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TMI Blog2014 (5) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... s no relation between the share of lands of the family members as per partition deed and the sale consideration shown in their hands - There is no evidence on record to show that the family members actually became owners of the properties falling into their irrespective shares as per the family arrangement - no document has been produced to establish ownership of the property in the name of the family members as per the partition deed - no such evidence was also produced before the authorities - it is difficult to accept the assessee’s claim of division of property as per the partition deed dt. 112005 - entire sale consideration at the hands of the assessee for computing capital gain – Decided against Assessee. Rejection of claim of indexation from 1981 – Held that:- There was no infirmity in the order of the revenue authorities - the assessee has contended that the land in question was received by assessee’s family earlier to 1981 - thus, fair market value of the property as on 1/4/1981 should be taken for indexation, but there are no material on record to show that assessee’s family were owners of the property prior to 1981 - the certificate dated 24-2-1993 issued by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration received from sale of land in the hands of the assessee for the purpose of computation of capital gain by brushing aside the family arrangement made by partition deed dated 11/11/2005. 4. Briefly the facts are the assessee (now deceased) was an individual. For the assessment year under dispute, he filed his return of income on 30-7-2009 declaring income of Rs.7,14,400/-. Initially, the return was processed u/s 143(1) of the Act. Subsequently, however assessee s case was selected for scrutiny assessment. During the assessment proceedings, the Assessing Officer noticed from the statement of computation of income filed along with return of income that the assessee had disclosed an amount of Rs.44,95,164/- as long term capital gain from which an amount of Rs.41,25,667/- was claimed as exempt u/s 54F of the Act. From the computation of capital gain, the Assessing Officer further noted that the assessee has shown the cost of acquisition of agricultural land at Rs.94,600/- and year of acquisition as shown as financial year 1982-83. From the information available on records, the Assessing Officer noted that during the impugned financial year, the assessee along with some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30-8-2008 and subsequently the registered sale deed was executed on 15-9-2008 before the Sub-Registrar, Uppal, Hyderabad. The Assessing Officer further noted that the sale was executed by the owners of the property on behalf of themselves and other coparceners of HUF being represented by them. In response to the query made by the Assessing Officer, all the above said persons furnished the amount to be received by all the coparceners out of sale consideration. Since none of the above persons have offered the capital gain to tax, the Assessing Officer called upon them to submit their returns of income. Except the present assessee all others took a plea before the Assessing Officer that though they are liable to capital gain tax but since their status is HUF and the sale consideration received by them in the capacity of coparceners was utilised by them in acquiring residential houses in their individual names, they are not liable to capital gain tax. 7. The Assessing Officer on going through the details of sale consideration shared between the family members noted that they have distributed the sale consideration among their family members under the guise of HUF status for each ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.3,28,35,500/- as the income of the assessee in his individual capacity and proceeded to compute the capital gain thereon. While computing the capital gain, the Assessing Officer also did not accept the assessee s claim of cost indexation from 1981 as well as his claim that 60% of the land having been given on patta without any consideration, no capital gain is there and since 40% land was out of HUF land income only no capital gain is leviable. The Assessing Officer also disallowed the claim of exemption u/s 54F of the Act on the ground that the assessee is the owner of more than one house on the date of transfer of the asset and as such is not eligible for exemption. Being aggrieved of the assessment order so passed, the assessee preferred an appeal before the CIT (A). 10. In course of hearing of appeal, the assessee reiterating its stand taken before the Assessing Officer submitted that as per the family arrangement made through the partition deed dated 11-11-2005 property was distributed amongst the his members of his family and the property in survey Nos.588/1 and 591 out of which 33 guntas belonged to the assessee was distributed as per the family arrangement between d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) upheld the view of the Assessing Officer in considering the entire sale consideration in the hands of the assessee. 12. We have heard the parties, perused the materials on record as well as the findings of the lower authorities on this issue. The primary ground on which the CIT (A) as well as the Assessing Officer have refused to accept the assessee s contention with regard to the family arrangement effected through partition deed dated 11-11-2005 is due to the fact that the said document has not been registered with the registering authority for stamp duty purpose. It is the contention of the learned AR before us that the non-registration of the family arrangement deed would not in any way dilute its effect as it is an arrangement between the family members for resolving the dispute with regard to the property which is existing or which may arise in future. It was submitted by the learned AR that the family arrangement has also been acted upon by the family members as they have become owners of the property falling into the irrespective shares as per the family arrangement. In this context, the learned AR referred to the registered sale deed dated 15-7-2008 wherein all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is applied. Family arrangements are governed by principles which are not applicable to dealings between strangers. The court, when deciding the rights of parties under family arrangements or claims to upset such arrangements, considers what in the broadest view of the matter is most for the interest of families, and has regard to considerations which in dealing with transactions between persons not members of the same family, would not be taken into account. Matters which would be fatal to the validity of similar transactions between strangers are not objections- to the binding effect-of family arrangements . In other words to put the binding effect and the essentials of a family settlement in a concretised form, the matter may be reduced into the form of the following propositions: (1) The family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family; (2) The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence: (3) The family arrangement may be even oral in which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognizing. the right of the others as they had previously asserted it to the portion allotted to them respectively. It was in this light, rather than as conferring - a new distinct title on each other, that the parties themselves seem to have regarded the arrangement, and we think that it is the duty of the Courts to uphold and give full effect to such an arrangement. 15. The Hon ble Court finally held as under:- In view of our finding that the family settlement did not contravene any provision of the law but was a legally valid and binding settlement in accordance with the law, the view of Respondent No. 1 that it was against the provisions of the law was clearly wrong on a point of law and could not be sustained. Similarly the view of the High Court that the compromise required registration was also wrong in view of the clear fact that the mutation petition filed before the Assistant Commissioner did not embody the terms of the family arrangement but was merely in the nature of a memorandum meant for the information of the Court. The High Court further in law in not giving effect to the doctrine of estoppel which is always applied whenever any party to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bounds in 1939. Its terms relating to shares would come into effect only in the future if and when division took place. If so understood, the document did not create any interest in immovable properties in praesenti in favour of the parties mentioned therein. If so, it follows that the document was not hit by Section 17 of the Indian Registration Act. 22. The principle underlying Section 17 of the Registration Act is well settled. The decisions cited at the Bar are only application of the said principle to the facts of each case. The decision of the Judicial Committee in (1911) 38 Ind App 104(PC), relates to an instrument of 1884 which wasintended to effect partition immediately and, therefore, it was held that it was void as regards immovable property. The decision in Rajangam Ayyar v. Rajangam Ayyar 50 Ind App 134 : AIR 1922 PC 266, turned upon the terms of Ex. AY whereunder two brothers severed themselves in status and agreed to have a document executed for effectuating the partition. Dealing with the document, the Judicial Committee held that the document did not by itself create, assign, limit or extinguish any right or interest in immovable property but only created a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volves on the parties by virtue of Section 15(a) thereof and they became owners of the said property in terms of the aforesaid previousness of half undivided share in the property. What the family settlement intended to do was to ascertain the portion of their share with definite identification, and the mode of acquiring possession by the petitioner and, therefore, the said document cannot be treated to be a document of title requiring registration. Even if it is assumed for the purpose of argument that the said document created right and title to the property, the clause relating to arbitration agreement could be looked into by the Court without there being any registration of the said document. In Damodar Valley Corporation v. K.K. Kar, of the said judgment the Supreme Court referred to the decision of Union of India v. Kishorilal Gupta, and mentioned with approval the decision recorded by Hon'ble Mr. Justice Subba Rao (as his Lordship then was) that an arbitration clause is a collateral term of a contract as distinguished from its obstantive terms. It was also stated that nonetheless it is an integral part of it. Therefore, ratio of the aforesaid decision is that alth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by fraud, coercion or undue influence does not require registration. Such family arrangements by itself would convey right, title and interest in immovable property without any further requirements. Thus when the property was sold on 31-3-2006, the assessee had nor right whatsoever in the property but was entitled to receive only the contribution made by him at the time of purchase of the property. In the sale deed dated 31/3/2006 by which the property was sold the fact that the assessee was paid Rs.5.00 lacs (which is in accordance with the family arrangement) is duly recorded. Though the sale deed does not refer to the family arrangement it is clear from the circumstances that the assessee received only Rs.5.00 lacs which is duly recorded in the sale deed, that the family arrangement had been acted upon. It is also seen that Mr. N.K. Chaturvedi had offered the entire capital gain on sale of the property to tax and has been taxed on such capital gain. In these circumstances we are of the view that the order of the CIT (A) does not call for any interference. We, therefore, confirm the order of the CIT (A) and dismiss this appeal by the revenue. 19. The principle which emerge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue of rejection of claim of indexation from 1981. 21. Briefly the facts are, in course of the assessment proceeding the assessee pleaded that since the land in question was under the protected tenancy of the assessee s family prior to 1981, the fair market value of the property as on 1-4-1981, the fair market value of the property as on 1-4-1981 of Rs.94,600/- should be taken as the cost of acquisition for the purpose of indexation. The Assessing Officer however did not accept the claim of the assessee by noting that as per the certificate issued by the Revenue Divisional Officer dt. 24-2-1993. The assessee along with 12 others had purchased land admeasuring Ac.14.05 guntas for a consideration of Rs.27,200. The CIT (A) also confirmed the view of the Assessing Officer on this issue. 22. Having heard the contentions of the parties in the context of the materials on record we do not find any infirmity in the order of the revenue authorities. Though the assessee has contended that the land in question was received by assessee s family earlier to 1981, hence fair market value of the property as on 1/4/1981 should be taken for indexation, but there are no material on record to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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