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2017 (11) TMI 1211
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....eing covered under the definition of transfer and thereby impliedly rejecting the ground. It is submitted that since there is a bonafide, genuine, equitable, equivocal and just family settlement to save reputation of the family by not going to the Court of law and to buy peace of mind, the CIT(A) ought to have held that family settlement does not amount to transfer as defined u/s. 2(47). (3) Without prejudice to above, the CIT(A) has erred in holding that Rs..1,36,00,000/- received for possessory right/right of occupancy amounts to transfer of tenancy right and that it also has a cost of acquisition Rs..56,00,000 and correctly taxed as capital gains. It is submitted that since possessory right / right of occupancy cannot be regarded as tenancy right and also, since the possessory right /occupancy right does not have a cost of acquisition, the CIT(A) ought to have held that provision of Sec. 45,48 and 55(2)(a)(i)/(ii) are not applicable. (4) Without prejudice to above, CIT(A) has erred in not granting indexed cost of acquisition as a deduction while working out taxable capital gains. It is submitted that CIT(A) having held that possessory right/occupancy right has ....
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....t only the occupancy/possessory right was recognized by the family settlement and capital gain of Rs..1,36,00,000/- by way of relinquishment of right in the said flat. However, as the assessee was entitled to claim exemption under section 54EC to the extent of Rs..80,00,000/- for investment made in approved bonds, the AO deducted the sum of Rs..80,00,000/- from Rs..1,36,00,000/- and added only the balance sum of Rs..56,00,000/- to the total income of the assessee. 5. Aggrieved by the order of the AO the assessee filed an appeal before the Ld.CIT(A) and raised various contentions/propositions before the Ld.CIT(A). The Ld.CIT(A) upheld the action of the Assessing Officer holding as under: - (a) The assessee continued to enjoy the possession of the property right from childhood as her father was the Virtual Tenant of the said fiat. With the effluence of time, the right vested in the assessee and her family got firmed up and assumed the proportion of an owner. It was only because of such rights that in the family settlement, these rights were brought out in black and white. Hence the Ld.CIT(A) affirmed the order of the AO (Page 29 of order of the Ld.CIT(A)). (b) Th....
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....ounsel for the assessee further submits that it is now settled by Hon'ble Supreme Court and various High Courts that under a family arrangement if a settlement is agreed amongst the members then it cannot be held that it's a case of transfer of a capital asset. In case of a family settlement it only settles the conflicting claims which had pre-existing joint interest, to a separate interest and there is no conveyance of property or transfer of a property. In such a case it is not a transfer of a capital asset but an arrangement for settling the interest and rights of the family member. The Learned Counsel for the assessee relied on the decision of Hon'ble ITAT Mumbai Bench in the case of Mrs.Urmila Mahesh Nathani v. ITO in ITA No. 5921/MUM/2012 A.Y. 2009- 2010 dated 10/07/2015 (copy submitted during the course of hearing), wherein after referring to various decisions of the Hon'ble Supreme Court and Hon'ble High Court it was held that the amount received by the assessee in terms of family settlement agreement cannot be treated on account of transfer of a capital asset which cannot be said to be chargeable to tax under the head 'capital gain'. 8. The Learn....
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....e of adverse possession is NIL and hence capital gains cannot be brought to tax. He relied upon the decision of Hon'ble Mumbai ITAT in the case of Smt. Seetha S. Shetty v. Dy.CIT in ITA No. 807/MUM/2013 A.Y. 2006-2007 dated 11/09/2015 (copy submitted during the course of hearing) wherein the Hon'ble ITAT after discussion held that no capital gain is chargeable to tax in relation to the asset acquire by way of adverse possession. He further submitted that the Hon'ble ITAT has also considered the decision of Vijay Singh R. Rathod [106 lTD 153 (Ahd) (special bench)] which has been relied upon by the Ld.CIT(A) for calculating the cost of acquisition and has held there cannot be any cost of acquisition in case of adverse possession. Therefore, the Learned Counsel for the assessee submits that from whichever angle the case of the assessee is seen the sum of Rs..1,36,00,000/- received by the assessee is not taxable. 11. The Ld.DR submits that property is in the name of the company and Company cannot be party to settlement. Assessee's father has no right on property. Ld.DR submits that the right to title cannot improve by settlement deed. Settlement deed excluded the other parties. Ld.D....
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....here were some disputes in the family of these groups the family settlement deed was entered into. Clause 11 of the deed suggest that the company Industrial Jewel Pvt. Ltd., (for short IJPL) owns the flat at Rashmi Cooperative Housing Society Ltd., and it was under the possession and occupation of the assessee's father and after the demise of the assessee's father, property is in possession of assessee and her brother and sister. As per Clause 16 of this deed of settlement it was agreed that the occupants of the said flat shall surrender their occupancy/possessory rights in the said flat and shall handover the vacant and peaceful possession of the said flat within a period of 90 days from the date of execution of the deed, when the property is sold and in lieu of which occupants shall be entitled to receive aggregate monetary lumpsum compensation of Rs..4,08,00,000/- in equal proportions. This settlement deed was recognized by the Assessing Officer but according to him since the flat was sold there was a transfer within the meaning of section 2(47) of the I.T Act. It is not the case of the Assessing Officer that the assessee possessed any tenancy rights nor the settlement deed is i....
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....ther amounts to transfer in relation to a capital asset and the Coordinate Bench following the decision of the Hon'ble Madras High Court in the case of CIT v. Kay Arr Enterprises & Others [299 ITR 348] and the Hon'ble Jurisdictional High Court in the case of CIT v. Sachin B. Ambulkar held that amount received by the assessee in terms of family settlement agreement cannot be treated on account of transfer of capital asset and cannot be said to chargeable tax under the head of capital gains observing as under: "We have heard the rival contention and perused the relevant material on record. The assessee inherited 1/3rd property in the estate of her deceased husband's father (i.e. her father-in-law) after the death of her minor son. A family arrangement was arrived to partition the interest of the assessee by paying her lump sum amount of Rs. 35,00,000/- to relinquish the right in the properties. A family settlement agreement was arrived at on 28th April, 2008 wherein, it was agreed that the assessee shall ceased to have any rights, title, interest, claims in any of the properties of late Shri R. L. Maheshwari i.e. her father-in-law. To complete the transaction of sett....
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....e members and security of the family by avoiding litigation or by saving its owner. Similar view has been taken in various decisions as relied upon by the Ld. Counsel. In the latest decision of Hon'ble Bombay High Court in the case of CIT vs Sachin B. Ambulkar, the Hon'ble High Court upheld that if there is no transfer of asset and amount has been received by the assessee as part of family arrangement, does not gave rise to liability of capital gain tax. Thus, we hold that the amount received by the assessee in terms of family settlement agreement cannot be treated on account of transfer of a capital asset which cannot be said to chargeable to tax under the head "capital gain". Accordingly ground raised by the assessee is treated as allowed." 17. Further in the case of Smt. Seetha S. Shetty v. Dy.CIT, Coordinate Bench of the Tribunal in ITA No.807/MUM/2013 dated 11.09.2015 considered a situation where the assessee acquired the assets by way of adverse possession and later on entered into a development agreement and received part consideration and a flat and in such circumstances whether assessee is liable for long term capital gain tax on the basis of the development agreement a....