9911796707
TMI Blog2007 (7) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred the above tax case appeals against the common order of the Income Tax Appellate Tribunal dated 26.7.2005([2005] 279 ITR(AT)163) made in ITA Nos.930, 928 and 931/Mds/2000, raising the substantial questions of law, viz., "(i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the family arrangement as arrived by the assessee to rearrange the share holdings to avoid possible litigation themselves will not attract Capital Gains Tax under the Income-tax Act, 1961 ? (ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that, the re-arrangement of share holdings in the company to avoid possible litigation among ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital Gains Tax. Hence, the present appeals by the Revenue raising the substantial questions of law referred to above. 3. The core issue that arises for consideration in these appeals is whether the transfer of shares pursuant to the family arrangement to avoid a possible litigation among the family members would attract the Capital Gains Tax. 4. The law on the point is well settled by the decisions of the Apex Court in Maturi Pullaiah and another v. Maturi Narasimham and others [A.I.R. 1966 (SC) 1836], and in Kale and Others v. Deputy Director of Consolidation and others [A.I.R. 1976 (Supreme Court) 807] which are followed by this Court in Commissioner of Income-tax v. Ponnammal [(1987) 164 I.T.R. 706], and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion 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. 7. This Court, in Commissioner of Income-tax v. Ponnammal [(1987) 164 I.T.R. 706], referred supra, held that, "... the family arrangement had been brought about by the intervention of the panchayatdars and this clearly showed that the sons and daughters of the assessee were laying claims to the property which the assessee got under the will of her father and it was not relevant at the time when the family arrangement was entered into to find out as to whether such claims if made in a court of law would be sustained or not. If the assessee foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family members is a prudent arrangement which is necessary to control the company effectively by the major share holders to produce better prospects and active supervision or otherwise there would be continuous friction and there would be no peace among the members of the family. Such a family arrangement intended either by compromising doubtful or disputed 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 re-alignment of interest by way of effecting a family arrangement among the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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