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TMI Blog1990 (7) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. On facts, the assessee in response to a notice issued by the Gift-tax Officer u/s. 16(1) of the Act, filed her return in the status of HUF admitting taxable gift at 'nil'. Certain properties devolved on the appellant on the death of her husband u/s. 14 of the Hindu Succession Act whereby she became their absolute owner. The Gift-tax Officer, therefore, took her status as 'Individual'. While filing nil return of gift, a note was appended claiming that the properties mentioned therein were transferred by the appellant to Shri Ch. Nagendra Rao, her adopted son, by a partition deed dated 25-9-1981. It has been claimed that the adoption by the appellant will relate back to her deceased husband. On these premises, the plea of the appellant is that the partition effected was valid, without bringing any element of gift therein. This plea was rejected by the Gift-tax Officer placing reliance on a decision of the Andhra Pradesh High Court in CWT v. Smt. T. Yasodamma [1984] 146 ITR 445 wherein it was held that wherein a female adopted a child after coming into force of the Hindu Succession Act, the adoption does not result in divesting her of the property which is already vested in her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te an adoption made by her and the legal position that such adoption shall make the adopted child the son of the appellant as well her deceased husband, she will not stand divested of such properties as clearly held by the jurisdictional High Court in Smt. T. Yasodamma's case in view of the fact that the appellant had already become the absolute owner of such property. However, there seems to be some force in the submission made on behalf of the lade that she remained under a bona fide impression that it was a joint family property in which her adopted son had a right and hence the partition. Notwithstanding this, let us now proceed to examine as to how far such an arrangement as were adverted to by the parties fell within the ambit of a family settlement. Before we do so, let us see as to what precisely a family settlement means. 7. 'A' Bench of the Income-tax Appellate Tribunal, Hyderabad Benches in Smt. Sonabai's case had the occasion to consider this question in great detail. 8. In Sahu Madho Das v. Mukand Ram AIR 1955 SC 481 their Lordships of the Supreme Court while considering the ingredients of a family arrangement held as under : " It is well settled that a comprom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill amongst the relations. " 10. In Ram Charan Das v. Mst. Girjanandani Devi AIR 1959 All. 473, describing a family arrangement and its nature, the Allahabad High Court held as under : " A family arrangement is a transaction between members of the same family which is for the benefit of the family generally, as for example, one which tends to the preservation of the family property, to the peace and security of the family and the avoiding of family disputes and litigation or to the saving of the honour of the family. A family arrangement to be good need not necessarily be a compromise of doubtful rights : AIR 1980 All. 687 and AIR 1943 All. 101 (FB) followed. AIR 1926 All. 194 Not followed. AIR 1938 Oudh 97, Doubted. Where in order to preserve the peace of the family and the avoidance of disputes and litigation and to save the honour of the family a deed of settlement between the members of a family was entered into, the family settlement would be binding on the parties, even though the title of one of the parties to the litigation was not in dispute. " The Court further held as under : " The true nature of a family settlement is that it does not involve any sort of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as per the present document. " From the aforesaid, the only inference which can be drawn is that the appellant considered it as her religious, moral as well legal duty to effect a partition of the properties between the adopted child and herself on the death of her husband. A dispute is rather inherent in such a situation in which the appellant was placed. It is also manifest from the narration in the deed that such arrangement was arrived at on the advice of elders. 13. In Pappathy Anni's case after the death of the father, the widow and the son proceeded on the assumption that the son had half share in the property left behind by his father. Although the Madras High Court found that the son had no right and the mother was entitled to the entire property left by the father, yet, it was held that the agreement for division amounted to a family arrangement and the properties allotted to son are not liable to gift-tax in the hands of mother. We are unable to agree with the learned Departmental Representative that this authority is distinguishable as it was a case of ancestral property. Firstly we do not know as to what is the status of the properties in the hands of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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