Late M Ram Reddy, Hyderabad V. ITO,Ward 11(2), Hyderabad

ITA 1052/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74525 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SON
• Keywords: Cost of acquisition; Fair market value; Corroborative evidences
• Section: 54F; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1052/HYD/13 ASSTT. YEAR 2009-10 LATE M. RAM REDDY, REP. BY SON & LR M. BHASKAR REDDY, HYDERABAD. V/S. INCOME-TAX OFFICER, WARD- 11(2), HYDERABAD. PAN:AHZPR9928G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI LAXMINIVAS SHARMA RESPONDENT BY : SHRI SOLAY JOSE T. KOTTARAM(DR) DATE OF HEARING 22 - 10 - 2013 DATE OF PRONOUNCEMENT 17.01.2014 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 28-3-2013 OF CIT(A) VI, HYDERABAD PASSED IN APPEAL NO.0414/2011-12/CIT(A)-VI PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED IN TOTAL SEVEN GROUNDS. GROUND NOS. 1 AND 7 ARE GENERAL IN NATURE, HENCE NO T REQUIRED TO BE ADJUDICATED UPON. 3. IN GROUND NOS. 2 AND 3, THE ASSESSEE HAS ASSAILE D THE DECISION OF DEPARTMENTAL AUTHORITIES IN TAXING THE ENTIRE SALE CONSIDERATION RECEIVED FROM SALE OF LA ND IN ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 2 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 30-7-200 9 DECLARING INCOME OF RS.7,14,400/-. INITIALLY, THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, HOWEVER ASSESSEES 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 GA IN, THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESS EE 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 AVAIL ABLE ON RECORDS, THE ASSESSING OFFICER NOTED THAT DURING THE IMPUGNED FINANCIAL YEAR, THE ASSESSEE ALONG WITH SO ME OTHER CO-OWNERS HAD SOLD AN IMMOVABLE PROPERTY FOR A CONSIDERATION OF ABOUT RS.42,70 CRORES AND THE SHAR E OF THE ASSESSEE IN THE SALE CONSIDERATION WAS MUCH MOR E THAN WHAT HAS BEEN SHOWN IN THE RETURN OF INCOME. HE THEREFORE REOPENED THE ASSESSMENT OF THE IMPUGNE D ASSESSMENT YEAR BY ISSUING A NOTICE U/S 148 OF THE ACT. DURING THE RE-ASSESSMENT PROCEEDINGS, THE ASSESSEE ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 3 APPEARING BEFORE THE ASSESSING OFFICER FURNISHED TH E INFORMATION AS WAS CALLED FOR. FURTHER, THE ASSESS EE STATED THAT DURING THE PREVIOUS YEAR, HE HAD SOLD H IS INHERITED LAND AND RECEIVED A SALE CONSIDERATION OF RS.50,00,276/- ON 23-9-2008 AND INVESTED RS.48,28,776/- IN CAPITAL GAIN ACCOUNT SCHEME WITH INDIAN OVERSEAS BANK. 5. THE ASSESSING OFFICER ON GOING THROUGH THE COPY OF SALE DEED DATED 15-9-2008 NOTED THAT AGRICULTURA L LAND BEARING SURVEY NO. 588/1 AND 591/1 SITUATED AT UPPAL KHALSA VILLAGE, UPPAL MANDAL, RR DISTRICT ADMEASURING AC.17-27 GUNTAS ORIGINALLY BELONGED TO ONE SRI SRIDHAR NAIK AND HIS SON DHANUNJAYA NAIK. THE SAID LANDS WERE UNDER THE PROTECTED TENANCY OF SRI M. JANAGA REDDY AND NARAYANA REDDY, M. RAMI REDDY, M. RAGHUNA REDDY, M. RAMACHANDRA REDDY, M. MOHAN REDDY SONS OF SRI LAKSHMA REDDY, M. YADI REDDY M. VENKAT REDDY, M. RANGA REDDY SONS OF SRI PAPI REDDY . M. KRISHNA REDDY, SON OF SRI LAKSHMA REDDY, M. SUDHARSHAN REDDY (DECEASED) PER L/R SMT. M. ANASUYA, M. JANARDHANA REDDY (DECEASED) PER L/R SMT M. RAJINI, M. NARASIMHA REDDY. HE FURTHER NOTED TH AT BY A CERTIFICATE DATED 24-22-1993 OF REVENUE DIVISI ONAL OFFICER IN CASE NO. L/7751 OF 1984 ALL THE ABOVE PERSONS WERE DECLARED AS PURCHASERS OF THE SAID PROPERTY U/S 38 (6) OF THE A.P (TELENGANA) AREA, TENANCY AND AGRICULTURAL LANDS ACT, 1950 AND BY VIR TUE OF OPERATION OF LAW, THESE PERSONS HAVE BECOME ABSOLUTE OWNERS OF THE SAID PROPERTY. HE FURTHER N OTED ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 4 THAT HUDA ACQUIRED CERTAIN PORTION OF THE ABOVE LA ND IN SURVEY NO.588 AND THE REMAINING LAND WAS IDENTIF IED AS SURVEY NO.588/1. SIMILARLY, IN RESPECT OF LAND IN SURVEY NO.591 ACQUISITION WAS MADE BY HUDA AND THE REMAINING LAND WAS IDENTIFIED AS SURVEY NO.591/1. 6. THE ASSESSING OFFICER NOTED THAT THE LAND TO TH E EXTENT OF AC.0.34 GUNTAS IN SURVEY NO.591/1 AND TO THE EXTENT OF AC.5.10 GUNTAS IN SURVEY NO.588/1 WAS SOLD BY THE ABOVE LAND OWNERS TO ONE METRO CASH AND CARRY (INDIA) (P) LTD.,. BANGALORE FOR A CONSIDERAT ION OF RS.42,70,00,000/- UNDER AN AGREEMENT OF SALE DATED 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 NO TED 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 HAV E OFFERED THE CAPITAL GAIN TO TAX, THE ASSESSING OFFI CER 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 L IABLE TO CAPITAL GAIN TAX BUT SINCE THEIR STATUS IS HUF A ND 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. ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 5 7. THE ASSESSING OFFICER ON GOING THROUGH THE DETAILS OF SALE CONSIDERATION SHARED BETWEEN THE FA MILY MEMBERS NOTED THAT THEY HAVE DISTRIBUTED THE SALE CONSIDERATION AMONG THEIR FAMILY MEMBERS UNDER THE GUISE OF HUF STATUS FOR EACH INDIVIDUAL ASSESSEE THROUGH THE REGISTERED SALE DEED. THE ASSESSING OFFICER WAS OF THE VIEW THAT EVEN THOUGH THERE IS N O BAR FOR AN INDIVIDUAL TO THROW HIS INDIVIDUAL PROPE RTY INTO THE COMMON HOTCH-POT OF THE HUF WITH THE INTENTION OF ABANDONING HIS SEPARATE CLAIM THEREIN AS HELD BY THE SUPREME COURT IN THE CASE OF LAKKI REDD Y CHINA VENKATA REDDY VS. LAKKI REDDY LAKSHMANA, STIL L THE PROVISIONS OF SECTION 64(2) OF THE ACT CONTEMPL ATE THAT WHERE A COPARCENER THROWS HIS SEPARATE PROPER TY INTO STOCK OF THE FAMILY AND THEREBY CONVERTS IT I NTO JOINT FAMILY PROPERTY OR WHERE SUCH PROPERTY IS SUBSEQUENTLY PARTITIONED AMONG THE FAMILY MEMBERS INCLUDING THE COPARCENERS MINOR CHILDREN, THERE IS NO DIRECT OR INDIRECT TRANSFER BY THE COPARCENER TO H IS WIFE OR MINOR CHILDREN NOR A TRANSFER BY HIM FOR THE BEN EFIT OF THE WIFE OR MINOR CHILDREN. ACCORDINGLY, IN CAS E OF VESTING OF SEPARATE PROPERTY ON A DATE LATER THAN 31- 12-1969, THE ENTIRE INCOME FROM THE CONVERTED PROPERTY WILL BE TAXED IN THE HANDS OF THE COPARCEN ER WHO VESTED IT AND THE SAME WILL NOT BE ASSESSABLE A S THE INCOME OF THE JOINT FAMILY. 8. THE ASSESSING OFFICER RELYING UPON A DECISION O F THE ALLAHABAD HIGH COURT IN THE CASE OF MULKRAJ VS . CIT 129 ITR 387 AND OF THE KARNATAKA HIGH COURT IN ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 6 CASE OF GOPAL RAM NARAIN VS. CIT 175 ITR 32 HELD T HAT THE AMOUNT OF SALE CONSIDERATION RECEIVED BY THE ASSESSEE SHALL HAVE TO BE ASSESSED IN HIS INDIVIDUA L HANDS ONLY AND NOT IN THE HANDS OF THE MEMBERS OF H IS FAMILY. THE ASSESSING OFFICER WAS OF THE VIEW THAT AT BEST THE RECITALS IN THE SALE DEEDS AND ALSO THE INTENTION OF THE ASSESSEES SUGGESTS THAT THEY WANT TO MAKE IT A SORT OF FAMILY SETTLEMENT THROUGH THE REGISTERED SALE DEED. THE ASSESSING OFFICER OBSERV ED THAT THE EXPRESSION FAMILY ARRANGEMENT CAN BE COMMONLY UNDERSTOOD AS AN ARRANGEMENT BETWEEN THE MEMBERS OF THE SAME FAMILY INTENDED TO BE GENERALLY AND REASONABLY FOR THE BENEFIT OF THE FAMILY EITHER BY COMPROMISING DOUBTFUL OR DISPUTED RIGHTS OR BY PRESERVING THE FAMILY PROPERTY OR THE PEACE AND THE SECURITY OF THE FAMILY BY AVOIDING LITIGATION OR BY SAVING ITS HONOUR. 9. THE ASSESSING OFFICER HELD THAT THE COLOURABLE DEVICE ADOPTED BY THE ASSESSEE TO DISTRIBUTE THE LO NG TERM CAPITAL GAIN DERIVED BY HIM AMONG THE MEMBERS OF HIS FAMILY CANNOT BE ACCEPTED AND NOT SUSTAINABL E IN THE EYES OF LAW. HE ACCORDINGLY PROCEEDED TO ASSE SS THE ENTIRE SALE CONSIDERATION OF RS.3,28,35,500/- A S THE INCOME OF THE ASSESSEE IN HIS INDIVIDUAL CAPACITY A ND PROCEEDED TO COMPUTE THE CAPITAL GAIN THEREON. WH ILE COMPUTING THE CAPITAL GAIN, THE ASSESSING OFFICER A LSO DID NOT ACCEPT THE ASSESSEES CLAIM OF COST INDEXAT ION FROM 1981 AS WELL AS HIS CLAIM THAT 60% OF THE LAND HAVING BEEN GIVEN ON PATTA WITHOUT ANY CONSIDERATIO N, ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 7 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 TH E DATE OF TRANSFER OF THE ASSET AND AS SUCH IS NOT EL IGIBLE 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 OF FICER SUBMITTED THAT AS PER THE FAMILY ARRANGEMENT MADE THROUGH THE PARTITION DEED DATED 11-11-2005 PROPE RTY WAS DISTRIBUTED AMONGST THE HIS MEMBERS OF HIS FAMI LY 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 DIFFERENT MEMBERS OF THE FAMILY AND THEY HAVE ALSO FILED THEIR RETURN OF INCOME DECLARING CAPITAL GAIN ON RECEIPT OF THE SALE CONSIDERATION. THE CIT (A) HOWEVER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE WI TH REGARD TO FAMILY SETTLEMENT AND HELD AS UNDER: 5.9 IN THIS CONTEXT, IT MAY BE RELEVANT TO OBSERVE THAT THE CASE LAWS RELIED UPON BY THE ASSESSING OFF ICER ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE. THE CASE LAWS RELIED UPON BY THE ASSESSING OFFICER ARE RELAT ABLE TO THE ISSUE OF CAPITAL GAINS ON PARTITION OF THE F AMILY, WHEREAS IN THIS CASE, THE FAMILY PARTITION IS REGAR DING THE CLAIMING OF THE STATUS FOR THE FAMILY MEMBERS INVOLVED. HOWEVER, THE FACT REMAINS THAT THE APPELL ANT ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 8 UNDER REFERENCE HAS CHOSEN THE STATUS OF INDIVIDUAL FOR OFFERING THE TAXES, BY CONSIDERING A PART OF THE SA LE CONSIDERATION RECEIVED BY THE APPELLANT AND HIS FAM ILY MEMBERS. THE ASSESSING OFFICER HELD THAT THE FAMILY PARTITION IS NOT VALID, WITHOUT REGISTRATION AND IN CASE OF INDIVIDUALS, THE PROPERTIES NORMALLY DEVOLVE ON LEGAL HEIRS ON THE DEATH OF A PERSON AND THERE IS NO SCOP E FOR SETTLEMENT OF THE PROPERTY, HELD IN INDIVIDUAL CAPA CITY. TO THIS EXTENT THE RATIO OF CASE LAW IN THIS CASE O F CIT VS. BIBIJAN BEGUM, APPLIES TO THE FACTS OF THE CASE . FURTHER, THOUGH IT IS A FACT THAT EVEN ORAL PARTITI ONS ARE PERMISSIBLE BUT SUCH PARTITION SHOULD INVOLVE CLEAR DEMARCATION OF PROPERTIES AND ALIENABLE/SALEABLE BY THE SHARES, AS HELD BY JUDICIAL DECISIONS. FURTHER HAVING REDUCED THE AGREEMENT INTO WRITING, THE PARTITION DEED IS REQUIRED TO BE REGISTERED AS PER THE PROVISIONS OF REGISTRATION LAWS OF ANDHRA PRADESH. IN THIS CASE, NEITHER THE PROPERTIES UNDER REFERENCE A RE DEMARCATED AND ALIENABLE OR SALEABLE SEPARATELY, AN D THE SAID PARTITION DEEDS AND SALE DEED DATED 15.09.2008 CONFIRM THESE FACTS. FURTHER, THE SAID PARTITION DEEDS WERE NOT REGISTERED, BUT ONLY WRITT EN ON RS. 100 STAMP PAPER. 11. AS CAN BE SEEN FROM THE OBSERVATION MADE BY THE ASSESSING OFFICER AS WELL AS CIT (A) THE ONLY REASO N FOR WHICH THE FAMILY ARRANGEMENT WAS NOT ACCEPTED IS DU E TO THE FACT THAT IT IS NOT REGISTERED UNDER THE REGISTRATION LAWS OF ANDHRA PRADESH. THE CIT (A) FURTHER HELD THAT THERE BEING NO RELATION BETWEEN T HE SHARE OF THE LAND AS PER THE PARTITION DEED AND THE SALE CONSIDERATION SHOWN IN THEIR HANDS, THE PARTITION D EED ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 9 CANNOT BE RELIED UPON. ON THE AFORESAID REASONING THE CIT (A) UPHELD THE VIEW OF THE ASSESSING OFFICER IN CONSIDERING THE ENTIRE SALE CONSIDERATION IN THE HA NDS OF THE ASSESSEE. 12. WE HAVE HEARD THE PARTIES, PERUSED THE MATERI ALS ON RECORD AS WELL AS THE FINDINGS OF THE LOWER AUTHORITIES ON THIS ISSUE. THE PRIMARY GROUND ON W HICH THE CIT (A) AS WELL AS THE ASSESSING OFFICER HAVE REFUSED TO ACCEPT THE ASSESSEES CONTENTION WITH RE GARD TO THE FAMILY ARRANGEMENT EFFECTED THROUGH PARTITIO N DEED DATED 11-11-2005 IS DUE TO THE FACT THAT THE S AID DOCUMENT HAS NOT BEEN REGISTERED WITH THE REGISTERI NG AUTHORITY FOR STAMP DUTY PURPOSE. IT IS THE CONTEN TION OF THE LEARNED AR BEFORE US THAT THE NON-REGISTRAT ION OF THE FAMILY ARRANGEMENT DEED WOULD NOT IN ANY WA Y DILUTE ITS EFFECT AS IT IS AN ARRANGEMENT BETWEEN T HE FAMILY MEMBERS FOR RESOLVING THE DISPUTE WITH REGAR D TO THE PROPERTY WHICH IS EXISTING OR WHICH MAY ARI SE 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 PE R THE FAMILY ARRANGEMENT. IN THIS CONTEXT, THE LEARNED A R REFERRED TO THE REGISTERED SALE DEED DATED 15-7-20 08 WHEREIN ALL THE FAMILY MEMBERS ARE PARTIES AND HAV E SOLD THE PROPERTY FALLING INTO THEIR RESPECTIVE SHA RES AS PER THE FAMILY ARRANGEMENT INDEPENDENTLY. THE LEARNED AR SUBMITTED THAT SINCE THE FAMILY ARRANGEMENT TOOK PLACE IN THE YEAR 2005 AND PROPERT Y ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 10 WAS ALSO DISTRIBUTED AMONGST THE FAMILY MEMBERS AS PER THE FAMILY ARRANGEMENT DEED DATED 11-11-2005, ONLY BECAUSE IT IS NOT A REGISTERED DOCUMENT, THE S AME CANNOT BE IGNORED AND THE ENTIRE SALE CONSIDERATIO N CANNOT BE CONSIDERED AT THE HANDS OF THE ASSESSEE ALONE. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AR RELIED UPON THE FOLLOWING DECISIONS:- I) KALE & OTHERS VS. DY. DIRECTOR OF CONSOLIDATION (1976) AIR 807 (SC) II) MATURI PULLAIAH AND ANOTHER VS. MATURI NARASIMHAM & OTHERS (AIR 1966 SC 1836) III) JUDGMENT DATED 20 TH MARCH, 2002 OF HONBLE DELHI HIGH COURT IN CASE OF SRI RAJESHCHANDRA SOOD VS. UMESHCHANDRA SOOD. IV) DEVANAND CHATURVEDI VS. DEPARTMENT OF INCOME-TAX (ITA NO.6343/MUM/2009 DATED 28-9-2011). 13. ON THE OTHER HAND, IT IS THE CONTENTION OF THE LEARNED DR THAT THE SO CALLED FAMILY ARRANGEMENT DE ED NOT BEING A REGISTERED DOCUMENT IS MERELY A COLOURA BLE DEVICE TO REDUCE THE LEGITIMATE TAX LIABILITY OF TH E ASSESSEE. 14. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIE S, THE UNDISPUTED FACTS ARE, SO FAR AS THE EXISTENCE O F THE FAMILY ARRANGEMENT DEED IS CONCERNED, IT IS NOT DISPUTED BY THE DEPARTMENT. HOWEVER, THEY HAVE NO T ACCEPTED IT ON THE GROUND THAT IT IS NOT REGISTERE D. IN THIS CONTEXT, LET US EXAMINE THE RATIO LAID DOWN IN THE ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 11 DECISION CITED BEFORE US TO FIND OUT WHETHER NON REGISTRATION OF THE DEED OF FAMILY ARRANGEMENT WOUL D RENDER IT INEFFECTIVE. THE HONBLE SUPREME COURT I N CASE OF KALE AND OTHERS VS. DY. DIRECTOR OF CONSOLIDATION (SUPRA) MADE CERTAIN IMPORTANT OBSERVATIONS WHICH WOULD BE THE GUIDING PRINCIPLE T O DECIDE THE ISSUE ON HAND. THE HONBLE SUPREME COUR T OBSERVED AS UNDER:- A FAMILY ARRANGEMENT IS AN AGREEMENT BETWEEN MEMBER S OF THE SAME FAMILY, INTENDED TO BE GENERALLY AND REASONABL Y FOR THE BENEFIT OF THE FAMILY EITHER BY COMPROMISING DOUBTFUL OR D ISPUTED RIGHTS OR BY PRESERVING THE FAMILY PROPERTY OR THE PEACE AND SECURITY OF THE FAMILY BY AVOIDING LITIGATION OR BY SAVING-ITS HONO UR. THE AGREEMENT MAY BE IMPLIED FROM A LONG COURSE. OF DEALING, BUT IT IS MORE USUAL TO EMBODY OR TO EFFECTUATE THE AGREEM ENT IN A DEED TO WHICH THE TERM 'FAMILY ARRANGEMENT' IS APPLIED. FAMILY ARRANGEMENTS ARE GOVERNED BY PRINCIPLES WHIC H 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 V IEW OF THE MATTER IS MOST FOR THE INTEREST OF FAMILIES, AND HAS REGAR D TO CONSIDERATIONS WHICH IN DEALING WITH TRANSACTIONS BETWEEN PERSONS NOT MEMBERS OF THE SAME FAMILY, WOULD NOT BE TAKEN INTO ACCOUNT. M ATTERS WHICH WOULD BE FATAL TO THE VALIDITY OF SIMILAR TRANSACTI ONS BETWEEN STRANGERS ARE NOT OBJECTIONS- TO THE BINDING EFFECT -OF FAMILY ARRANGEMENTS'. IN OTHER WORDS TO PUT THE BINDING EFFECT AND THE ES SENTIALS 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 EQUI TABLE DIVISION OR ALLOTMENT OF PROPERTIES BETWEEN THE VARIOUS MEMBERS OF THE FAMILY; (2) THE SAID SETTLEMENT MUST BE VOLUNTARY AND SHOULD NO T BE INDUCED BY FRAUD, COERCION OR UNDUE INFLUENCE: (3) THE FAMILY ARRANGEMENT MAY BE EVEN ORAL IN WHIC H CASE NO REGISTRATION IS NECESSARY; (4) IT IS WELL-SETTLED THAT REGISTRATION WOULD BE N ECESSARY ONLY IF THE ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 12 TERMS OF THE FAMILY ARRANGEMENT ARE REDUCED INTO WR ITING. HERE ALSO, A DISTINCTION SHOULD BE MADE BETWEEN A DOCUMENT CONTA INING THE TERMS AND RECITALS OF A FAMILY ARRANGEMENT MADE UNDER THE DOCUMENT AND A MERE MEMORANDUM PRE PARED AFTER THE FAMILY ARRANGEM ENT HAD ALREADY BEEN MADE EITHER FOR THE PURPOSE OF THE REC ORD OR FOR IN FORMATION OF THE COURT FOR MAKING NECESSARY MUTATIO N. IN SUCH A CASE THE MEMORANDUM ITSELF DOES NOT CREATE OR EXTINGUISH ANY RIGHTS IN IMMOVABLE PROPERTIES AND THEREFORE DOES NOT FALL WI THIN THE MISCHIEF OF S. 17(2) OF THE REGISTRATION ACT AND IS, THEREFORE, NOT COMP ULSORILY REGISTRABLE; (S) THE MEMBERS WHO MAY BE PARTIES TO THE FAMILY ARRANG EMENT MUST HAVE SOME ANTECEDENT TITLE, CLAIM OR INTEREST EVEN A POSSIBLE CLAIM IN THE PROPERTY 'IT WHICH IS ACKNOWLEDGED BY THE PARTIES T O THE SETTLEMENT. EVEN IF ONE OF THE PARTIES TO THE SETTLEMENT HAS NO TITLE BUT UNDER THE ARRANGEMENT THE OTHER PARTY RELINQUISHES ALL ITS CL AIMS OR TITLES IN FAVOUR OF SUCH A PERSON AND ACKNOWLEDGES HIM TO BE THE SOLE 9 OWNER, THEN THE ANTECEDENT TITLE MUST BE ASSUMED AND THE F AMILY ARRANGEMENT WILL BE UPHELD AND THE COURTS WILL FIND NO DIFFICUL TY 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 FAM ILY ARRANGEMENT WHICH IS FAIR AND EQUITABLE THE FAMILY ARRANGEMENT IS FINAL AND BINDING ON THE PARTIES TO THE SETTLEMENT. THE PRINCIPLES INDICATED ABOVE HAVE BEEN CLEARLY EN UNCIATED AND ADROITLY ADUMBRATED IN A LONG COURSE OF DECISIONS O F THIS COURT AS ALSO THOSE OF THE PRIVY COUNCIL AND OTHER HIGH COURTS, W HICH WE SHALL DISCUSS PRESENTLY. IN LALA KHUNNI LAL & ORS. V. KUNWAR GOBIND KRISHNA NARAIN AND ANR.(I) THE STATEMENT OF LAW REG ARDING THE ESSENTIALS OF A VALID SETTLEMENT WAS FULLY APPROVED OF BY THEIR LORDSHIPS OF THE PRIVY COUNCIL. IN THIS CONNECTION THE HIGH C OURT MADE THE FOLLOWING OBSERVATIONS , WHICH WERE ADOPTED BY THE PRIVY COUNCIL: THE LEARNED JUDGES SAY AS FOLLOWS: 'THE TRUE CHARACTER OF THE TRANSACTION APPEARS TO U S TO HAVE BEEN A SETTLEMENT BETWEEN THE SEVERAL MEMBERS OF THE FAMIL Y OF THEIR DISPUTES, EACH ONE RELINQUISHING ALL CLAIM IN RESPE CT OF ALL PROPERTY IN DISPUTE OTHER THAN THAT FALLING TO HIS SHARE, AND R ECOGNIZING. THE RIGHT OF THE OTHERS AS THEY HAD PREVIOUSLY ASSERTED IT TO THE PORTION ALLO TTED TO THEM RESPECTIVELY. IT WAS IN THIS LIGHT, RATHER THA N AS CONFERRING - A NEW DISTINCT TITLE ON EACH OTHER, THAT THE PARTIES THEM SELVES SEEM TO HAVE REGARDED THE ARRANGEMENT, AND WE THINK THAT IT IS THE DUTY OF THE COURTS TO UPHOLD AND GIVE FUL L EFFECT TO SUCH AN ARRANGEMENT.' ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 13 15. THE HONBLE COURT FINALLY HELD AS UNDER :- IN VIEW OF OUR FINDING THAT THE FAMILY SETTLEMENT D ID NOT CONTRAVENE ANY PROVISION OF THE LAW BUT WAS A LEGALLY VALID AN D 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 H IGH COURT THAT THE COMPROMISE REQUIRED REGISTRATION WAS ALSO WRONG IN VIEW OF THE CLEAR FACT THAT THE MUTATION PETITION FILED BEFORE THE AS SISTANT COMMISSIONER DID NOT EMBODY THE TERMS OF THE FAMILY ARRANGEMENT BUT WAS MERELY IN THE NATURE OF A MEMORANDUM MEANT FOR THE INFORMATIO N 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 VALID FAMILY SETTLEMENT TRIES TO ASSAIL. THE HIGH COURT FURTHER ERRED IN NOT CONSIDERING THE FACT THAT EVEN IF THE FAMILY ARRANG EMENT WAS NOT REGISTERED IT COULD BE USED FOR A COLLATERAL PURPOS E, NAMELY, FOR THE PURPOSE OF SHOWING THE NATURE AND CHARACTER 0F POSSESSION OF THE PARTIES IN PURSUANCE OF THE FAMILY SETTLEMENT AND A 0 FOR THE PURPOSE OF APPLYING THE RULE OF ESTOPPEL WHICH FOLLOWED FROM THE CONDUC T OF THE PARTIES WHO HAVING TAKEN BENEFIT UNDER THE SETTLEMENT KEEP THEI R MOUTHS SHUT FOR $EVEN YEARS AND LATER TRY TO RESILE FROM THE SETTLEMENT. IN SHYAM S UNDER AND OTHERS V. SIYA RAM AND ANOTHER (1) IT WAS CLEARLY HELD BY THE ALLAHABAD HIGH COURT THAT THE COMPROMISE COULD HAVE BEEN TAKEN INTO CONSIDERATION AS A PIECE OF EVIDENCE EVEN IF IT WAS NOT REGISTERED OR FOR THAT MATTER AS AN EVIDENCE OF AN ANTECEDENT TITLE. THE HIGH COURT OBSERVED AS FOLLOWS: 'THE DECISION IN RAM GOPAL V. TULSHI RAM,-AIR 1928 ALL. 641 (FB)-IS CLEAR THAT SUCH A RECITAL CAN BE RELIED UPON AS A PIECE OF EVIDENCE. 16. THE HONBLE SUPREME COURT IN THE CASE OF MATURI NARASIMHAM AND OTHERS (SUPRA) HELD AS UNDER:- 21. THE OPERATIVE PART OF EX. B-1 READS THUS: THEREFORE OUT OF OUR FAMILY PROPERTY, I.E., PROPERT Y WHICH BELONGS TO US AT PRESENT AND THE PROPERTY WHICH WE MAY ACQUIRE IN FUTURE, THE 1ST PARTY OF US AND HIS REPRESENTATIVES SHALL TAKE TWO SHARES WHILE THE 2ND PARTY OF US AND HIS REPRES ENTATIVES SHALL TAKE THREE SHARES. WE BOTH PARTIES, HAVING AG REED THAT WHENEVER ANYONE OF US OR ANYONE OF OUR REPRESENTATI VES DESIRES AT ANY TIME THAT THE FAMILY PROPERTIES SHOULD BE PA RTITIONED ACCORDING TO THE ABOVE MENTIONED SHARES AND THAT TI LL SUCH TIME OUR FAMILY SHALL CONTINUE TO BE JOINT SUBJECT TO TH E TERMS STIPULATED HEREIN ENTERED INTO THIS AGREEMENT. IT IS COMMON CASE THAT THIS DOCUMENT DID NOT BRING ABOUT A DIVISION BY METES AND BOUNDS BETWEEN THE PARTIES. I T DID NOT ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 14 ALSO AFFECT THE INTERESTS OF THE PARTIES IN IMMOVAB LE PROPERTIES IN PRAESENTI. WHAT IN EFFECT IT SAID WAS THAT THAT THE PARTIES WOULD CONTINUE TO BE MEMBERS OF THE JOINT HINDU FAMILY AN D THAT NARASIMHA WOULD MANAGE THE FAMILY PROPERTIES AS BEF ORE, AND THAT WHEN THEY EFFECTED A PARTITION IN FUTURE VENKA TRAMAIAH WOULD GET 2 SHARES AND NARASIMHA WOULD GET 3 SHARES IN THE PROPERTIES THOU IN EXISTENCE OR ACQUIRED THE REAFTER. THERE WAS NEITHER A DIVISION IN STATUS NOR A DIVISION BY METES AND 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 INTERES T IN IMMOVABLE PROPERTIES IN PRAESENTI IN FAVOUR OF THE PARTIES MENTIONED THEREIN. IF SO, IT FOLLOWS THAT THE DOCUM ENT WAS NOT HIT BY SECTION 17 OF THE INDIAN REGISTRATION ACT. 22. THE PRINCIPLE UNDERLYING SECTION 17 OF THE REGI STRATION ACT IS WELL SETTLED. THE DECISIONS CITED AT THE BAR ARE ONLY APPLICATION OF THE SAID PRINCIPLE TO THE FACTS OF E ACH CASE. THE DECISION OF THE JUDICIAL COMMITTEE IN (1911) 38 IND APP 104(PC), RELATES TO AN INSTRUMENT OF 1884 WHICH WAS INTENDED TO EFFECT PARTITION IMMEDIATELY AND, THEREFORE, IT WAS HELD THAT IT WAS VOID AS REGARDS IMMOVABLE PROPERTY. THE DECISIO N IN RAJANGAM AYYAR V. RAJANGAM AYYAR 50 IND APP 134 : AIR 1922 PC 266, TURNED UPON THE TERMS OF EX. AY WHEREU NDER TWO BROTHERS SEVERED THEMSELVES IN STATUS AND AGREED TO HAVE A DOCUMENT EXECUTED FOR EFFECTUATING THE PARTITION. D EALING WITH THE DOCUMENT, THE JUDICIAL COMMITTEE HELD THAT THE DOCUMENT DID NOT BY ITSELF CREATE, ASSIGN, LIMIT OR EXTINGUI SH ANY RIGHT OR INTEREST IN IMMOVABLE PROPERTY BUT ONLY CREATED A R IGHT TO OBTAIN ANOTHER DOCUMENT. THE DECISION IN HARI SANKA R PAUL V. KEDAR NATH SAHA , WAS RELIED UPON BY ANALOGY. THERE AN AGREEMENT IN WRITING WHICH CONTAINED ALL THE ESSENT IALS OF THE TRANSACTION OF A MORTGAGE WAS HELD TO BE A DOCUMENT HIT BY SECTION 17(1)(B) OF THE REGISTRATION ACT. IT WAS HE LD TO BE A DOCUMENT CONTAINING THE BARGAIN MADE BETWEEN THE PA RTIES AND CONSTITUTING A TRANSFER OF THE PROPERTY BY WAY OF M ORTGAGE AND, THEREFORE, IT REQUIRED REGISTRATION. FURTHER CITATI ON IS UNNECESSARY. 23. FOR THE FOREGOING REASONS, WE HOLD THAT THE DOC UMENT, EX. B- 1, DOES NOT REQUIRE REGISTRATION. 17. THE HONBLE DELHI HIGH COURT IN THE CASE OF RAJ ESH CHANDRA SOOD VS. UMESH CHANDRA SOOD (SUPRA) WHIL E ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 15 CONSIDERING THE EFFECT OF NON REGISTRATION OF THE FAMILY ARRANGEMENT DEED HELD AS UNDER:- IN ROSHAN SINGH AND ORS., V. ZILE SINGH AND ORS., R EPORTED IN (1988) 2 S.C.R. PAGE 1106 THE SUPREME COURT AFTER NOTICING VARIOUS EARLIER DECISIONS HELD THAT THE TRUE PRINCI PLE IS THAT IF THE ARRANGEMENT OF COMPROMISE IS ONE UNDER WHICH A PERS ON HAVING AN ABSOLUTE TITLE TO THE PROPERTY TRANSFERS HIS TIT LE IN SOME OF THE ITEMS THEREOF TO THE OTHERS, THE FORMALITIES PRESCR IBED BY LAW HAVE TO BE COMPLIED WITH, SINCE THE TRANSFEREES DERIVE THEI R RESPECTIVE TITLE THROUGH THE TRANSFEROR. IF, THE OT HER HAND, THE PARTIES SET UP COMPETING TITLES AND THE DIFFERENCES ARE RESOLVED BY THE ' COMPROMISE, THERE IS NO QUESTION OF ONE DERIVING TI TLE FROM THE OTHER, AND THEREFORE, THE ARRANGEMENT DOES NOT FALL WITHIN THE MISCHIEF OF SECTION 17 READ WITH SECTION 49 OF THE REGISTRATION ACT AS NO INTEREST IN PROPERTY IS CREA TED OR DECLARED BY THE DOCUMENT FOR THE FIRST TIME. IT IS ASSUMED THAT THE TITLE HAD ALWAYS RESIDED IN HIM OR HER SO FAR A S THE PROPERTY FALLING TO HIS OR HER SHARE IS CONCERNED AND THEREF ORE TO CONVEYANCE IS NECESSARY. -. IN THE PRESENT CASE, THE PETITIONER AND THE RESPOND ENT WERE THE TWO SONS OF LATE SMT. LILAWATI SOOD AND, THEREFORE, THEY WERE AND ARE THE ONLY HEIRS OF SAID SMT. LILAWATI SOOD U NDER SECTION 15(A) OF THE HINDU SUCCESSION ACT. BEING THE SONS, BOTH OF THEM WERE/ARE ENTITLED TO HALF SHARE OF THE PROPERTY BY VIRTUE OF SECTION 15(A) OF HINDU SUCCESSION ACT, AND THE TILE TO THE SAID PROPERTY WOULD AND IS BEING DERIVED THROUGH SUCH RI GHT. SAID SMT. LILAWATI DIED ON 3.2.1986 INTESTATE AND ON HER DEATH UNDIVIDED SHARE EACH IN THE SAID PROPERTY DEVOLVES ON THE PARTIES BY VIRTUE OF SECTION 15(A) THEREOF AND THEY BECAME OWNERS OF THE SAID PROPERTY IN TERMS OF THE AFORESA ID PREVIOUSNESS OF HALF UNDIVIDED SHARE IN THE PROPERT Y. WHAT THE FAMILY SETTLEMENT INTENDED TO DO WAS TO ASCERTAIN T HE PORTION OF THEIR SHARE WITH DEFINITE IDENTIFICATION, AND THE M ODE OF ACQUIRING POSSESSION BY THE PETITIONER AND, THEREFO RE, THE SAID DOCUMENT CANNOT BE TREATED TO BE A DOCUMENT OF TITL E REQUIRING REGISTRATION. EVEN IF IT IS ASSUMED FOR THE PURPOSE OF ARGUMENT T HAT THE SAID DOCUMENT CREATED RIGHT AND TITLE TO THE PROPERTY, T HE CLAUSE RELATING TO ARBITRATION AGREEMENT COULD BE LOOKED I NTO BY THE COURT WITHOUT THERE BEING ANY REGISTRATION OF THE S AID DOCUMENT. IN DAMODAR VALLEY CORPORATION V. K.K. KAR , OF THE SAID JUDGMENT THE SUPREME COURT REFERRED TO THE DEC ISION OF ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 16 UNION OF INDIA V. KISHORILAL GUPTA, AND MENTIONED W ITH APPROVAL THE DECISION RECORDED BY HON'BLE MR. JUSTI CE SUBBA RAO (AS HIS LORDSHIP THEN WAS) THAT AN ARBITRATION CLAUSE IS A COLLATERAL TERM OF A CON TRACT AS DISTINGUISHED FROM ITS OBSTANTIVE TERMS. IT WAS ALS O STATED THAT NONETHELESS IT IS AN INTEGRAL PART OF IT. THEREFORE , RATIO OF THE AFORESAID DECISION IS THAT ALTHOUGH THE ARBITRATION CLAUSE IS AN INTEGRAL PART OF THE MAIN AGREEMENT BUT THE SAID AR BITRATION CLAUSE IS A COLLATERAL TERM OF CONTRACT. IN THAT VI EW OF THE MATTER SUCH A CLAUSE COULD BE LOOKED INTO BY THE COURT BEI NG A MATTER OF COLLATERAL PURPOSE WITHOUT THEIR BEING ANY REGIS TRATION IN RESPECT OF THE SAME. THEREFORE, EVEN IF THE ARBITRA TION AGREEMENT IS A TRANSACTION AFFECTING SUCH IMMOVABLE PROPERTY UNDER SECTION 49(C) OF THE REGISTRATION ACT, THEN T HE SAME IS ALSO SAID TO BE FOR A COLLATERAL PURPOSE AND, THEREFORE, COULD BE LOOKED INTO AND GIVEN EFFECT TO. COUNSEL APPEARING FOR THE RESPONDENT, HOWEVER, SOUG HT TO RELY UPON SEVERAL DECISIONS IN SUPPORT HIS CONTENTION TH AT THE FAMILY ARRANGEMENT NOT BEING A REGISTERED DOCUMENT WAS ILL EGAL AND VOID AND, THEREFORE, ARBITRATION CLAUSE ALSO PERISH ED WITH IT. IN SUPPORT OF THE SAID CONTENTION HE MAINLY RELIED UPO N THE DECISION IN UNION OF INDIA V. KISHORILAL GUPTA (SUP RA). IN MY CONSIDERED VIEW THE SAID DECISION INSTEAD OF HELPIN G THE RESPONDENT HELPS THE PETITIONER AS DEALT WITH HEREI NABOVE. IN THE PRESENT CASE THE FAMILY ARRANGEMENT CANNOT BE SAID TO BE VOID AND NON EST AS WAS BEFORE THE SUPREME COURT IN UNJ ON OF INDIA V. KISHORI LAL GUPTA (SUPRA). THE RESPONDENT HIMSEL F DID NOT CHALLENGE THE LEGALITY AND VALIDITY OF THE SAID FAM ILY ARRANGEMENT IN THE PRESENT PROCEEDINGS AT ALL AND T HE SAID DOCUMENT IS AN ADMITTED DOCUMENT NOR A PLEA WAS TAK EN THAT THE SAID DOCUMENT IS NOT EVEN ADMISSIBLE THE SAME B EING NOT REGISTERED. THE DECISIONS RELIED UPON BY THE COUNSE L APPEARING FOR THE RESPONDENT, THEREFORE, SHALL HAVE NO APPLIC ATION TO THE FACTS OF THE CIRCUMSTANCES OF THE CASE AND AS THEY ARE DISTINGUISHABLE ON FACTS. ACCORDINGLY, I HOLD THAT THE AFORESAID TWO ISSUES NAMELY, ISSUES NO. 1 & 4 ARE ALSO ANSWERED IN FAVOUR OF THE PETITIONER AND AGAINST THE RESPONDENT. 18. THE INCOME-TAX APPELLATE TRIBUNAL MUMBAI BENCH IN THE CASE OF DEVANAND CHATURVEDI VS. IT DEPARTME NT (SUPRA) AFTER FOLLOWING THE RATIO LAID DOWN BY THE ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 17 HONBLE SUPREME COURT IN THE CASE OF KALE AND OTHER S (SUPRA) HELD AS UNDER:- THE ABOVE FAMILY ARRANGEMENT WAS ENTERED SOMETIME PRIOR TO 11-4-2005 AND THESE FACTS HAVE BEEN AFFIRMED IN AN AFFIDAVIT DATED 11-4-2005 BY MR . N.K. CHATURVEDI. THE LAW IS WELL SETTLED THAT FAMI LY ARRANGEMENT ENTERED INTO WITH A VIEW TO RESOLVE FAMILY DISPUTES, WHICH IS BONAFIDE, VOLUNTARY AND N OT INDUCED 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 T HE FAMILY ARRANGEMENT IT IS CLEAR FROM THE CIRCUMSTANC ES 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 EMERGES FROM THE LAW LAID DOWN IN THE AFORESAID DECISION IS TO THE EFFECT THA T FAMILY ARRANGEMENT ENTERED INTO WITH A VIEW TO RES OLVE FAMILY DISPUTE, WHICH IS BONAFIDE, VOLUNTARY AND NO T INDUCED BY FRAUD, COERCION OR UNDUE INFLUENCE DOES NOT REQUIRE REGISTRATION. SUCH FAMILY ARRANGEMENT BY I TSELF WOULD CONVEY RIGHT, TITLE AND INTEREST IN IMMOVABLE PROPERTY WITHOUT ANY FURTHER REQUIREMENTS. REVERTI NG BACK TO THE FACTS OF THE PRESENT CASE, IT IS CLAIME D BY THE ASSESSEE THAT THE FAMILY ARRANGEMENT AS PER THE ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 18 WRITTEN DOCUMENT HAS BEEN EFFECTED ON 11/11/2005 WHICH IS MUCH PRIOR TO THE SALE OF THE PROPERTY IN DISPUTE. IT IS ALSO THE CLAIM OF THE ASSESSEE THAT IN THE REGISTERED SALE DEED ALL THE FAMILY MEMBERS ARE PARTIES IN RESPECT OF THEIR RESPECTIVE SHARES AS PE R THE FAMILY ARRANGEMENT. THEREFORE, THE ASSESSEE IS REQUIRED TO PROVE AS TO WHETHER THE FAMILY ARRANGEMENT DATED 11-11-2005 HAS BEEN ACTED UPON IN LETTER AND SPIRIT. IT IS ALSO REQUIRED TO BE PROVE D BY THE ASSESSEE, WHETHER IT IS A GENUINE AND AUTHENTIC DOCUMENT. FURTHERMORE, AS CAN BE SEEN FROM THE ORDE R OF THE CIT (A), HE HAS ALSO REFUSED TO ACCEPT THE F AMILY ARRANGEMENT BY OBSERVING THAT THERE IS NO RELATION BETWEEN THE SHARE OF LANDS OF THE FAMILY MEMBERS AS PER PARTITION DEED AND THE SALE CONSIDERATION SHOWN IN THEIR HANDS. THE LEARNED AR APART FROM SUBMITTING BEFORE US THAT THE PROPERTIES HAVE BEEN DISTRIBUTED AMONGST THE FAMILY MEMBERS AS PER THE PARTITION DEE D DT. 11-11-2005 HAS NOT PRODUCED ANY SUPPORTING EVIDENCE TO SHOW THAT THE FAMILY ARRANGEMENT AS PER THE TERMS OF THE PARTITION DEED DATED 11-11-2005 WA S ACTUALLY ACTED UPON. THERE IS NO EVIDENCE ON RECOR D TO SHOW THAT THE FAMILY MEMBERS ACTUALLY BECAME OWNERS OF THE PROPERTIES FALLING INTO THEIR IRRESPECTIVE S HARES AS PER THE FAMILY ARRANGEMENT. AT LEAST NO DOCUMEN T HAS BEEN PRODUCED BEFORE US TO ESTABLISH OWNERSHIP OF THE PROPERTY IN THE NAME OF THE FAMILY MEMBERS AS P ER THE PARTITION DEED. AS IT APPEARS, NO SUCH EVIDENC E WAS ALSO PRODUCED BEFORE THE AUTHORITIES BELOW. IN THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT THE ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 19 ASSESSEES CLAIM OF DIVISION OF PROPERTY AS PER TH E PARTITION DEED DT. 112005. ACCORDINGLY, WE UPHOLD THE DECISION OF THE AUTHORITIES BELOW IN TAKING THE ENT IRE SALE CONSIDERATION AT THE HANDS OF THE ASSESSEE FOR COMPUTING CAPITAL GAIN. THE GROUNDS RAISED ARE THEREFORE DISMISSED. 20. IN GROUND NO.4, THE ASSESSEE HAS RAISED THE ISS UE OF REJECTION OF CLAIM OF INDEXATION FROM 1981. 21. BRIEFLY THE FACTS ARE, IN COURSE OF THE ASSESSM ENT PROCEEDING THE ASSESSEE PLEADED THAT SINCE THE LAND IN QUESTION WAS UNDER THE PROTECTED TENANCY OF THE ASSESSEES FAMILY PRIOR TO 1981, THE FAIR MARKET VA LUE OF THE PROPERTY AS ON 1-4-1981, THE FAIR MARKET VAL UE OF THE PROPERTY AS ON 1-4-1981 OF RS.94,600/- SHOU LD 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 OF FICER DT. 24-2-1993. THE ASSESSEE ALONG WITH 12 OTHERS H AD PURCHASED LAND ADMEASURING AC.14.05 GUNTAS FOR A CONSIDERATION OF RS.27,200. THE CIT (A) ALSO CONFI RMED 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 A NY INFIRMITY IN THE ORDER OF THE REVENUE AUTHORITIES. THOUGH THE ASSESSEE HAS CONTENDED THAT THE LAND IN QUESTION WAS RECEIVED BY ASSESSEES FAMILY EARLIER TO ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 20 1981, HENCE FAIR MARKET VALUE OF THE PROPERTY AS O N 1/4/1981 SHOULD BE TAKEN FOR INDEXATION, BUT THERE ARE NO MATERIAL ON RECORD TO SHOW THAT ASSESSEES FAMIL Y WERE OWNERS OF THE PROPERTY PRIOR TO 1981. ON THE CONTRARY, THE CERTIFICATE DATED 24-2-1993 ISSUED BY THE REVENUE DIVISIONAL OFFICER CLEARLY PROVES THE FACT THAT THE ASSESSEE BECAME OWNER OF THE PROPERTY IN THE YE AR 1992-93 AS A RESULT OF PURCHASE FROM THE ORIGINAL OWNERS. IN THIS VIEW OF THE MATTER THE GROUND RAIS ED BY THE ASSESSEE IS DISMISSED. 23. THE NEXT ISSUE AS RAISED IN GROUND NO.5 IS RELA TING TO DENIAL OF EXEMPTION U/S 54F OF THE ACT ON THE GR OUND THAT ASSESSEE WAS THE OWNER OF MORE THAN ONE HOUSE ON THE DATE OF SALE OF THE PROPERTY. 24. WE HAVE HEARD THE CONTENTIONS OF THE PARTIES ON THIS ISSUE. THOUGH THE LEARNED AR HAS CONTENDED BEFORE US THAT ASSESSEE DID NOT HOLD MORE THAN ONE PROPERTY AS ALLEGED BY THE ASSESSING OFFICER, BUT T HE DISCUSSIONS MADE BY THE CIT (A) IN PARAGRAPH 5.13.1 OF HIS ORDER PROVES OTHERWISE. THE ASSESSEE HAS NOT B EEN ABLE TO CONTROVERT THE FINDING OF THE CIT (A) WITH SUPPORTING EVIDENCE. FURTHER, SINCE WE HAVE ALREAD Y HELD IN EARLIER PART OF THE ORDER, THAT THE ASSESSE E HAS NOT BEEN ABLE TO PROVE THAT THE SO CALLED FAMILY ARRANGEMENT WAS ACTUALLY ACTED UPON, THE ASSESSEES CLAIM THAT AFTER THE FAMILY ARRANGEMENT THE ASSESSE E WAS NOT THE OWNER OF ANY RESIDENTIAL HOUSE CANNOT B E ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 21 ACCEPTED. IN THE AFORESAID CIRCUMSTANCES, WE UPHOL D THE ORDER OF THE CIT (A) ON THIS ISSUE. 25. THE NEXT ISSUE AS RAISED IN GROUND NO.6 RELATES TO ASSESSEES CLAIM THAT ONLY 40% OF THE SALE CONSIDERATION IS LIABLE FOR CAPITAL GAIN. 26. DURING THE ASSESSMENT PROCEEDING AS WELL AS BEFORE THE CIT (A) THE ASSESSEE CLAIMED THAT CAPITA L GAIN ON SALE OF THE LAND SHOULD BE RESTRICTED TO 40 % OF THE LAND OR RIGHTS IN THE LAND, SINCE 60% OF RIGHTS IN THE LAND WERE ACQUIRED BY THE ASSESSEE AND HIS FAM ILY MEMBERS AS PROTECTED TENANTS, THE COST OF WHICH IS NOT ASCERTAINABLE. HENCE, CAPITAL GAIN CANNOT BE COMPUTED ON 60% OF THE LAND AS THERE IS NO COST OF ACQUISITION. THE ASSESSING OFFICER AS WELL AS THE CIT (A) HOWEVER REJECTED SUCH CONTENTION OF THE ASSESSE E. THE ASSESSING OFFICER AFTER EXAMINING THE PROVISION S OF THE TENANCY ACT, 1950 HAS HELD THAT THE RATIO OF 60 :40 HAS BEEN IMPOSED ONLY FOR THE PURPOSE OF PROTECTING THE INTERESTS OF THE PROTECTED TENANT AS WELL AS HI S FAMILY MEMBERS SO LONG AS THEY CONTINUE TO BE THE TENANTS. IT IS A FACT ON RECORD THAT AS PER THE CERTIFICATE ISSUED BY THE REVENUE DIVISIONAL OFFICE R THE LAND WAS PURCHASED BY THE ASSESSEE AND HIS FAMILY MEMBERS FOR RS.27,200/-. THEREFORE, THE FINDING OF THE CIT (A) THAT THE COST OF ACQUISITION TO THE EXTENT OF RS.27,200/- TO BE MADE APPLICABLE TO THE ENTIRE LAN D APPEARS TO BE LOGICAL AND APPROPRIATE. HENCE, WE DO ITA NO.1052 OF 2013 LATE M. RAM REDDY, REP. SON & LR M. BHASKAR REDDY, HYDERABAD.. ====================== 22 NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) ON THIS ISSUE. THE GROUND RAISED IS DISMIS SED. 27. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ODER PRONOUNCED IN OPEN COURT ON 17 .01.2014. S D / - / - SD/ - ( CHANDRA POOJARI ) SD/ - (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/- 17 TH JANUARY, 2014 COPY FORWARDED TO: 1 SRI BHASKARA REDDY, 2-1-85, LAXMAREDDY COLONY, UP PAL, HYDERABAD. 2 INCOME-TAX OFFICER, WARD-11(2), IT TOWERS, AC GUA RDS, MASABTANK, HYDERABAD. 3 CIT(A)-VI, HYDERABAD 4 CIT-V, HYDERABAD. 5. ITAT, DEPARTMENTAL REPRESENTATIVE, HYDERABAD JMR*