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TMI Blog2015 (2) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... e avenue to examine the question as to how the amount so settled must be treated in the hands of the person on whom it was settled.Two other reasons assigned by the Tribunal are: (a) the insertion of Section 29A of the Hindu Succession Act in the context of State of Andhra Pradesh, makes the arrangement not binding and (b) clause - IV of the Deed of Settlement, is not legally correct. Both the aspects are totally outside the jurisdiction of the adjudication or determination under the Act. - Decided in favour of assessee. - I.T.T.A.Nos.3, 26, 29 & 30 of 2004 - - - Dated:- 19-11-2014 - SRI L.NARASIMHA REDDY AND SRI CHALLA KODANDA RAM, JJ. For the Appellant : Sri Pushyam Kiran For the Respondent : Sri S.R.Ashok COMMON JUDGMENT: (Per the Honble Sri Justice L.Narasimha Reddy) This batch of appeals raises questions of some general importance and interest. All of them arise out of a common order dated 30.06.2003 passed by the Hyderabad Bench of the Income Tax Appellate Tribunal (for short the Tribunal), in I.T.A.Nos.1326 of 1997 and batch. Hence, they are disposed of through a common judgment. The appellant is an assessee under the Income Tax Act, 1961 (f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer as well as the Tribunal have taken correct view of the matter. He contends that the judgment of the Madras High Court in S.M.M. Muthappa Chettiars case (2 supra) was on a totally different set of facts and in the instant case, the amount covered by FDRs, albeit, in the name of the minor daughters of the Karta, continue to be that of the HUF. He submits that the Tribunal has discussed the matter from correct perspective and that the common order does not warrant any interference. That the appellant is a HUF, is beyond any pale of doubt. The returns filed by it year after year in that capacity were being received and processed. In the returns filed for the assessment year 1991-92, the factum of a family arrangement having been made, allotting a sum of ₹ 1,25,000/- in favour of each of the minor daughters of the Karta, was mentioned. The amount so allotted was reduced to the form of FDRs, and those FDRs, in turn, were earning interest. While for the year in which the allotment was made, the question was, as to whether the amount covered by FDRs ceased to be the wealth of HUF, for the subsequent years, the question was as to whether the interest that has accrued on the FDR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference as to HUF, can be drawn. The Assessing Officer took note of the fact that none of the members of the appellant-HUF came forward with the plea, and therefore, the occasion to deal with the question as to whether the document brought about any partition, does not arise. However, on the one hand the family settlement was disbelieved, and on the other hand, it was taken on its face value. In the process, the amount in question was assessed to HUF on the ground that the Karta of HUF was authorised to hold and manage the funds so allocated to the minor daughters. In the appeal, the Commissioner took note of the judgment of the Madras High Court in S.M.M.Muthappa Chettiars case (supra) and reversed the finding of the Assessing Officer. The Tribunal, however, took a different view viz., (a) the arrangement deserves to be treated as a partial partition of the family, which, in turn, is not recognised under the Act; and (b) even if it is a family arrangement, it does not have the effect of taking the assets from the purview of HUF. Two principal questions arise for consideration. The first is as to the legal character of a family arrangement and the second is as to whether any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... protect the family from long-drawn litigation or perpetual strifes which mar the unity and solidarity of the family and create hatred and bad blood between the various members of the family. Today when we are striving to build up an egalitarian society and are trying for a complete reconstruction of the society, to maintain and uphold the unity and homogeneity of the family which ultimately results in the unification of the society and, therefore, of the entire country, is the prime need of the hour. A family arrangement by which the property is equitably divided between the various contenders so as to achieve an equal distribution of wealth instead of concentrating the same in the hands of a few is undoubtedly a milestone in the administration of social justice. That is why the term family has to be understood in a wider sense so as to include within its fold not only close relations or legal heirs but even those persons who may have some sort of antecedent title, a semblance of a claim or even if they have a spes successionis so that future disputes are sealed for ever and the family instead of fighting claims inter se and wasting time, money and energy on such fruitless or futi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as continuing to be with the assessee. The mere fact that the transfer or settlement of such portion was in favour of one of the members of the HUF, does not make much of difference. On being parted in favour of other persons, in a manner recognised under law, the corresponding amount ceases to be part of the wealth of the assessee. Before the Madras High Court, similar question but with some more complications has arisen for consideration in S. M. M. Muthappa Chettiars case (2 supra). Not only the provisions of the Income Tax Act, but also of the Gift Tax Act and Wealth Tax Act, became relevant. At least, in the instant case, the disposition in favour of six minor children is in the form of FDRs. In the case before the Madras High Court, it was in the form of book adjustment. Dealing with the question as to whether the property so conferred upon the minor children would continue to be that part of the wealth of the HUF, the Madras High Court summed up the discussion as under: The above referred to sums in all the above said questions pertaining to different assessment years, are sums which are standing to the credit of all minor daughters, all put together, including ..... X X X X Extracts X X X X X X X X Extracts X X X X
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