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TMI Blog1985 (9) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... he four sons of the late Shri Chinubhai executed a deed captioned 'Memorandum/notes of partial partition' whereby one-fourth share in the Panchavati property (both land and superstructure) was allotted to each of the four sons of the late Shri Chinubhai. The relevant portion of the said deed reads as under : "However, we the parties of all the four parts have mutually decided to divide by a partial partition, the said bungalow bearing Municipal Census No. A/1235/H and the plot of land on which it is situated and have actually divided the same on falgun vadi 7th day of Samvat year 2029, Monday the date 26-3-1973. Therefore, from the said date, we have ceased to treat the said bungalow and the plot land, as the joint property, and have declared that from the said date, we the parties of all the four parts have each, undivided one-fourth share in the said bungalow, and we have divided the same accordingly. That means, the said bungalow and its plot land become the joint property of the co-ownership of us, the parties of all the four parts, from the date 26-3-1973; and we have declared from the said date that each of us, the parties of all the four parts, has clear one-fourth share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at Rs. 3 lakhs. I have relinquished the right in the said property and received Rs. 75,000 towards my one-fourth share in the property from Shri Surendrabhai. I have constructed a property for self-residence in assessment year 1977-78 and invested about Rs. 92,000. Thus, benefit of section 54 of the Income-tax Act regarding exemption of capital gain (long-term) from tax would be available." 5. Thereafter, a revised return was filed wherein the assessee had shown capital gains of Rs. 34,425 in respect of the Panchavati property which was worked out as under : "Working of capital gain (long-term) on transfer of house property situated at Panchvati, Ambavadi, Ahmedabad-6, on 7-7-1978 Description of the property Owner's four brothers; Municipal No. A/1235 -------------- H Survey No. 126 plot area 1331 sq. yards Final plot No. 648 with superstructure Ground floor 370 sq. yards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------- 6. By a letter dated 12-2-1982 of its tax consultant, the assessee claimed that in the aforesaid transaction no capital gains arose. With a view to complete our order, we reproduce below the contents of the said letter : "The assessment proceedings of our abovenamed client for the assessment year 1979-80 were conducted in November 1981. During the year under assessment, our client received Rs. 75,000 from his brother Shri Surendra Chinubhai towards relinquishing his right in the house property of Panchavati, Ambavadi Ellisbridge, in July 1978. This transaction is considered being transfer---long-term capital gain Rs. 34,425 as worked out under section 45 and thereby revised return of income is submitted on 6-11-1981, declaring total income Rs. 58,097. The whole submission is not according to provisions of Income-tax Act. The above said distribution of capital asset between members of association of persons is covered under section 47(ii) of the Income-tax Act and it would not amount to transfer as per this provision of law. Thus, assessing our client on capital gain Rs. 34,425 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as partitioned by metes and bounds. Inviting our attention to the decision of the Hon'ble Madras High Court in the case of M.K. Stremann v. CIT [1961] 41 ITR 297, more particularly, item (iii) appearing at page 298, the learned counsel for the assessee submitted that by executing the deed dated 7-7-1978, no transfer was involved and, therefore, the provisions of section 45 cannot be attracted in the instant case. By the deed dated 27-3-1973, there was severance in status in respect of the Panchavati property inasmuch as the property hitherto held by the coparcenary was held thereafter by the separated members as tenants-in-common. Subsequent partition on 7-7-1978 between the divided members of the family does not amount to a transfer of assets from that body of the tenants-in-common to each of such tenants-in-common. Thereafter, inviting our attention to the decision of the Hon'ble Supreme Court in the case of CIT v. Keshavlal Lallubhai Patel [1965] 55 ITR 637, he highlighted the fact that at page 641 the Hon'ble Supreme Court has approved certain observations made by the Hon'ble Madras High Court in the case of M.K Stremann regarding three stages of division of a coparcenary prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, assessed by the ITO. He also highlighted the fact that even for the year under appeal also, the one-fourth share of the self-occupied property income was shown by the assessee for the period 1-4-1978 to 30-6-1978, i.e., till the date of the execution of the second deed, viz., 7-7-1978. In other words, he wanted to impress upon us that there cannot be two partitions in respect of the same property, one in 1973 and the other in 1978 as claimed by the assessee. 11. We have carefully considered the rival submissions of the parties and we do not find any merit in the stand taken on behalf of the assessee. It is pertinent to note that late Shri Chinubhai had died intestate on 20-2-1965. Therefore, by virtue of the provisions of the Hindu Succession Act, all the properties owned by the late Shri Chinubhai would be divided equally amongst his legal heirs, viz., the wife, daughters and the sons. However, it appears that on 1-11-1970, the wife, daughters and the sons of the late Shri Chinubhai executed a deed (a copy of which is not brought on record), whereby they made family arrangement regarding the properties left by the late Shri Chinubhai keeping in mind the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich Shri Jitendra and Shri Surendra took over from them for a consideration. In this view of the matter, even the decision in the case of Keshavlal Lallubhai Patel has no bearing on the facts and in the circumstances obtaining in the instant case. In our view, the decision in the case of Vajulal Chunilal (HUF) would help the stand taken on behalf of the revenue than to the assessee. We make this observation as Shri Jitendra and Shri Surendra took over the entire Panchavati property by paying off Shri Bharatbhai and Shri Dilipbhai in respect of their shares in the said property. It is pertinent to note that the HUF of Shri Chinubhai Motilal was never assessed as such under the Act and, therefore, the decision in the case of Govindlal Mathurbhai Oza would not be of any help to the assessee. In our considered opinion, by the deed dated 27-3-1973, the Panchavati property was partitioned in accordance with the Hindu law whereby each of the parties got one-fourth share in the said property. Since it was not physically possible to divide the said property, another deed was executed on 7-7-1978 whereby the shares fallen to the assessee and Shri Bharatbhai were sold to Shri Jitendra and Sh ..... 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