PARVEZ A. POONAWALLA, MUMBAI V. ITO 16(1)(2), MUMBAI

ITA 6476/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8304 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: S E DASTURMADHUR AGAR WAL
• Keywords: Gift
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI RAJENDRA SIN GH(A.M) ITA NO.6476/MUM/2009(A.Y. 2006-07) MR. PURVEZ A. POONAWALLA, KAMALA NIWAS, 1 ST FLOOR, PROCTOR ROAD, GRANT ROAD, MUMBAI 400 007 PAN:AACPP 0586C (APPELLANT) VS. THE ITO 16(1)(2), MUMBAI. (RESPONDENT) APPELLANT BY : S/SHRI S.E.DASTUR/MADHUR AGAR WAL RESPONDENT BY : SHRI NARENDRA SINGH ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 20/10/2009 OF CIT(A)-27, MUMBAI RELATING TO ASSESSMENT YEAR 20 06-07. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS FOLLOWS: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(APPEALS) 27/16(1)/2 ERRED IN CONFIRMING THE ADD ITION OF RS. 3,73,95,334/- AS AN AMOUNT CHARGEABLE UNDER SECTION 56(2)(V) OF THE INCOME TAX ACT. 2. THE CIT(APPEALS) 27/16(1)/2 FAILED TO APPRECIAT E THAT THE WITHDRAWAL BY THE APPELLANT OF HIS CAVEAT THEREBY ENABLING MR. RAJESH KARSANDAS BHAVSAR(HEREINAFTER REFERRED TO AS THE S AID BHAVSAR) TO APPLY FOR AND OBTAIN LETTERS OF ADMINISTRATION TO T HE ESTATE OF THE DECEASED MR. MANI CAWAS BAMJI AND ALSO TO APPLY FOR AND OBTAIN PROBATE OF THE WILL OF THE DECEASED MR.DINSHAW JAMS HEDJI MISTRY WAS THE CONSIDERATION WHICH MADE THE SAID BHAVSAR PAY T HE SAID AMOUNT OF RS. 4,78,80,000 TO THE APPELLANT AND IN ANY EVEN T WAS TO BE REGARDED AS RECEIVED BY WAY OF INHERITANCE. ITA NO.6476/MUM/2009(A.Y. 2006-07) 2 3. THE CIT(APPEALS) 27/16(1)/2 ERRED IN HOLDING THA T THE APPELLANT WILLINGLY OFFERED TO SURRENDER THE AMOUNT FOR TAXAT ION AND ALSO SUBMITTED AS CHEQUE OF RS.1,60,46,844/- DATED 28/11 /07 DRAWN HSBC BANK, MUMBAI. 4. THE CIT(APPEALS) 27/16(1)/2 FAILED TO APPRECIATE THAT THE AMOUNT OF RS. 1,60,46,840/- WAS COLLECTED BY MR. KARUN KANT O JHA, DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION), UNIT-II(2) ROOM 437,SCINDIA HOUSE, N.M. ROAD, BALLARD PIER, MUMBAI 400 038 AN D WAS RECOVERED FROM THE APPELLANT UNDER DURESS, WITHOUT ANY FORMAL NOTICE TO THE APPELLANT, WITHOUT ANY JURISDICTION OVER THE APPELL ANT, OUTSIDE OF AND IN BREACH OF THE INCOME TAX ACT AND THE LAW. 5. THE CIT(APPEALS) 27/16(1)/2 ERRED IN DIRECTING T HE ASSESSING OFFICER TO CONSIDER THE ADDITION OF RS. 1.047 CRORES FOR TH E ASSESSMENT YEAR 2004-05. 6. THE CIT(APPEALS) 27/16(1)/2 ERRED IN HOLDING THA T THE APPELLANT IS NOT THE LEGAL HEIR OF THE TESTATRIX MRS. MANI CAWAS BAMJI. 2. THE ASSESSEE IS AN INDIVIDUAL. THE FACTS AND CI RCUMSTANCES UNDER WHICH THE PRESENT APPEAL OF THE ASSESSEE ARISES FOR CONSIDERATION ARE AS FOLLOWS. ONE MRS. MANI CAWAS BAMJI WAS A CHILDLESS WIDOW AND SHE DIED IN BOMBAY ON 6/01/2001. SHE POSSESSED CONSIDERABLE MO VABLE PROPERTIES IN THE FORM OF SHARES, DEBENTURES AND FIX DEPOSITS AND ALSO IMMOVABLE PROPERTY KNOWN AS AVASIA HOUSE IN HER SOLE NAME AT NEPEAN SE A ROAD, MUMBAI. DURING HER LIFE TIME SHE HAD ALLEGEDLY EXECUTED A W ILL DATED 2/5/1997. SHE LEFT BEHIND AS LEGAL HEIRS ENTITLED TO SUCCEED HER PROPERTIES, THE ASSESSEE BEING SON OF A PRE-DECEASED SISTER AND A BROTHER ON E MR. DINSHAW JAMSHEDJI MISTRY. UNDER THE WILL DATED 2/5/1997 SHE HAD BEQU EATHED ALL HER PROPERTIES TO HER BROTHER MR. DINSHAW JAMSHEDJI MIS TRY, WHO WAS ALSO APPOINTED AS ONE OF THE EXECUTORS IN THE WILL. THE RE WERE THREE EXECUTORS NAMED IN THE AFORESAID WILL. IT APPEARS TWO OF THE OTHER EXECUTORS RENOUNCED THEIR EXECUTORSHIP. MR. D.J MISTRY, THE BROTHER OF THE DECEASED, FILED A PETITION BEFORE THE HONBLE BOMBAY HIGH COURT FOR G RANT OF PROBATE OF THE LAST WILL TESTAMENTARY OF MRS. MANI CAWAS BAMJI. THE SAME WAS ITA NO.6476/MUM/2009(A.Y. 2006-07) 3 NUMBERED AS PETITION 387 OF 2001. AS ALREADY STATE D THE ASSESSEE WAS ADMITTEDLY A PERSON ENTITLED TO SUCCEED TO THE PROP ERTY OF THE DECEASED MRS. MANI CAWAS BAMJI BY VIRTUE OF SECTION 55 R.W. PART II, SCHEDULE II OF THE INDIAN SUCCESSION ACT, 1925. THE ASSESSEE, THEREFO RE, RECEIVED A CITATION FROM HONBLE BOMBAY HIGH COURT IN THE PETITION FOR GRANT OF PROBATE FILED BY MR. DINSHAW JAMSHEDJI MISTRY. THE ASSESSEE FILED A CAVEAT AGAINST THE GRANT OF PROBATE IN RESPECT OF THE LAST WILL AND TESTAMEN TARY OF MRS. MANI CAWAS BAMJI. IN THE AFFIDAVIT FILED IN SUPPORT OF THE CA VEAT THE ASSESSEE SET OUT THE VARIOUS REASONS AS TO WHY ALLEGED WILL DATED 2/5/19 97 IS NOT VALID. ON SUCH OBJECTION BEING FILED PETITION NO.387 OF 2001 WAS C ONVERTED INTO A TESTAMENTARY SUIT BEING TIL SUIT NO.27 OF 2001. 3. THE ASSESSEE ALSO FILED A NOTICE OF MOTION FOR R ESTRAINING MR. DINSHAW JAMSHEDJI MISTRY BY AN ORDER OF INJUNCTION FROM TRA NSFERRING, DISPOSING, ALIENATING ETC. OF THE SHARES, OPERATING BANK LOCKE RS AND DEALING WITH PROPERTIES OF THE DECEASED MRS. MANI CAWAS BAMJI. THE HONBLE HIGH COURT BY ORDER DATED 21/2/2000 RESTRAINED MR.DINSHAW JAMS HEDJI MISTRY FROM DEALING WITH PROPERTIES OF THE DECEASED. 4. ON 28/9/2002 MR. DINSHAW JAMSHEJI MISTRY DIED. DURING HIS LIFE TIME HE HAD EXECUTED HIS LAST WILL AND TESTAMENT DATED 29/10/2001 APPOINTING MR. RAJESH K. BHAVSAR AS THE SOLE EXECU TOR AND LEGATEE. MR.RAJESH K.BHAVSAR GOT HIMSELF IMPEDED AS PLAINTIF F IN PIL SUIT NO.27 OF 2001 BEFORE HONBLE BOMBAY HIGH COURT FOR GRANTING OF PROBATE OF THE LAST WILL TESTAMENT OF MRS. MANI CAWAS BAMJI IN PLACE OF DINSHAW JAMSHEJI MISTRY. 5. MR. RAJESH K. BHAVSAR AND THE ASSESSEE ENTERED I NTO A COMPROMISE WHEREBY THE ASSESSEE AGREED TO RECEIVE A SUM OF RS. 5,08,80,000/- IN CONSIDERATION FOR AGREEING TO THE COURT GRANTING PR OBATE IN RESPECT OF THE LAST WILL OF MRS. MANI CAWAS BAMJI DATED 2/5/1997. THI S AGREEMENT BY WHICH ITA NO.6476/MUM/2009(A.Y. 2006-07) 4 THEY AGREED TO COMPRISE THEIR DISPUTES WAS DATED 22 /11/2002. THERE IS NO DISPUTE THAT THIS SUM OF RS. 5,08,80,000/- LATER RE DUCED BY RS.30,00,000/- AND ULTIMATELY THE ASSESSEE RECEIVED A SUM OF RS. 4 ,78,80,000/- IN THE FOLLOWING MANNER. FOR FIN. YEAR 2003-04 (ASST. YEAR 2004-05) DATE OF PAYMENT AMOUNT MODE OF PAYMENT DRAWN ON BAN K 03/04/2003 17,47,000.00 CHEQUE HSBC 484087 10/4/2003 12,61,585.25 CHEQUE HSBC 484087 24/04/2003 4,19,777.60 CHEQUE HSBC 484087 28/04/2003 13,21,486.38 CHEQUE HSBC 484087 28/04/2003 1,33,411.54 CHEQUE HSBC 484087 12/05/2003 16,80,739.50 CHEQUE HSBC 484087 19/05/2003 6,60,489.85 CHEQUE HSBC 484087 19/05/2003 6,99,935.19 CHEQUE HSBC 484087 28/05/2003 3,96,293.87 CHEQUE HSBC 484087 28/5/2003 10,39,884.50 CHEQUE HSBC 484087 17/07/2003 6,28,066.10 CHEQUE HSBC 484087 17/07/2003 63,317.75 CHEQUE HSBC 484087 14/10/2003 4,25,044.75 CHEQUE HSBC 484087 TOTAL (A) 1,04,77,032.28 FOR FIN.YEAR 2005-06(A.Y. 2006-07) DATE OF PAYMENT AMOUNT MODE OF PAYMENT DRAWN ON BA NK 6/4/2005 1,39,033.15 CHEQUE HSBC 484087 19/10/2005 3,72,56,301.00 CHEQUE HSBC 484087 TOTAL (B) 3,73,95,334.15 FOR FIN YEAR 2006-07 (A.Y. 2007-08) DATE OF PAYMENT AMOUNT MODE OF PAYMENT DRAWN ON BA NK 10/8/2006 7,633.57 CASH HSBC 484087 TOTAL (C) 7,633.57 TOTAL A + B + C = 4,78,80,000.00 6. ON ENTERING INTO THE AGREEMENT DATED 22/11/2002, THE PARTIES ALSO SIGNED A CONSENT TERMS BEFORE THE HONBLE HIGH COUR T, WHICH CONSENT TERMS WERE IDENTICAL TO THE AGREEMENT DATED 22/11/2002. THIS CONSENT TERMS WAS DATED 12/12/2002. IT WAS FILED IN COURT AND RECORD ED AS A COMPROMISE ITA NO.6476/MUM/2009(A.Y. 2006-07) 5 BETWEEN THE PARTIES. IN NOTICE OF MOTION NO.2432 O F 2001 BY ORDER DATED 12/12/2002, THE HONBLE COURT RECORDED THE CONSENT TERMS AND MODIFIED ITS EARLIER ORDER RESTRAINING D.J.MISTRY FROM ALIENATIN G ANY PART OF THE ESTATE OF THE DECEASED MRS. MANI CAWAS BAMJI, PERMITTING MR.R .K.BHAVSAR TO ALIENATE SOME OF THE PROPERTIES TO ENABLE HIM TO RAISE FUNDS TO DISCHARGE THE OBLIGATION TO PAY MONIES TO THE ASSESSEE. IN THIS ORDER THE HONBLE COURT HAS RECORDED THAT THE COMPROMISE AND HAS HELD THAT THE CONSENT TERMS ARE LAWFUL. THE ASSESSEE ON RECEIPT OF AGREED SUM, HAS TO WITHDRAW HIS CAVEAT TO ENABLE ISSUE OF LETTERS OF ADMINISTRATION WITH THE WILL ANNEXED IN RESPECT OF THE ESTATE OF THE DECEASED MRS.MANI CAWAS BAMJI. 7. WE HAVE ALREADY SEEN THAT ONE OF THE PROPERTY BE LONGING TO MRS.MANI CAWAS BAMJI WAS THE PROPERTY KNOWN AS AVASIA HOUSE AT NEPEAN SEA ROAD, MUMBAI. MR.R.K.BHAVSAR HAD ENTERED INTO A AG REEMENT FOR SALE OF THIS PROPERTY TO AN ENTITY BELONGING TO ORBIT GROU P. IN A SEARCH AT THE PREMISES CONDUCTED BY THE REVENUE U/S.132 OF THE AC T, IT WAS NOTICED THAT AVASIA HOUSE WAS AGREED TO BE SOLD TO ORBIT GROUP . IT ALSO TRANSPIRED THAT MR.R.K.BHAVSAR HAD PAID A SUM OF RS.4,78,80,000/- T O THE ASSESSEE, THE DETAILS OF WHICH HAVE ALREADY BEEN SET OUT IN THE E ARLIER PART OF THIS ORDER. IN A STATEMENT RECORDED DURING THE SEARCH OF MR.RK BHA VSAR, HE NARRATED THE SEQUENCE OF EVENTS AS DESCRIBED IN THE EARLIER PARA GRAPHS. THE DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION) MUMBAI IN PU RPORTED EXERCISE OF HIS POWERS U/S.131 OF THE ACT, ISSUED SUMMONS TO THE AS SESSEE AND RECORDED HIS STATEMENT ON 24/11/2007. THE ASSESSEE ALSO NAR RATED THE SEQUENCE OF EVENTS AS SET OUT ABOVE. THE ASSESSEE ALSO AGREED TO OFFER THE SUM SO RECEIVED TO TAX AND ALSO PAID TAX PAYABLE ON SUCH R ECEIPTS. 8. IN THE RETURN OF INCOME FILED ON 27/09/2007 FOR AY 06-07, THE ASSESSEE DID NOT OFFER THE AFORESAID RECEIPTS TO TA X. IN THE ORDER OF ASSESSMENT THERE IS A REFERENCE TO THE OPINION OF M R.SOLI DASTUR, SENIOR ADVOCATE, GIVEN REGARDING NON-TAXABILITY OF THE REC EIPTS IN QUESTION. IN THIS ITA NO.6476/MUM/2009(A.Y. 2006-07) 6 OPINION THERE IS A REFERENCE TO A QUERY BY THE AO R EGARDING TAXABILITY OF THE RECEIPTS IN QUESTION U/S.56(2)(V) OF THE ACT. THE OPINION IS TO THE EFFECT THAT U/S.56(2)(V) ANY RECEIPT TO BE TREATED AS INCOME SH OULD BE RECEIPT OF MONIES WITHOUT ANY CONSIDERATION BUT IN THE CASE OF THE AS SESSEE THE RECEIPTS IN QUESTION ARE IN CONSIDERATION FOR THE ASSESSEE WITH DRAWING HIS CAVEAT AND GIVING UP HIS RIGHT TO CHALLENGE THE LEGALITY AND V ALIDITY OF THE WILL OF LATE MRS.MANI CAWAS BAMJI. IT HAS FURTHER BEEN OPINED T HAT THE CASE OF THE ASSESSEE WOULD, IN ANY EVENT, BE COVERED BY THE EXC EPTIONS PROVIDED U/S.56(2)(V) BEING A RECEIPT BY WAY OF INHERITANCE. 9. THE AO HOWEVER REFERRED TO THE WILL OF MRS.MANI CAWAS BAMJI AS WELL AS THAT OF DJ MISTRY WHEREIN THEY HAD DISINHERITED THE ASSESSEE AND WAS OF THE VIEW THAT THE ASSESSEE WAS ONLY A CLOSE RELATIV E AND NOT A LEGAL HEIR. HE ALSO HELD THAT THE CONSENT TERMS WERE ARRIVED AT BE TWEEN THE PARTIES OUT OF COURT. HE FURTHER HELD THAT THE RECEIPT IN QUESTIO N WAS A CASUAL RECEIPT AND NOT A RECEIPT BY WAY OF INHERITANCE. 10. THE AO TAXED ON SUBSTANTIVE BASIS THE SUM OF RS .3,73,95,334 IN THE YEAR OF RECEIPT AND THE SUM OF RS.1,04,77,032 (RECE IVED IN PREVIOUS YEAR RELEVANT TO AY 04-05) ON A PROTECTIVE BASIS. 11. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ORDER OF THE AO, HOLDING AS FOLLOWS: 6. THE LEARNED COUNSEL OF THE APPELLANT HAS ARGUE D THAT THE APPELLANT SHOULD BE TREATED AS A LEGAL HEIR BECAUSE ONLY BEC AUSE OF HIS BEING A CLOSE RELATIVE OF THE TESTATRIX COULD HE FILE A CA VEAT IN THE COURT FOR CONTESTING THE TILL AND THE MONEY HAS COME AS A PAR T OF THE JUDICIAL SETTLEMENT, HENCE, SHOULD BE TREATED AS AN INHERITA NCE AND SHOULD NOT BE TAXED U/S. 56(2)(V). THIS CONTENTION OF THE APP ELLANTS COUNSEL IS NOT ACCEPTABLE AS THE APPELLANT HAD NOT FILED A CAS E IN THE COURT, BUT ONLY A CAVEAT AGAINST THE PROBATION OF THE WILL. H ENCE, HE COULD NOT BE SAID THAT HE HAD CONTESTED THE WILL AND RECEIVED TH E SUM AS AN INHERITANCE. HE HAD ONLY RECEIVED THE SUM OF MONEY FOR WITHDRAWING HIS CAVEAT FROM THE COURT AND NOT CREATING A NUISAN CE FOR MR. RAJESH ITA NO.6476/MUM/2009(A.Y. 2006-07) 7 K. BHAVASAR AND DELAYING HIS GETTING HIS WILL MR. R AJESH K. BHAVASAR AS PER HIS STATEMENT HAD PAID THE APPELLANT THE MON EY SO THAT HE SHOULD NOT CREATE HURDLES FOR HIM AND DELAY IN GET TING THE INHERITANCE. THE PROVISIONS OF SEC. 56(2)(V) ARE C LEARLY ATTRACTED IN THIS CASE AS THE MONEY HAS NOT BEEN RECEIVED AS A LEGAL INHERITANCE AND AS STATED BY THE AO HE WAS ONLY A CLOSE RELATIVE AND N OT A LEGAL HEIR MENTIONED IN THE WILL AND AS CLAIMED BY THE APPELLA NT. HENCE, THE ACTION OF THE AO IN TAXING THIS AMOUNT U/S. 56(2)(V ) IS ABSOLUTELY CORRECT AND IS UPHELD AND THIS GROUND OF APPEAL OF THE APPELLANT IS DISMISSED. THEIR OTHER ARGUMENT THAT THIS MONEY HA D ACCRUED IN THE EARLIER YEARS WHEN THE AGREEMENT WAS REACHED AND HE NCE, SHOULD NOT BE TAXED IN THIS YEAR IS ALSO NOT CORRECT. SINCE T HE MONEY WAS RECEIVED IN THIS YEAR, IT HAS TO BE TAXED IN THIS YEAR. EVE N IF THE AGREEMENT WAS MADE IN THE EARLIER YEAR, IT DID NOT BECOME FULL CO NTRACT AS NO PAYMENT WAS MADE IN THE EARLIER YEAR. ONLY WHEN THE PAYMEN T IS RECEIVED, THEN THE AGREEMENT COMES INTO FORCE. 12. THE MAIN ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE PROVISIONS OF SEC.56(2)(V) ARE ATTRACTED. THE SAID PROVISIONS READ AS FOLLOWS: (AS AMENDED BY THE TL (AMEND.) ACT, 2006, W.EF. 1-4 -2006.) 56. INCOME FROM OTHER SOURCES.--(1) INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FRO M OTHER SOURCES' IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. (2) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GEN ERALITY OF THE PROVISIONS OF SUB-SECTION (1), THE FOLLOWING INCOME S SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM OTHER SOU RCES', NAMELY:-- (V) WHERE ANY SUM OF MONEY EXCEEDING TWENTY-FIVE TH OUSAND RUPEES IS RECEIVED WITHOUT CONSIDERATION BY AN INDI VIDUAL OR A HINDU UNDIVIDED FAMILY FROM ANY PERSON ON OR AFTER THE 1ST DAY OF SEPTEMBER, 2004, BUT BEFORE THE 1ST DAY OF APRIL , 2006, THE WHOLE OF SUCH SUM : PROVIDED THAT THIS CLAUSE SHALL NOT APPLY TO ANY SU M OF MONEY RECEIVED (A) FROM ANY RELATIVE ; OR (B) ON THE OCCASION OF THE MARRIAGE OF THE INDIVI DUAL ; OR (C) UNDER A WILL OR BY WAY OF INHERITANCE ; OR (D) IN CONTEMPLATION OF DEATH OF THE PAYER ; OR (E) FROM ANY LOCAL AUTHORITY AS DEFINED IN THE EXPL ANATION TO CLAUSE (20) OF SECTION 10 ; OR (F) FROM ANY FUND OR FOUNDATION OR UNIVERSITY OR OT HER EDUCATIONAL INSTITUTION OR HOSPITAL OR OTHER MEDICA L ITA NO.6476/MUM/2009(A.Y. 2006-07) 8 INSTITUTION OR ANY TRUST OR INSTITUTION REFERRED TO IN CLAUSE (23C) OF SECTION 10 ; OR (G) FROM ANY TRUST OR INSTITUTION REGISTERED UNDER SECTION 12AA. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, RELA TIVE MEANS (I) SPOUSE OF THE INDIVIDUAL ; (II) BROTHER OR SISTER OF THE INDIVIDUAL ; (III) BROTHER OR SISTER OF THE SPOUSE OF THE INDI VIDUAL ; (IV) BROTHER OR SISTER OF EITHER OF THE PARENTS OF THE INDIVIDUAL ; (V) ANY LINEAL ASCENDANT OR DESCENDANT OF THE IND IVIDUAL ; (VI) ANY LINEAL ASCENDANT OR DESCENDANT OF THE SPOU SE OF THE INDIVIDUAL ; (VII) SPOUSE OF THE PERSONS REFERRED TO IN CLAUS ES (II) TO (VI). 13. THUS PRIOR TO 1-9-2004, RECEIPTS OF ANY SUM OF MONEY WOULD NOT BE INCOME U/S.56(2)(V) OF THE ACT. THE DISPUTED RECEI PTS OF RS.3,73,95,334.15 PS. WERE RECEIVED AFTER 1-4-2005 AND UPTO 19/10/200 5. A SUM OF RS.1,04,77,032.28 PS. WERE RECEIVED BETWEEN 3/4/200 3 TO 14/10/2003. THEREFORE THESE RECEIPTS COULD NOT BE TAXED AS INCO ME U/S.56(2)(V) OF THE ACT. AS FAR AS THE SUM OF RS.3,73,95,334.15PS. IS CONCER NED, THE TAXABILITY OF THE SAID SUM HAS TO BE EXAMINED IN THE LIGHT OF THE PRO VISIONS OF SEC.56(2)(V) OF THE ACT. THE CONDITION PRECEDENT TO ATTRACT THE MA IN PROVISIONS OF SEC.56(2)(V) OF THE ACT, ARE THAT THE RECEIPT OF AN Y SUM OF MONEY SHOULD BE WITHOUT ANY CONSIDERATION. THE QUESTION IS WAS T HERE ANY CONSIDERATION FOR THE RECEIPT OF MONEY BY THE ASSESSEE. 14. IT WAS THE CONTENTION OF THE LD. COUNSEL FOR T HE ASSESSEE THAT THE SUM RECEIVED BY THE ASSESSEE WAS IN CONSIDERATION OF TH E ASSESSEE WITHDRAWING THE CAVEAT FILED IN THE PROCEEDINGS FOR GRANT OF PR OBATE/LETTERS OF ADMINISTRATION IN RESPECT OF WILL OF LATE MANI CAWA SA BAMJI. IN THIS REGARD LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE PROVISIONS OF SECTION 2(D) OF THE INDIAN CONTRACT ACT, 1872 WHICH DEFINES CONSIDERATION AS FOLLOWS: (D) WHEN, AT THE DESIRE OF THE PROMISOR, THE PROMI SE OR ANY OTHER PERSON HAD DONE OR ABSTAINED FROM DOING, OR DOES OR ABSTAINS FROM ITA NO.6476/MUM/2009(A.Y. 2006-07) 9 DOING OR PROMISES TO DO OR TO ABSTAIN FROM DOING SO METHING, SUCH ACT OR ABSTINENCE OR PROMISE IS CALLED A CONSIDERATION FOR THE PROMISE. 15. IN THIS REGARD LD. COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO THE AFFIDAVIT FILED BY THE ASSESSEE IN SUPPORT OF THE C AVEAT FILED OPPOSING THE GRANT OF PROBATE IN RESPECT OF LAST WILL OF MRS. MA NI CAWASA BAMJI IN FAVOUR OF MR. DINSHAW JAMSHEDJI MISTRY. HE FURTHER DEW OU R ATTENTION TO THE AGREEMENT DATED 22/11/2002 WHEREBY IT WAS AGREED TH AT THE ASSESSEE WILL RECEIVE A LUMPSUM CONSIDERATION OF RS. 5,08,80,000/ - AND IN CONSIDERATION OF THE SAID PAYMENT ASSESSEE WILL WITHDRAW HIS CAVE AT AND REQUEST THE HONBLE COURT TO GRANT THE LETTERS OF ADMINISTRATIO N WITH WILL ANNEXED OF THE DECEASED OF MRS. MANI CAWASA BAMJI IN FAVOUR OF MR . R.K.BAVASAR. OUR ATTENTION WAS ALSO DRAWN TO THE CONSENT TERMS DATE D 12/12/2002 WHEREIN SIMILAR TERMS AS CONTAINED IN THE AGREEMENT DATED 2 2/11/2002 WERE INCORPORATED AND THE SAME WERE FILED BEFORE THE HON BLE BOMBAY HIGH COURT. THE HONBLE BOMBAY HIGH COURT IN NOTICE OF MOTION N O.2432 OF 2001 IN TESTAMENTARY SUIT NO.27 OF 2001 HAS RECORDED THE CO NSENT TERMS. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF I.CHATTERJEE VS. CGT 185 ITR 610(BO M), WHEREIN IN THE CONTEXT OF THE PROVISIONS OF SECTION 2(XII) OF THE GIFT TAX ACT,1958 THE HONBLE BOMBAY HIGH COURT HELD THAT WHERE SHARES ARE TRANSF ERRED IN CONSIDERATION OF THE TRANSFEREE AGREEING TO MARRY TRANSFEROR WITH OUT ANY MONETARY CONSIDERATION THE SAME WOULD AMOUNT TO A GIFT. I T WAS ARGUED ON BEHALF OF THE ASSESSEE THAT PROMISE TO MARRY WAS VALID CONSID ERATION FOR TRANSFER OF SHARES BUT THE HONBLE BOMBAY HIGH COURT AFTER REFE RRING TO THE DEFINITION OF GIFT UNDER GIFT TAX ACT 1958 WHICH DEFINES GIFT AS A TRANSFER BY ONE PERSON TO ANOTHER OF ANY EXISTING MOVABLE OR IMMOVABLE PROPER TY MADE VOLUNTARILY AND FOR CONSIDERATION IN MONEY OR MONEYS WORTH, HELD T HAT PROMISE TO MARRY IS NOT A CONSIDERATION IN MONEY OR MONEYS WORTH. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE CASE OF THE ASSESSEE IN THIS APPEAL THE ITA NO.6476/MUM/2009(A.Y. 2006-07) 10 PROMISE TO WITHDRAW CAVEAT WAS IN CONSIDERATION OF PAYMENT OF A SUM OF MONEY AND THEREFORE, THE RECEIPT IN QUESTION WAS NO T WITHOUT CONSIDERATION. FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KESHUB MAHINDRA & OTHERS VS. C GT 70 ITR 1. THIS CASE RELATED TO APPLICABILITY OF PROVISIONS OF SECTION 4 (A) OF THE GIFT TAX ACT 1958 WHICH PROVIDE THAT ANY TRANSFER FOR INADEQUATE CONS IDERATION COULD BE TREATED AS A GIFT TO THE EXTENT TO WHICH THE CONSID ERATION IS INADEQUATE I.E. TO THE EXTENT WHICH THE MARKET VALUE OF THE PROPERTY O N THE DATE OF TRANSFER EXCEEDS THE VALUE OF CONSIDERATION FOR THE TRANSFER . THE HONBLE BOMBAY HIGH COURT HELD AS FOLLOWS: (II)AS THE TERM CONSIDERATION IS NOT DEFINED IN THE GIFT-TAX ACT, IT MUST BE CONSTRUED ACCORDING TO THE DEFINITION OF TH E TERM IN SECTION 2(D) OF THE CONTRACT ACT. THOUGH THE ASSESSEE MUST BE DISTINGUISHED FROM THE COMPANY OF WHICH THEY WERE ONLY THE SHAREH OLDERS, DIRECTORS OR OFFICERS, YET THERE WAS NOTHING IN THE DEFINITIO N OF CONSIDERATION IN SECTION 2(D) OF THE CONTRACT ACT TO SHOW THAT WHEN THE PROMISE HAS DONE OR ABSTAINED FROM DOING OR DOES OR ABSTAINS FR OM DOING, OR PROMISES TO DO OR TO ABSTAIN FROM DOING SOMETHING, THE BENEFIT OF THAT ACT OR ABSTINENCE MUST DIRECTLY GO TO THE PROMISO R (II) THE PROVISIONS RELATING TO CONSIDERATION HAV E BEEN MODIFIED BY THE PROVISIONS OF THE GIFT TAX ACT IN TWO RESPECTS; FIR ST, IN THE GIFT-TAX ACT AN AGREEMENT TO TRANSFER PROPERTY OTHERWISE THAN F OR ADEQUATE CONSIDERATION[SEE SECTION 4(A)] GIVES RISE TO A GI FT TO THE EXTENT OF THE INADEQUACY, WHILE UNDER THE DEFINITION IN THE CONTR ACT ACT THAT IS NOT SO. UNDER THE CONTRACT ACT THE ADEQUACY OR INADEQU ACY OF THE CONSIDERATION IS IMMATERIAL. UNDER EXPLANATION 2 OF SECTION 25 OF THE CONTRACT ACT, AN AGREEMENT TO WHICH THE CONSENT OF THE PROMISOR IS FREELY GIVEN IS NOT VOID MERELY BECAUSE THE CONSID ERATION IS INADEQUATE; IT IS STILL A VALID AGREEMENT. BUT UND ER SECTION 4(A) OF THE GIFT-TAX ACT, SUCH AN AGREEMENT OR TRANSFER WOULD B E PARTIALLY BAD, TO THE EXTENT OF THE INADEQUACY. IT WOULD BE A GIFT O NLY TO THE EXTENT TO WHICH THE MARKET VALUE OF THE PROPERTY AT THE DATE OF THE TRANSFER EXCEEDS THE VALUE OF THE CONSIDERATION FOR THE TRAN SFER. SECONDLY, THE GIFT-TAX ACT HAS MODIFIED THE DEFINITION IN THE CON TRACT ACT BY THE USE OF THE WORDS CONSIDERATION IN MONEY OR MONEYS WOR TH IN THE DEFINITION OF GIFT. UNDER THE CONTRACT ACT CONSI DERATION MUST BE SOMETHING WHICH THE LAW CAN DEEM OF SOME VALUE BUT IT NEED NOT NECESSARILY BE MONEY OR MONEYS WORTH. ITA NO.6476/MUM/2009(A.Y. 2006-07) 11 16. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE I N THE PRESENT CASE THE ASSESSEE ABSTAINED FROM CONTESTING THE PROCEEDINGS FOR GRANT OF LETTERS OF ADMINISTRATION IN RESPECT OF THE WILL OF LATE MANI CAWASA BAMJI. EVEN THAT ACT OF ABSTINENCE WOULD CONSTITUTE VALID CONSIDERAT ION. IN THIS REGARD LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E WITHDREW HIS CAVEAT IN THE TESTAMENTARY SUIT ON 25/11/2005. IT WAS FURTHE R SUBMITTED THAT IN THE PRESENT CASE THE ASSESSEE RECEIVED THE CONSIDERATIO N IN MONEY OR MONIES WORTH AND, THEREFORE, IT CANNOT BE SAID THAT THE RE CEIPT IN QUESTION WAS WITHOUT ANY CONSIDERATION. IT WAS THUS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE MAIN PROVISIONS OF SECTION 56(2)( V) OF THE ACT COULD NOT BE APPLICABLE. APART FROM THIS THE LD. COUNSEL FOR TH E ASSESSEE ADDRESSED ARGUMENTS ON THE APPLICABILITY OF THE EXCEPTIONS PR OVIDED UNDER SECTION 56(2)(V) OF THE ACT. 17. THE LD. D.R ON THE OTHER HAND, SUBMITTED THAT T HE ASSESSEE CLAIMS THAT HE WAS ENTITLED TO HALF SHARE IN THE ESTATE OF LATE MRS. MANI CAWASA BAMJI BUT HE RECEIVED SOMETHING LESS THAN WHAT COULD BE VALUE OF THE HALF SHARE IN THE SAID ESTATE. ACCORDING TO HIM THIS SHOWS THAT THE ASSESSEE WAS NOT VALIDLY ENTITLED TO INHERIT THE ESTATE OF LATE MRS . MANI CAWASA BAMJI. ACCORDINGLY TO HIM THE CAVEAT FIELD BY THE ASSESSEE HAD NO SANCTITY. IT WAS ALSO SUBMITTED THE SETTLEMENTS ARRIVED AT BETWEEN T HE ASSESSEE AND MR. R.K.BAVASA WAS OUT OF COURT SETTLEMENT AND, THEREFO RE, THOSE TERMS COULD NOT BE ACCEPTED AS GENUINE. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN O UR VIEW THE CONTENTIONS PUT FORTH ON BEHALF OF THE ASSESSEE HAVE TO BE ACCE PTED. ADMITTEDLY THE ASSESSEE WAS THE LEGAL HEIR OF THE DECEASED LATE MR S. MANI CAWASA BAMJI BEING THE SON OF A PRE-DECEASED SISTER OF THE DECEA SED. HE TOGETHER WITH MR. DINSHAW JAMSHEDJI MISTRY , BROTHER OF THE DECEASED WERE ALONE ENTITLED TO ITA NO.6476/MUM/2009(A.Y. 2006-07) 12 THE ESTATE OF LATE MRS. MANI CAWASA BAMJI IN THE EV ENT OF INTESTACY OF LATE MRS. MANI CAWASA BAMJI. IT WAS BECAUSE OF THE FACT THAT THE ASSESSEE WAS ENTITLED A HALF SHARE IN THE ASSET OF LATE MRS. M ANI CAWASA BAMJI THAT A CITATION WAS ISSUED TO THE ASSESSEE BY HONBLE BOMB AY HIGH COURT BEFORE GRANTING THE PROBATE IN RESPECT OF THE LAST WILL OF LATE MRS. MANI CAWASA BAMJI TO MR. DINSHAW JAMESHEDJI MISTRY. THE ASSESS EE PROMPTLY FILED THE CAVEAT OPPOSING THE GRANT OF PROBATE IN FAVOUR OF M R. DINSHAW JAMSHEDJI MISTRY AND CONSEQUENTLY THE PROCEEDINGS BECAME A TE STAMENTARY SUIT. IN SUCH PROCEEDINGS IT WAS THE DUTY OF MR. DINSHAW JAM SHEDJI MISTRY TO ESTABLISH THAT THE WILL OF LATE MRS. MANI CAWASA BA MJI WAS THE LAST WILL AND THAT WAS EXECUTED IN ACCORDANCE WITH LAW AND THAT T HE TESTATATRIX EXECUTED THE WILL IN A SOUND AND DISPOSING STATE OF MIND. T HE ASSESSEE ALSO OBTAINED AN ORDER OF INJUNCTION RESTRAINING MR. DINSHAW JAM SHEDJI MISTRY FROM DEALING WITH ESTATE OF THE DECEASED IN ANY MANNER. AFTER THE DEATH OF MR. DINSHAW JAMSHEDJI MISTRY MR. R.K.BAVASA BECAME THE PARTY TO THE TESTAMENTARY SUIT IN RESPECT OF MR. DINSHAW JAMSHED JI MISTRY AND SETTLED THE ISSUE WITH THE ASSESSEE BY A SUM OF RS.5,08,80, 000/-. IT WAS THEREAFTER THAT THE COURT ACCEPTED THE TERMS OF SETTLEMENT AND ALLOWED MR. R.K.BAVASA TO DEAL WITH SOME OF THE PROPERTIES OF THE ESTATE O F THE DECEASED. LATER ON THE ASSESSEE ALSO WITHDREW HIS CAVEAT ON 25/11/2005 . IT IS THUS CLEAR THAT THE SUM IN QUESTION WAS RECEIVED BY THE ASSESSEE IN CONSIDERATION OF GIVING UP HIS RIGHTS TO CONTEST THE WILL OF LATE MRS. MANI CAWASA BAMJI. AS RIGHTLY CONTENDED ON BEHALF OF THE ASSESSEE THE CONSIDERATI ON REFERRED TO IN THE PROVISIONS OF SECTION 56(2)(V) OF THE ACT HAVE TO B E UNDERSTOOD AS PER THE DEFINITION OF CONSIDERATION AS GIVEN IN THE INDIAN CONTRACT ACT, 1872 IN SECTION 2(D). THE ASSESSEE HAS ABSTAINED FROM CONT ESTING THE WILL AND THIS CONSTITUTE THE CONSIDERATION FOR PAYMENT BY MR. R.K .BAVASA TO THE ASSESSEE. THUS THE AMOUNT RECEIVED BY THE ASSESSEE IS NOT WIT HOUT ANY CONSIDERATION. THEREFORE, THE PROVISIONS OF SECTION 56(2)(V) OF TH E ACT WERE NOT APPLICABLE. IN THAT VIEW OF THE MATTER WE HOLD THAT THE RECEIPTS B Y THE ASSESSEE FROM MR. R.K.BAVASA CANNOT BE TREATED AS INCOME UNDER SECTIO N 56(2)(V) OF THE ACT. ITA NO.6476/MUM/2009(A.Y. 2006-07) 13 THE ADDITIONS MADE BY THE AO ARE DIRECTED TO BE DEL ETED. IN VIEW OF THE DECISION ON THE MAIN PROVISION WE HAVE NOT DEALT WI TH THE OTHER ARGUMENTS REGARDING APPLICABILITY OF THE EXCEPTIONS SET OUT I N SECTION 56(2)(V) OF THE ACT. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 9 TH DAY OF MARCH, 2011. SD/- SD/- (RAJENDRA SINGH) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 9 TH MAR.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RE BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.6476/MUM/2009(A.Y. 2006-07) 14 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 1/3/2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 2/3/2011 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER