9911796707
TMI Blog1986 (2) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... rds Shri Rama Seshadri and Shri P.V. Acharya were full blooded real brothers. Shri and Smt. P. Rama Seshadri, that is the assessee before us and her husband, had no issues. Shri P.V. Acharya was married to Mrs. Vishen Acharya. Mrs. Vishen Acharya had a sister, called Smt. Ram Kumari Khanna wife of Kishan Chand Khanna. They had sons ; Ramesh Khanna and Kamlesh Khanna. As on9-7-1965, they were respectively aged 27 and 18 years. On that day Smt. Vishen Acharya then shown as resident ofStation Road, Jaipur, was aged about 45 years. She was being looked after by abovenamed Khanna brothers. Therefore, out of love and affection due to services rendered by these brothers to Smt. Vishen Acharya, she made a will on9-7-1965. A copy of this will appears at page 40 of the assessee's paper book. 3. In this will, she deposed that during her lifetime she will hold ownership rights of all her immovable and movable properties but on her death the said properties shall belong to Ramesh Khanna and Kamlesh Khanna in equal shares. She further averred in this will that nobody else shall have any right whatsoever on the properties left by her except the beneficiaries mentioned in this will. It was, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned and in order to arrive at a settlement which is beneficial to all. It was stated in this application that the parties have entered into a family settlement and decided that the plaintiff will be content with having 45 per cent share in the properties of the deceased. Shri Ramesh Khanna, defendant No. 1, will be content with 40 per cent share and Smt. Meera Khanna, widow of Kamlesh Khanna, both for herself and as guardian of her minor son, will be content with 15 per cent share being given to her minor son, Master Himansu Khanna, defendant No. 8. TheHon'ble Courtpassed a preliminary decree accordingly through the Hon'ble Mr. Justice M.S. Joshi on20-9-1982. The assessee received some assets including jewellery which she later on sold on the basis of this settlement arrived at through the Court. 6. The assessee filed her return of income for the assessment year under appeal on16-7-1980, declaring income of Rs. 37,960 under the head 'Income from other sources' comprised of dividends, interest and income from U.T.I. During the course of the assessment proceedings, the ITO found that the assessee had sold jewellery weighing 1166 grams on4-9-1979for a sum of Rs. 1,04,483 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before him on behalf of the assessee as recorded in paragraph 6 of his impugned order. The learned AAC, therefore, held that the assessee had become owner of the properties sold by way of family settlement and the properties were not received by any of the modes mentioned in section 49(1)(iii). Therefore, the cost of jewellery to the assessee had to be taken as the market value prevailing on the date of acquisition of these assets and that date according to the learned AAC was August 1979. Since the properties (jewellery) was sold immediately thereafter, the learned AAC held that there was no material change in their cost and no capital gain could arise from the sale thereof. The capital gains of Rs. 91,723 included in the total income of the assessee were, therefore, directed to be deleted. 9. The revenue contended before us that the order of the learned AAC is erroneous both on facts and in law. It should, therefore, be set aside and in its place that of the ITO restored. It was contended that a family settlement can take place where a family is already the owner of the property. It was contended that in this case, the assessee claimed her right, title and interest to the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reality of such recitals as held by the Supreme Court in the case of CIT v. Durga Prasad More [1971] 82 ITR 540. It was contended that if the settlement arrived at by the assessee with others is examined in the light of the above guidelines given by the Courts, it would become clear that the assessee had merely availed of the family settlement to avoid liability to proper tax. The AAC, therefore, erred in accepting the claim of the assessee as he did. His order may be reversed. 11. Opposing these contentions, the learned counsel for the assessee submitted that the revenue is making very far fetched and untenable allegations. The chronological development of events culminating in the death of Mrs. Vishen Acharya could not be said to be any plan or design by the assessee. The assessee had claimed her rights on the properties, described in the will dated9-7-1965of Mrs. Vishen Acharya who was the assessee's sister-in-law. It was submitted that the will was made by Mrs. Vishen Acharya on11-7-1965when husband of the testator was alive. However, Shri P.V. Acharya, husband of Mrs. Vishen Acharya died on27-11-1966. Mrs. Vishen Acharya died on11-7-1975. Thereafter, husband of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire properties in view of the will left by Mrs. Vishen Acharya and it was by compromise that the assessee and those parties arrived at a family settlement to establish complete right, title and interest upon the properties received. Since the source of the complete right, title and interest to these properties was the family settlement, the properties were received and can be traced back as having been received only due to the family settlement. It was once again emphasised by the learned counsel for the assessee that there could not be any suggestion of any artifice or device because the events took place naturally over a long period of time, and these were not in the contemplation of the parties who arrived at the family settlement. Therefore, the learned AAC was fully justified in arriving at the decision as he did. The revenue has not made out a case for an interference in his order. The appeal of the revenue may be dismissed. 15. In the rejoinder, the revenue contended that it has not been established that the property was self-acquired by the assessee, that in view of challenge to the will of the deceased by the assessee, the will was not operative and the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding the properties, including the jewellery which was sold by the assessee subsequently, the date of acquisition by the assessee has to be taken with reference to the family settlement and, not with reference to any other right which was in an unsettled state earlier. The argument of the revenue, therefore, that she got the properties by virtue of the provisions of the Hindu Succession Act is not tenable. Since the properties were received in view of and by way of family settlement, the date of acquisition for the purpose of computation of capital gains on sale of jewellery will be with reference to this family settlement. 19. We have looked into relevant provisions of Hindu law regarding family arrangement or family settlement. In article 248B it has been recorded that family arrangement or family settlement as it is sometimes termed generally meets with the approval of the Courts and the Court always leans in favour of a transaction relating to any such arrangement as it ensures peace and goodwill among the family members. This does not rest on any special rule of Hindu law, but flows from general principles and policy of law. 20. The revenue raised a contention before us t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expectation that such a settlement will result in establishing or ensuring amity and goodwill amongst the relations. That consideration having passed by each of the disputants, the settlement consisting of recognition of the right asserted by each other cannot be impeached thereafter---Ramgowda Annagowda Patil v. Bhausaheb AIR 1927 PC 227. 23. From what is stated above, it is clear that the objection of the revenue regarding the lack of relationship amongst the parties to arrive at a family settlement has no substance. It also meets with the contentions of the revenue that the assessee had right, title and interest to the properties on the basis of the Hindu Succession Act, because the Court has clearly shown that a family settlement does not necessarily flow from such existing rights as pointed out by the revenue. 24. The proposition projected from the side of the revenue that the ITO is entitled to go behind an instrument and find out the substance of the matter to establish the intention of the parties cannot be disputed. However, what is necessary and is required in this case is to see whether such a proposition is applicable to the facts of this case. The narration of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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