment. Unfortunately those two expressions have been pressed into service in the past few decades to connote not so noble and congenial ideas but only disruptive and divisive ideas." It is also held by the Hon'ble Andhra Pradesh High Court in 371 ITR 386 "We, therefore, are of the view that the family arrangement, whatever it exists and is proved, is a sui generis i.e. a class by itself, with full legal enforceability, de hors the fact that it is not dealt with under any specific provision of an enactment. The settlement deserves to be given full effect and the legal consequences flowing there from cannot be ignored, on the ground that they do not fit into any specific provision of law." The purport of the family arrangement was explained by the Hon'ble Supreme Court in Kale vs Deputy Director of Consolidation AIR 1976 SC 807....
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....ord and in view of the judicial precedents recognizing the family arrangement in the eyes of law, the action of the ld. AO in bringing to tax the long term capital gain of Rs. 2,12,78,361/- is illegal and is hereby directed to be deleted in the hands of the assessee. 11. The next issue is as to whether the ld. CIT(A) is justified in confirming the disallowance of Rs. 45,000/- towards interest paid on loans. 12. The brief facts of the case are that the assessee borrowed loan to re-pay his earlier loan borrowed by him during the course of his business. The interest paid on the new loan amounting to Rs. 45,000/- was claimed as deduction by the assessee which was disallowed by the ld. AO on the ground that the interest is paid on borrowed funds which was utilized for earning dividend. Aggrieved, the assessee challenged this issue before the ld. CIT(A) , who simply gave a finding that the assessee has earned dividend income of Rs. 1,76,808/- which is exempted and accordingly the interest paid on loans for earning dividend income is not allowable as deduction. Aggrieved, the assessee challenged this issue before the Hon'ble Tribunal on the following ground :- "2. For that ....