9911796707
TMI Blog1990 (7) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... ed return on 24th March, 1986 claiming that no gift-tax is liable to be paid on the above amount of Rs. 1.50 lakhs in view of the Supreme Court's decisions in the case of Ramcharan Das vs. Girja Nandini Devi Ors. Air 1966 SC 323 and in the case of Tax Bahadur vs. Debisingh AIR 1966 SC 292. Copies of these two judgments were also made enclosures to the revised return. It was claimed in the revised return that the above sum of Rs. 1.50 lakhs was transferred to the minor grand children in the course of a family settlement to avoid future disputes in the family. Thereafter the GTO heard the assessee on 27th March, 1986, during the course of which the assessee produced a copy of the memorandum of family settlement and a letter dt. 21st Dec., 1979 stated to have been written by one of his close relations, Smt. A. Nancharamma to the assessee's daughter Kanigolla Rajyalakshmi Andal. According to the family settlement deed, the assessee was having an idea of taking one of the two sons of his daughters Rajalakshmi Andal in adoption originally. Later he changed his mind and wanted to adopt the son of his natural brother, Suryanarayana. As this change of decision is likely to create heart-bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so-called family settlement in the partition deed entered into between the assessee and his adoptive son on 1st July, 1982. Thus, the claim of family settlement was only an afterthought. Even otherwise the assessee's claim for exemption of the sum of Rs. 1.50 lakhs on the basis of memorandum of family settlement and letter of N. Nancharamma cannot be accepted, since the cash gifts were given to the daughter's son when the assessee had absolute disposing power of the properties at the time of making the gifts. In view of the above, he held that the sum of Rs. 150 lakhs is liable to be included in the taxable gifts of the year. 3. The assessee thereafter appealed before the CIT(A) and contended once against that the sum of Rs. 1.50 lakhs being the amount transferred by him to his grandchildren in the course of a family settlement is not liable to be included in the taxable gifts. It was claimed that the non-mention of the family settlement in the return originally filed and the action of the assessee in returning the sum of Rs. 1.50 lakhs as taxable gifts were due to ignorance. It is clear from the evidence produced before the GTO by way of settlement deed and the letter of Smt. Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one or other of her children in adoption to the assessee was also contained. She was advising the daughter not to enter into any controversy with the father and given one or the other child in adoption as per the father's desire. These materials according to him, clearly showed that the assessee was intending to take one of the children of the daughter in adoption, but later changed his decision and wanted to adopt the sons of his natural brother. Feeling that this change of decision may result in heart-burn and result in family disputes, he transferred sum of Rs. 67,000 and Rs. 83,000 in favour of the two grandchildren to pacify the daughter. It was done for the purpose of restoring the family amity and see that there are no family disputes. He relied in this connection on the decision of the Supreme Court in the case of Ram Charan vs. Giraja Nandini, in which it was held that the courts give effect to a family settlement upon the broad and general ground that its object is to settle existing or future disputes regarding property amongst members of a family. In this context, the word 'family' is not to be understood in a narrow sense of being group of persons whom the law recognis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . They cannot have any expectation of getting any properties of the assessee. It was only their mother who could succeed to the properties of the assessee after his death. Apart from that, they did not have even a semblance of a claim over the properties. The Madras High Court in the case of CIT vs. R. Ponnammal held that members who may be parties to a family arrangement must have some antecedent title, claim or interest or even a possible claim in the property which is acknowledged by the parties to the settlement. In the present case there is not even a semblance of title in favour of the grandchildren. In the circumstance, it is contended that the transfer of properties cannot be considered as a family settlement. Reliance was also placed on the decision of the Andhra Pradesh High Court in the case of N. Durgaiah vs. CGT (1975) 99 ITR 477 (AP). In view of the above, it is contended that the authorities below are justified in including the above sum of Rs. 1.50 lakhs in the taxable gifts made by the assessee. 6. We have considered the rival submissions. In our opinion, the assessee is entitled to succeed in his appeal. The fact that the assessee by mistake declared the sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the circumstances, we are not inclined to agree with the authorities below that the document of family settlement never existed at all. Even if such a document did not exist, in our opinion, the circumstances of the case clearly show that a family settlement did take place and the transfer of the above sum of Rs. 1.50 lakhs to the grandsons was made in the course of such family settlement in order to assuage the injured feelings of the daughter on account of disappointment caused to her in the assessee's not adopting one of her sons and deciding to adopt some other person. The letter of Nancharamma dt. 21st Dec., 1979 clearly brings forth the state of affairs existing at the relevant time when the assessee was entertaining an idea of adopting one of the children of his daughter. Later he had changed his mind and wanted to adopt his own natural brother's son, with the result that the family of his daughter has been deprived of his properties. Apprehending natural heart burn and family disputes in order to assuage the injured feelings of the daughter, the father seems to have settled sums of Rs. 87,000 and Rs. 63,000 in favour of her two sons, In our opinion, such a transfer, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. N. Ponnammal held that when parties enter into a family arrangement, the validity of the family arrangement is not to be judged with reference to whether the parties who raised disputes or rights or claims in certain properties had in law any such right or not. The members of a joint family may enter into a family arrangement and if the arrangement is entered into bona fide and the terms thereof are fair, Courts will normally give assent to such an arrangement rather then avoid it. Even if a party to the settlement has no title under the arrangement but the other party relinquishes all its claims or title in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld. The family arrangement may be oral or in writing and if it is oral, no registration is necessary. 10. The Tribunal, B Bench, Hyderabad in the case reported in 1987 Sot page 1.152 (to which, one of us, the Judicial Member, was a party), held that " for a family settlement, it is now settled law, there need not be a conflict of legal claims in praesenti or in futuro and even bona fide disputes, present or possible, which may ..... X X X X Extracts X X X X X X X X Extracts X X X X
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