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TMI Blog2013 (1) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... on, therefore deemed to be immovable property. Such amount is not an income liable to tax. Thus, the amount of owelty i.e. compensation deposited by Group B is to equalize the partition represents immovable property and will not attract capital gain. The argument that the assessee is liable to tax being interest on cash, suffice it to say, that such question or fact does not arise from the orders of the Tribunal - question of law is answered against the Revenue. - ITA No.353 to 356 of 2011 - - - Dated:- 10-1-2013 - MR. HEMANT GUPTA AND MS. RITU BAHRI, JJ. Mr. Vivek Sethi, Advocate for the appellant. Mr. Akshay Bhan, Advocate for the respondent. H EMANT GUPTA, J. This order shall dispose of afore-mentioned four appeals filed under Section 260-A of the Income Tax Act, 1961 (for short the Act ) arising out of an order passed by the Learned Income Tax Appellate Tribunal, Amritsar Bench, Amritsar in respect of Assessment Year 2007-08. However, for facility of reference the facts are taken from ITA No.354 of 2011. The Revenue has raised the following substantial questions of law: i. Whether the Hon ble ITAT was right in law in confirming the relief allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant extract of the order dated 19.10.2005 reads as under: The appellants as well as Group A have decided to settle the matter amicably. It has been agreed that the appellants will be entitled to lot-2, in terms of the enclosures accompanying the letter dated 07.03.2000 constituting proposals formulated by Group A (herein) and available on the record of the Company Law Board. It goes without saying that lot-1 as determined by the enclosures to the aforesaid letter dated 07.03.2000, shall be retained by Group A. The afore stated arrangement shall be entail that the assets and the liabilities of the company and the firms under lot-2 located in the territories of Delhi and Jaipur shall fall to the share of the appellants and the assets and the liabilities of the company and the firms under lot-1 in the territories of Jalandhar and Ambala shall fall to the share of Group A. Additionally, the appellants have exercised their option to accept Rs.24 crores under paragraph (xx)(i) of the modified proposal. This amount has been agreed to be deposited by Group A with the Company Law Board, by way of Bank draft, for onward transmission to the appellants within six weeks from today ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable on the amount of compensation received. On the other hand, learned counsel for the respondent relying upon the principle of owelty , argued that the amount of compensation received by the assessee, is to equalize the inequalities in the partition and, thus, such amount is nothing but an immovable property. It is contended that such amount received by the assessee is not an income, but a share in the immovable property though paid in cash, as it is the cash value to settle inequalities in partition. Therefore, such amount cannot be treated as income liable to capital gain. Reliance has been made to the judgment of Hon ble Supreme Court reported as T.S.Swaminatha Odayar Vs. Official Receiver of West Tanjore AIR 1957 SC 577 and the Division Bench judgments of Madras High Court in Commissioner of Income Tax Vs. AL. Ramanathan (2000) 245 ITR 494 and Commissioner of Income Tax Vs. Kay Arr Enterprises others (2008) 299 ITR 348 apart from the Division Bench judgments of Karnataka and Gauhati High Court in Commissioner of Income Tax Vs. R. Nagaraja Rao Rao [2013] 352 ITR 565 (Karn) (2012) 207 TAXMAN 74 and Ziauddin Ahmed Vs. Commissioner of Gift-Tax, Assam, Nagaland, Meghala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... created in express terms, even so the lien may exist because it is implied by the very terms of the partition in the absence of an express provision in that behalf. The member to whom excessive allotment of property has been made on such partition cannot claim to acquire properties falling to his share irrespective of or discharged from the obligation to pay owelty to the other members. What he gets for his share is therefore the properties allotted to him subject to the obligation to pay such owelty and there is imported by necessary implication an obligation on his part to pay owelty out of the properties allotted to his share and a corresponding lien in favour of the members to whom such owelty is awarded on the properties which have fallen to his share. A Full Bench of Kerala High Court in a judgment reported as Parvathi Amma Vs. Makki Amma AIR 1962 Kerala 85 explained the concept of owelty and held that such amount is not a debt being a liability for which charge is provide under sub clause (b) of Clause (4) of Section 55 of the Transfer of Property Act, 1882. The Court observed as under: 4. The case of owelty is, in our view, very similar to the consideration for a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot a liability in the nature of a debt, but is property . The Madras High Court in a judgment reported as Palanikumar Pillai Vs. Palanikumar Pillai others (1988) 1 LW 448 explained the scope of provision of owelty . While referring to the Supreme Court judgment in Badri Narain Prasad Choudary others Vs. Nil Rattan Sarkar (1978) 3 SCR 467, held to the following effect: 23..........A Court may also be confronted with a situation, namely, that the item of property is not capable of physical partition or is such that, if divided, it will lose its intrinsic worth, in such a case, that item is allotted to one and compensation in money value is given to the other and if such a course is not possible it is sold outright and the sale proceeds divided between the joint owners. All the aforesaid and similar other methods are adopted by Courts in making an equitable partition of the joint properties either with the consent of the parties or where such consent is not forthcoming in exercise of its own discretion. Whatever method is adopted, it is only to implement the process of equitable partition. It would well-night be impossible for a Court to effectuate a partition on an equit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour cannot be concluded as any other dealings between strangers, as such a family arrangement is for the interest of the family and for the harmonious way of living. Therefore, such a realignment of interest by way of effecting a family arrangement among the family members would not amount to transfer. The Division Bench of Karnataka High Court in R. Nagaraja Rao s case (supra) has held that partition is not a transfer and adjustment of shares, crystallization of the respective rights in the family properties cannot be construed as a transfer in the eye of law. When there is no transfer of asset, there is no capital gain and consequently there is no liability to pay tax on capital gains. In view of the aforesaid principles of law, we find that the payment of Rs.24 crores to Group A is to equalize the inequalities in partition of the assets of M/s Hind Samachar Ltd. The amount so paid is immovable property. If such amount is to be treated as income liable to tax, the inequalities would set in as the share of the recipient will diminish to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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