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TMI Blog1986 (1) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ed his property to five of his sons. After the death of Sri Ranga Konar, the five sons, experiencing some difficulty in partitioning the property according to the will, decided to ignore the will and effected partition by a duly drawn up partition deed dated December 3, 1934. As a result of the partition, Chinna Venkatachala Konar, one of the sons of the deceased, Sri Ranga Konar, received some property in respect of which he executed a will on March 11, 1938, bequeathing his property to his wife and daughter, Smt. Ponnammal, the assessee. Chinna Venkatachala Konar died on March 31, 1955, leaving behind the two legatees, namely, the widow and the daughter. There were some disputes raised by the brothers of the deceased, Chinna Venkatachala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled. As a result of this family arrangement, the assessee was given property worth Rs. 1,00,000 and the rest of the property was divided between the two sons and the two daughters. One son was a minor at the time when the family arrangement was entered into. The Income-tax Officer, who was also exercising powers as the Gift-tax Officer, took the view that the family arrangement had resulted in transfer of property as contemplated by section 2 (xxiv) of the Gift-tax Act, and was, therefore, liable to be treated as a gift for purposes of section 4(1)(a) and section 4(2) of the Gift-tax Act. He, therefore, proceeded to make an asessment order and found that there was a transfer of property which was in the nature of a gift as contemplate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted December 17, 1971 was the result of the intervention of the panchayatdars and observed that the family arrangement was entered into as directed by the panchayatdars. Having taken this view, the Tribunal found that the document dated December 17, 1971, constituted a valid family arrangement and there was no transfer of property involved within the meaning of section 2(xxiv) and there was no liability to gift-tax either under section 4(1)(a) or under section 4(2). Arising out of this order, at the instance of the Revenue, the following question had been referred to this court. " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that there was no gift by the assessee to her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of properties so as to attract the provisions of section 64(iii) of the Income-tax Act, 1961, and the inclusion of the income from the surrendered properties in the assessee's hands was improper and, therefore, should be deleted." The decision of both the questions must necessarily depend on whether the finding recorded by the Tribunal that the document dated December 17, 1971 was a family arrangement can or cannot be sustained. The learned counsel appearing on behalf of the Revenue, at whose instance the reference has been made, has urged before us that even prior to the date of the family arrangement, the exclusive title of the father of the assessee to the property bequeathed by him was upheld by the Supreme Court and since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the terms thereof are fair in the circumstances of a particular case, courts will more readily give assent to such an arrangement than to avoid it." These observations have been reiterated by the Supreme Court in later decision in Kale v. Dy. Director of Consolidation [1976] 3 SCC 119 ; AIR 1976 SC 807. In paragraph 10, the Supreme Court has laid down the following propositions in the matter of the binding effect and the essentials of a family settlement, which are as follows (p. 812 of AIR): " In other words, to put the binding effect and the essentials of 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the antecedent title must be assumed and the family arrangement will be upheld and the courts will find no difficulty in giving assent to the same; (6) Even if bona fide disputes, present or possible, which may not involve legal claims are settled by a bona fide family arrangement which is fair and equitable, the family arrangement is final and binding on the parties to the settlement." The fifth proposition quoted above clearly contemplates that even if a party to the settlement had no title but, under the arrangement, the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld and the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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