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Issues Involved:
1. Whether the revenue authorities are justified in bringing to tax long-term capital gain of Rs. 86,07,480/- in the hands of the assessee. Summary: Issue 1: Justification of Taxing Long-Term Capital Gain - Facts and Background: The property in question was owned by Shri B.L. Bettaiah Setty and after his death, his heirs (4 sons and 6 daughters) became entitled to the property. A partition suit led to a compromise where the sons retained the property and agreed to pay Rs. 5.25 Crores to the daughters. The daughters executed a release deed relinquishing their rights over the property. - Assessment by AO: The AO viewed the transaction as a direct sale by the daughters to the developer, resulting in long-term capital gains. The AO relied on statements from family members and the developer, concluding that the daughters transferred their rights to the developer. - CIT(A) Findings: The CIT(A) upheld the AO's decision, stating: - The release deed constituted a transfer of a capital asset u/s 2(47) of the IT Act, 1961. - The compromise decree was not a family settlement. - U/s 47(i) of the Act, the distribution of capital assets on partition of a HUF is not regarded as a transfer, but this was not applicable as there was no HUF property. - The joint development agreement indicated a commercial transaction, not a family settlement. - Tribunal's Analysis: The Tribunal considered the following: - Family Arrangement: The Tribunal referred to judicial precedents, emphasizing that family arrangements are not considered transfers under the IT Act. The money received by the assessee was pursuant to a family arrangement, not a transfer. - Definition of Transfer: U/s 2(47) of the Act, the transaction did not meet the criteria for a transfer. The compromise decree and subsequent release deed were part of a family arrangement, not a commercial transaction. - Partition and Capital Gains: The Tribunal noted that the money received was in lieu of the assessee's share in the property, akin to a partition, which is not considered a transfer. The provisions of Sec.47(i) and judicial precedents support that such transactions do not attract capital gains tax. - Conclusion: The Tribunal held that the revenue authorities were not justified in taxing the sum of Rs. 89,16,667 as capital gain. The appeal by the assessee was allowed, and the sum in question was not chargeable to tax. Result: The appeal filed by the assessee is allowed.
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