Mrs. Shalini Aravind, V. ACIT, Bangalore

ITA 173/BANG/2014

• Counselvise Citation: 17321114 RSA 2014
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: RAGHAVENDRA CHAK RAVARTHI
• Keywords: Capital asset; Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO. 173/BANG/2014 ASSESSMENT YEAR : 2009-10 MRS .SHALINI ARAVIND, NO.193, NGEF LAYOUT, SADANANDA NAGAR, BANGALORE 560 038. PAN: ACXPA 8371R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 7(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI RAGHAVENDRA CHAKRAVARTHI, C.A. REVENUE BY : SHRI P. DHIVAHAR, JT. CIT(DR) DATE OF HEARING : 27.01.2015 DATE OF PRONOUNCEMENT : 13.02.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 4.11.2013 OF THE CIT(APPEALS)-I, BANGALORE RELATING TO ASSESSMEN T YEAR 2009-10. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE RIGHT IN HOLDI NG THAT RELINQUISHMENT OF THE SHARE OF ASSESSEE IN THE PROPERTY COMPRISING OF LAND SITUATED AT PADMARAO NAGAR COLONY, SECUNDERABAD IN FAVOUR OF HE R SISTERS WAS A TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT AND CAPITAL GAIN ITA NO.173/BANG/2014 PAGE 2 OF 8 ACCRUING ON SUCH TRANSFER WAS EXIGIBLE TO CAPITAL G AINS TAX U/S. 45 OF THE ACT. 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE AFO RESAID ISSUE ARISES FOR CONSIDERATION ARE AS FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL. THE PROPERTY COMPRISING OF LAND AND BUILDING AT PADMARA O NAGAR COLONY, SECUNDERABAD [HEREINAFTER REFERRED TO AS 'THE SECUN DERABAD PROPERTY'] BELONGED TO ONE C.S. VENKATESAN, HE HAVING PURCHASE D THE SAME IN THE YEAR AS A PLOT OF LAND ON WHICH HE HAD PUT UP CONST RUCTION OF BUILDING IN THE YEAR 1976. C.S. VENKATESAN DIED ON 27.2.2003 INTES TATE LEAVING BEHIND HIS WIFE, MRS. SHANTI VENKATESAN AND THREE DAUGHTERS VI Z., MRS. SHALINI ARAVIND (THE ASSESSEE HEREIN), MRS. C.V. RANJINI AND MRS. M ALINI RAJKUMAR. THE WIFE AND THE THREE DAUGHTERS OF C.S. VENKATESAN WER E EACH ENTITLED TO 1/4TH SHARE OVER THE SECUNDERABAD PROPERTY. MRS. S HANTHI VENKATESAN AND MRS. MALINI RAJKUMAR BY REGISTERED RELEASE DEED DATED 9.1.2009 RELINQUISHED THEIR SHARE OF RIGHT, TITLE AND INTERE ST OVER THE SECUNDERABAD PROPERTY IN FAVOUR OF MRS. C.V. RANJINI, ONE OF THE DAUGHTERS OF LATE C.S. VENKATESAN. THE ASSESSEE FOR RELEASING HER 1/4TH S HARE OF RIGHT, TITLE AND INTEREST OVER THE PROPERTY, RECEIVED A SUM OF RS.25 LAKHS. 4. IN THE RETURN OF INCOME FILED FOR A.Y. 2009-10, THE ASSESSEE DID NOT DECLARE ANY CAPITAL GAIN ON RELINQUISHMENT OF HER 1 /4TH SHARE OF RIGHT, TITLE AND INTEREST OVER THE AFORESAID PROPERTY. ITA NO.173/BANG/2014 PAGE 3 OF 8 5. THE AO HELD THAT RELINQUISHMENT OF ASSESSEE'S R IGHT OVER THE PROPERTY GAVE RISE TO LONG TERM CAPITAL GAINS AND A CCORDINGLY THE SUM OF RS.25 LAKHS WAS BROUGHT TO TAX AS LONG TERM CAPITAL GAINS. 6. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT U/S. 47(1) OF THE ACT, ANY DISTRIBUTION OF CAPITAL ASSETS ON THE TOTAL OR PARTIAL DISTRIBUTION OF HUF CANNOT BE REGARDED AS TRANSFER. THE ASSESSE E FURTHER SUBMITTED THAT RELINQUISHMENT OF HER SHARE OVER THE PROPERTY WAS NOTHING BUT PART OF A FAMILY SETTLEMENT WHEREBY ONE OF THE SISTERS OF THE DECEASED WHEREBY ONE OF DECEASED VENKATESAN'S WIFE AND MOTHER OF ASSESSE E AND TWO DAUGHTERS WERE LOOKED AFTER BY C.V. RANJINI AND THEREFORE THE PROPERTY WAS GIVEN TO HER BY WAY OF RELINQUISHMENT BY OTHER SHARERS. THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN CIT V. R. NAGARAJA RAO , 362 ITR 565 AND K.N. MADHUSUDHAN , GTA NOS. 1 & 2/2008 DATED 6.9.2010 . 7. THE CIT(A) DID NOT AGREE WITH THE AFORESAID SUB MISSIONS OF THE ASSESSEE. HE, FIRSTLY, FOUND THAT THE DECISION OF R. NAGARAJA RAO (SUPRA) WAS A CASE WHERE THERE WAS TRANSFER OF SHARES, PURS UANT TO A FAMILY ARRANGEMENT, WHEREBY FAMILY DISPUTES WERE SETTLED A T THE INSTANCE OF ARBITRATORS. THE HON'BLE HIGH COURT OF KARNATAKA A FTER MAKING A REFERENCE TO THE DECISION OF K .N. MADHUSUDAN (SUPRA) CAME TO THE CONCLUSION THAT THE WORD 'TRANSFER' DOES NOT INCLUDE PARTITION OR F AMILY SETTLEMENT AS DEFINED UNDER THE ACT. IT CAME TO THE CONCLUSION THAT EVERY MEMBER HAS ITA NO.173/BANG/2014 PAGE 4 OF 8 AN ANTERIOR TITLE TO THE PROPERTY WHICH IS THE SUBJ ECT MATTER OF A TRANSACTION, I.E., PARTITION OR FAMILY ARRANGEMENT. BY A TRANSF ER PURSUANT TO FAMILY ARRANGEMENT, THERE IS ONLY AN ADJUSTMENT OF HOW SHA RES OR CRYSTALLIZATION OF RESPECTIVE RIGHTS OVER THE PROPERTIES, WHICH CANNOT BE CONSTRUED AS TRANSFER IN THE EYE OF LAW. THE HON'BLE COURT FINALLY HELD THAT WHEN THERE IS NO TRANSFER, THERE IS NO CAPITAL GAIN. ACCORDING TO T HE CIT(A), THE AFORESAID DECISION WAS NOT APPLICABLE TO THE CASE OF ASSESSEE BECAUSE THERE WAS NO FAMILY SETTLEMENT AND ON THE OTHER HAND, THERE WAS ONLY RELINQUISHMENT OF RIGHTS OF CO-SHARERS IN FAVOUR OF ONE OF THE CO-SHA RER. HE FURTHER DREW SUPPORT FOR THE ABOVE CONCLUSIONS FROM THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF LALIT RATNAM V. ITO (2013) 153 TTJ CHD. TRIB. 59 . IN THE SAID CASE, THE ASSESSEE AND HER BROTHER GOT BY WAY OF GIFT 40% AND 60% SHARE OF PROPERTY FROM THEIR FA THER. THE ASSESSEE RELEASED HER 40% SHARE IN FAVOUR OF HER BROTHER. T HE TRANSACTION WAS CONSIDERED AS NOT GIVING RISE TO CAPITAL GAINS BY T HE ASSESSEE. THE TRIBUNAL HELD THAT THE CASE OF RELEASE/RELINQUISHME NT OF RIGHT WOULD BE COVERED BY THE DEFINITION OF TRANSFER GIVEN IN SE CTION 2(47)(I) OF THE ACT. EVEN OTHERWISE IN CASE OF FAMILY SETTLEMENT WHEN VA RIOUS PROPERTIES WERE INVOLVED A MEMBER MAY GET LESSER SHARE OR SUCH SHAR E FOR CONSIDERATION OF RELEASE OF SHARE BUT IN THIS CASE ONLY THE PROPERTY INVOLVED WAS SHARE IN THE SAID PROPERTY WHICH HAD BEEN RELEASED AGAINST THE R ECEIPT OF CASH AND THEREFORE INSTRUMENT OF RELEASE COULD NOT BE CALLED A FAMILY SETTLEMENT. THE CIT(A) THEREFORE DISMISSED THE APPEAL OF ASSESSEE. ITA NO.173/BANG/2014 PAGE 5 OF 8 8. AGGRIEVED, THE ASSESSEE HAS PREFERRED THE PRESE NT APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE MAD E IDENTICAL SUBMISSIONS BEFORE THE TRIBUNAL AS THAT MADE BEFORE THE CIT(A). IN ADDITION, HE ALSO RELIED ON THE DECISION OF BANGALORE BENCH OF THE TR IBUNAL IN THE CASE OF SMT. T. GAYATRI V. ITO , 150 ITD 48 (BANG). 9. THE LD. DR RELIED ON THE ORDER OF CIT(APPEALS). 10. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. IT IS NO DOUBT TRUE THAT AMOUNT RECEIVED ON TRANSFE R PURSUANT TO FAMILY ARRANGEMENT WOULD NOT CONSTITUTE TRANSFER SO AS TO ATTRACT CAPITAL GAINS BECAUSE SUCH TRANSFERS ARE ONLY FOR THE PURPOSE OF GIVING EFFECT TO FAMILY ARRANGEMENT, WHEREBY FAMILY DISPUTES ARE SETTLED IN TER SE BETWEEN THE PARTIES. IN THE PRESENT CASE, HOWEVER, THERE WAS N O SUCH FAMILY DISPUTE WHICH WAS SETTLED PURSUANT TO WHICH DEED OF RELEASE CAME TO BE EXECUTED BY THE ASSESSEE IN FAVOUR OF HER SISTERS. IN THE C ASE OF SMT. T. GAYATRI (SUPRA) , THE FACTS WERE, ONE B, FATHER OF ASSESSEE DIED INTESTATE LEAVING BEHIND FOUR SONS AND SIX DAUGHTERS INCLUDING ASSESS EE. AFTER EXPIRY OF B, ASSESSEE ALONG WITH OTHER SISTERS FILED A SUIT FOR PARTITION OF SELF ACQUIRED PROPERTY OF THEIR FATHER. THE SUIT WAS ULTIMATELY COMPROMISED BETWEEN THE PARTIES DULY RECOGNIZED BY COURT. IN TERMS OF MEMOR ANDUM OF COMPROMISE DAUGHTERS AGREED TO RECEIVE THEIR 1/10 TH SHARE EACH IN PROPERTY COMING TO RS. 87.50 LAKH FROM THEIR BROTHERS. THE ASSESSEES BROTHERS SUBSEQUENTLY ENTERED INTO A JOINT DEVELOPMENT AGREEMENT OF PROPE RTY IN QUESTION. IN ITA NO.173/BANG/2014 PAGE 6 OF 8 TERMS OF SAID AGREEMENT, THE DEVELOPER DIRECTLY PAI D AMOUNT OF RS. 87.50 LAKH EACH TO DAUGHTERS OF B INCLUDING ASSESSEE TH EREIN. THE DAUGHTERS OF B THEREUPON EXECUTED A RELEASE DEED OF DISPUTED P ROPERTY IN FAVOUR OF THEIR BROTHERS. FOR THE RELEVANT YEAR, THE ASSESSEE FILED HER RETURN WHEREIN AMOUNT OF RS. 87.50 LAKHS WAS NOT OFFERED TO TAX UN DER THE HEAD CAPITAL GAIN. THE ASSESSEE TOOK A STAND THAT THE SUM IN QU ESTION WAS A RECEIPT CONSEQUENT TO A FAMILY ARRANGEMENT AND THEREFORE, T HERE WAS NO TRANSFER OF ANY CAPITAL ASSET SO AS TO ATTRACT PROVISIONS OF SE CTION 45. 11. THE TRIBUNAL DEALT WITH THE AFORESAID ISSUE AN D CAME TO THE CONCLUSION THAT SUM RECEIVED BY ASSESSEE IS TRACEAB LE TO THE REALISATION OF RIGHTS AS LEGAL HEIR OF INTESTATE SUCCESSION AND NOT TO ANY SALE, RELINQUISHMENT OR EXTINGUISHMENT OF RIGHT TO PROPER TY. THE TRIBUNAL TOOK NOTE OF THE FACT THAT THERE WAS A SUIT FOR PARTITIO N IN WHICH THE ASSESSEE BECAME ENTITLED TO 1/10TH SHARE OVER THE PROPERTY. THE TRIBUNAL ALSO TOOK NOTE OF THE FACT THAT THERE WAS A COMPROMISE RECORD ED BETWEEN THE PARTIES BEFORE THE APPELLATE COURT, WHEREBY ASSESSEE AGREED TO RECEIVE RS.87.50 LAKHS TOWARDS HER 1/10TH SHARE OVER THE PROPERTY IN LIEU OF 1/10TH SHARE OF PROPERTY PHYSICALLY DELIVERED AFTER DIVISION BY MET ES AND BOUNDS. IT IS IN THESE CIRCUMSTANCES THAT THE TRIBUNAL CAME TO THE C ONCLUSION THAT THE SUM RECEIVED BY ASSESSEE WAS NOTHING BUT REALIZATION OF ASSESSEE'S RIGHTS AS LEGAL HEIR. THE TRIBUNAL ALSO TOOK NOTE OF THE SUB SEQUENT RELEASE DEED EXECUTED BY ASSESSEE IN FAVOUR OF DEVELOPERS, WHO P URCHASED THE PROPERTY FROM OTHER CO-SHARERS, AS A DOCUMENT FOR PERFECTING THE TITLE OF THE THIRD ITA NO.173/BANG/2014 PAGE 7 OF 8 PARTY TO THE PROPERTY AND NOT FOR ANY OTHER PURPOSE . THE TRIBUNAL ULTIMATELY CAME TO THE CONCLUSION THAT THERE WAS NO TRANSFER W ITHIN THE MEANING OF SECTION 2(45) OF THE ACT AND THEREFORE CAPITAL GAIN WAS NOT EXIGIBLE. 12. IN THE PRESENT CASE, HOWEVER, THE ASSESSEE TRA NSFERRED HER SHARE OF RIGHT TITLE AND INTEREST OVER THE PROPERTY IN FAVOU R OF OTHER CO-OWNERS OF THE PROPERTY. THIS WAS CLEARLY A TRANSFER. IF THE ASS ESSEE HAD SOLD HER SHARE OF PROPERTY TO THIRD PARTY, IT WOULD HAVE CERTAINLY BE EN EXIGIBLE TO CAPITAL GAINS TAX. THE FACT THAT THE TRANSFEREE IS ANOTHER CO-SH ARER OF THE PROPERTY WILL NOT MAKE ANY DIFFERENCE. WE ARE THEREFORE OF THE VIEW THAT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THERE WAS A TRAN SFER OF CAPITAL ASSET AND THEREFORE CAPITAL GAIN ON SUCH TRANSFER WAS RIG HTLY BROUGHT TO TAX BY THE REVENUE AUTHORITIES. WE DO NOT FIND ANY GROUNDS TO INTERFERE WITH THE ORDER OF CIT(APPEALS). 13. CONSEQUENTLY, THE APPEAL BY THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF FEBRUARY, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 13 TH FEBRUARY, 2015. /D S/ ITA NO.173/BANG/2014 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.