| SooperKanoon Citation | sooperkanoon.com/72860 |
| Court | Income Tax Appellate Tribunal ITAT Ahmedabad |
| Decided On | Nov-28-2003 |
| Judge | R Garg, Vice |
| Reported in | (2004)90ITD21(Ahd.) |
| Appellant | Dr. K.M. Shah |
| Respondent | The Asstt. Commissioner of |
(ii) On the valuation date 31-3-95 relevant to the A.Y.1995-96 assessee Dr. K.M. Shah, individual did not declare the same in his individual return of wealth on the basis of arbitration award given by Shri S.N. Soparkar on 30-3-1995 and two sons of the assessee declared the property allocated by Arbitrator in their returns of wealth for the A.Y.1995-96 and subsequent years.
(iii) On 1-4-1995 assessee and his two sons and three daughters without waiting for decree of Court on arbitration award entered into an agreement for sale of the property in question namely: "Mohan Niwas" in Final Plot No. 417/1.
(iv) In view of the finding given by ITAT in assessee's own case in WTA Nos. 55 to 58/Ahd/99 for the A.Ys. 1991-92 to 1994-95 and M.A.No. 31/Ahd/02 of the assessee dismissed vide order dated 25-5-2001.
(2) Whether the decision of Hon'ble Madras High Court in the case of CIT v. R. Ponnammal reported in 164 ITR 706 (Madras) is applicable to the facts of the assessee's case when the first test laid down by Hon'ble Madras High Court is that "the family settlement must be bona fide one" (Please see pg.712 of the report of ITR 164) which ITAT decided against the assessee in his appeal in wealth tax appeals for A.Ys.1991-92 to 1994-95.
(3) Whether the Tribunal has option to hold that Arbitration Award - pronouncing that "Mohan Niwas" is property of HUF, when the finding of ld. CIT(A) in W.T. appeal that "it is collusive deals" is upheld by Tribunal in W.T. appeals of the assessee pertaining to the A.Ys.1991-92 to 1994-95." 2. The difference in this appeal between the two Members is thus broadly on the point whether there was a gift within the meaning of Section 4(2) of the Gift-tax Act, 1958 and, if so, was it taxable in the year under consideration? 3. The learned Judicial Member wrote the leading order and held that the property "Mohan Niwas" and the surrounding land was not the HUF property but the individual property of the assessee; and that by converting that individual property into HUF property, the assessee made a gift Under Section 4(2) of the Gift-tax Act. He rejected the claim of the assessee that the transaction was a settlement by way of family arrangement by holding that the settlement was not bona fide, it being predetermined and a collusive deal as held by the Tribunal in wealth-tax proceedings of the assessee for asst.year 1991-92 to 1995-96.
4. The ld. Accountant Member, on other hand, held that thee was a dispute about the ownership of the property and the two sons of the assessee held valid title of ownership over the property and in case of dispute and litigation between the assessee and is two sons, for scale was titled heavily against the assessee. The assessee is an ailing man of 80 years eager to sell the property and lacked energy and patience for protracted litigation with his sons. In such circumstances, the settlement thereof by way of family arrangement was a bona fide family settlement and therefore there was no transfer which could attract the provisions of Section 4(2) of the Act. In any case there was no gift in the year under consideration at all as it is the date of the consent decree passed by the High Court on which conversion could take place and that date being 18-7-1995 the transaction fell in asst.year 1996-97 and not in this year and, therefore, the gift-tax assessment was liable to be quashed.
"4(2) Where, in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family (such property being hereafter in this sub-section referred to as the converted property), then, notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, for the purpose of computation of the taxable gifts made by the individual, the individual shall be deemed to have made a gift of so much of the converted property as the members of the Hindu undivided family other than such individual would be entitled to, if a partition of undivided family property had taken place immediately after such conversion." 6. On a perusal of this sub-section, it is evident that it deems the individual to have made a gift of so much amount of the converted property as the member of HUF other than such individual would be entitled, if a partition of the converted property had taken place immediately after such conversion. The pre-requisite for the application of this sub-section is that the individual should convert his separate property into property belonging to the HUF through the act of - (i) impressing such separate property with the character of the property belonging to the family; and (ii) throwing such separate property into common stock of the family. It, therefore, requires an act by the assessee either to impress such property with the character of HUF property or throw such property into common stock of the family.
It may be stated that before the introduction of this sub-section, the conversion was not subject to gift-tax as there was no transfer of property by conversion of such property into HUF property in view of the Supreme Court decision in the case of Goli Eswriah v. CIT 76 ITR 675. This loophole was plugged by Finance (No. 2) Act, 1971 by inserting Sub-section (2) in Section 4 aforesaid. However, the requirement still remains that it should be an act of the assessee to impress or throw the property.
7. The assessee in this case entered into a family arrangement and the property which was hitherto being declared as individual property in this wealth-tax and Income-tax returns was settled to be the HUF property through the arbitration proceedings and 1/3^rd thereof was allotted to the assessee on partition. These proceedings, in my opinion, cannot be said to be amounting to impressing the property with that of HUF property or throwing the same into the family hotch pot to which Section 4(2) of the Act could be applied. In a case of a family arrangement as held by the Supreme Court in the case of Ram Charan Das v. Girja Nandini Devi and Ors. AIR 1966 SC 323, each party takes a share in the property by virtue of the independent title which is admitted to that extent by the other party. Every party who takes benefit under it need not necessarily be shown to have, under the law, a claim to share in the property. All that is necessary to show is that parties are related to each other in some way and have a possible claim to the property or even a semblance of a claim on some other ground as say, affection. A similar case has come up before the Madras High Court in the case of CIT v. R. Ponnammal 164 ITR 606 wherein the exclusive right of the father of the assessee to the property bequeathed by him was upheld by the Supreme Court and as a result of provisions of Section 14 of the Hindu Succession Act the property became absolute property of the assessee at the time of family arrangement. In these circumstances, it was contended by the Revenue that there was no necessity for the assessee to part with her property and if she had under the family arrangement parted with some property, that would clearly result in transfer of property as contemplated Under Section 2(xxiv) of the Act. This argument was rejected by the court by stating that it ignored the settled law, that when parties enter into a family arrangement, the validity of the family arrangement is not to be judged with reference to the way the party who raised disputes or rights or claimed rights in certain properties had in law any such right or not.
If the assessee found it worthwhile to settle the dispute between herself, her sons and daughters by making the family arrangement as contained in the document, that family arrangement cannot be ignored by tax authorities. The court, accordingly, upheld the order of the Tribunal in holding that the documents constituted a valid 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(1) of the Gift-tax Act.
8. From the facts brought on record, the position on the first dispute, whether Mohan Niwas property was individual property or the property of two sons or HUF property, is not very clear. Nothing can be said in clear terms. Various conflicting stands emerging are: (i) One fact is that the property Mohan Niwas was purchased in 1954 by the assessee as guardian in the name of his two sons Mrugesh and Bhadresh who were minors at that time. But what is the source of the acquisition of the property is not known. A part of the property so purchased was gifted to the three daughters of the assessee on 30^th July, 1968 by executing the deed of gift by Mrugesh who became major by that time and by the assessee as guardian of Bhadresh who continued to be minor on that day. This gives an impression that it was originally a joint property of the two sons of the assessee and after getting a part thereof the three daughters of assessee also became the part owners.
(ii) Second position is that the value of Mohan Niwas property was being declared by the assessee in his individual return of wealth-tax and the income from house property was also being shown in individual returns of Income-tax right upto asst.year 1994-95. In the wealth-tax proceedings for asst.year 1991-92 to 1994-95 (WTA Nos. 55 to 58/Ahd/1999), the assessee raised an additional ground claiming that the property belonged to HUF but the same was not pressed, hence rejected. In Miscellaneous Application again the assessee sought rectification on the ground that his aforesaid additional ground was not decided. The MA, however, was rejected by the Tribunal by pointing out the fact that the said additional ground was not pressed at the time of hearing - MA No. 13/Ahd/2001 dated 25-4-2001. This gave an impression that it was individual property of the assessee and held in the benami names of the two sons.
(iii) In 1976, in the proceedings under Urban Land Ceiling Act, 1976, a third position was depicted i.e. the property was shown as owned by Mrugesh, Bhadresh, the assessee, the assessee's wife Chandrakanta and his three daughters to whom a part of the land in the property was gifted in 1968. This statement was filed in these proceedings under the signature of Bhadresh.
(iv) The fourth position taken is by Bhadresh in 1994, when he filed a suit in the City Civil Court against the assessee and his second son Mrugesh claiming one third share in the property.
9. Can, therefore, on these facts, it be said that the property was of the assessee alone; or it was joint property of two sons; or two sons and three daughters; or the assessee and his two sons and three daughters or the assessee and his two sons or the assessee, his wife, two sons and three daughters? It is not necessary also for disposal of these appeals to determine as to who really owns the property in the eye of law.For the purpose of making a settlement by way of a family arrangement, the possibility of a dispute as to ownership or title to the property itself is sufficient and there need not be a real dispute or an effective one in the eye of law. The sons of the assessee have openly challenged the sole ownership of the assessee. The property even though it was being shown in the return of Income-tax and wealth-tax, in fact, stood in the name of the two sons and three daughters. On these facts, in my opinion it would not be correct to say that the property belonged to the assessee absolutely or that there was no actual or possible dispute amongst the family members of the assessee.
When the property is not in the name of the assessee, chances of his being declared as owner or absolute owner were bleak or almost nil. On the contrary, the chances were that he could have been deprived in toto and/or declared not be entitled even to any part thereof.
10. The only fact that was stated to be in favour of holding the assessee to be the owner and on which the Revenue is heavily relying upon, is that the assessee had been showing in his Income-tax returns income from this property in his income returns and that the value was being declared in his wealth-tax returns right from beginning to asst.year 1994-95, the year before the settlement. But, that was his own creation, a unilateral acknowledgement without consent of anybody, persuaded probably by his dominating position in family as guardian or head of the family. It was at his own peril. Further, that by itself, in my opinion, could not make the assessee owner of the property in view of more weighty material on record against him namely, property stands in the names of the two sons and three daughters and the assessee, its entry in revenue records in the name of the two sons and three daughters and the provisions of Benami Transaction (Prohibition) Act, 1988 barring any suit, claim or action to enforce any right in respect of any property held benami against the person in whose name it stands or who claims through him - see in this connection the provisions of that Act and the two Supreme Court decisions. Section 4 of the Benami Transactions (Prohibition) Act, 1988 provides that "no suit claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property." The Supreme Court in the case of Mithilesh Kumari v. Prem Behari Khare 177 ITR 97 considering this section observed "this naturally relates to past transactions as well.
The expression "any property held benami" is not limited to any particular kind, date or duration. Once the property is found to have been held benami, no suit, claim or action to enforce any right in respect thereof shall lie." These observations of the Division Bench in the case of Mithilesh Kumari were upheld by the Full Bench decision in the case of R. Rajgopala Reddy and Ors. v. Padmini Chadrashekhar 213 ITR 340 wherein the court observed, "he plaintiff's right to that effect is sought to be taken away and any suit to enforce suit a right after coming into force of Section 4(1) i.e. 19^th May, 1988 shall not lie. The Full Bench also observed, "the view expressed by Division Bench in the case of Mithilesh Kumari's case that Section 4(1) would apply even to pending suits which were already filed and entertained prior to the date when the section came into force and it has the effect of destroying the then existing rights of the plaintiff in connection with the suit property cannot be sustained in face of the clear language of Section 4(1). On the express language of Section 4(1) any right inheriting in real owner in respect of any property held benami would be affected once Section 4(1) operates, even if such transactions had been entered into prior to the coming into operation of Section 4(1) and hence once Section 4(1) applies, no suit can lie in respect of such a past benami transaction. To that extent, the section may be retro-active. The next step that, therefore, then existing rights can be destroyed and even though suits by real owners filed prior to coming into operation of Section 4(1) they would not survive does not logically follow." On the basis of the aforesaid provisions and the two decisions, the assessee has lost right to make a claim on that property Mohan Niwas as his own after the introduction of the Benami Transactions (Prohibition) Act, 1988 with effect from 19^th May, 1988.
11. In such circumstances, it was rather wise on the part of the assessee to have a family settlement by which he got at least 1/3^rd share. It was at a time when one of the sons filed a suit claiming 1/3^rd share in the property, as his share. It cannot be a sham or bogus transaction. Not contesting the proceedings for arbitration or agreeing to settlement without recording reasons by the arbitrator was also on the contrary, a wise thing on the part of the assessee, lest he be not exposed that his claim for entire property or to even a part thereof was devoid of any merits. In my opinion, neither the conduct of the assessee nor any material on record show any doubt that he had any pre-determined bad motive in agreeing to refer the matter for settlement through the intervention of the court which appointed the sole arbitrator, a person being a leading advocate of the time. Looking to the precarious position about the rights in the property, particularly when the property stood in the name of the assessee and the provisions of Benami Transaction (Prohibition) Act depriving him to claim any right in such property, it cannot be said that his agreeing to the position that the property be treated as HUF property was collusive or pre-determined because in any cash he is getting 1/3^rd property as against almost nil chances or his getting anything.
12. In the Tribunal's order in wealth-tax proceedings for asst.years 1991-92 to 1994-95, the Issue as to whom the property belonged, was not there as is evident by the ground extracted in paragraph 2.6 of the aforesaid order. The following were the questions stated to have been raised before the Tribunal: "2.6 Aggrieved by the order of the learned CWT(A) assessee is in appeal before us and the common grounds of appeal are as under:- "1. That the learned CIT(A) ought to have accepted as established on evidence, that the entire property comprising of sub-plots 414/1/1, 417/1/2 and 417/1/4 was residential house with lands appurtenant thereto and was used by Dr. K.M. Shah, his wife and two sons and unmarried daughters as a single unit and as such was exempted Under Section 5(1)(iv) and or (vi) of the W.T.Act.
2. The learned CIT(A) failed to see that apart from the bungalow erected on sub-plots 417/1/2 and 416/1/4 as part of the construction of the bungalow for the purpose of using the same as a single unit by the entire family of Dr. K.M. Shah and used as such.
3. That the learned CIT(A) wrongly highlighted certain points in Para 8.3 of her order as the same were not conclusive nor indicative of the other sub-plots being vacant urban lands and, therefore, subject to wealth-tax.
4. That the remaining adopted by the CIT in this behalf is totally untenable and the assessee's case fully falls within the principles laid down by the Madras High Court (227 ITR 733) and the Andhra Pradesh High Court (151 ITR 320) 5. That the decision of the CIT(A) holding the two sub-plots as vacant urban land is wholly untenable and unsupportable on the evidence on record, especially in absence of any proof in rebuttal.
6. That the learned CIT(A), therefore, erred in coming to the conclusion that the property could be valued at the market price and was assessable to wealth tax as such and ignoring the valuation given by the assessee. Under Schedule III of the Wealth-tax Act in respect of the said property." 13. There is, obviously, also no finding by the Tribunal in absence of any ground which is also evident from the order of the Tribunal in the aforesaid wealth-tax case as contained in paragraph 2.9 which reads as under: "2.9 We have carefully gone through the orders of the authorities below as well as on various details and documents placed before us at the time of hearing. The sub plot Nos. 417/1/1.417/1/2 & 417/1/4 are, in our opinion, independent residential plot on which as per approval of Municipal Corporation Independent residential house can be built up. We are, therefore, of the opinion that the learned CIT(A) is fully justified in holding that assessee is entitled to exemption Under Section 5(1)(iv) and or Under Section 5(vi) of the W.T. Act in respect of bungalow constructed on plot No. 417/1/1. The remaining two sub-plots namely plot No. 47/1/2 and 417/1/4 cannot be treated as land appurtenant to even as per principle laid down by Hon'ble Madras High Court and Madhya Pradesh High Court (supra). On this remaining plots independent bungalows/residential house can be built, thee are having separate approach roads, duly approved by Municipal Corporation as plots for separate residential units.
Therefore, in our opinion, learned CIT(A) is fully justified in holding that these two sub-plots are urban land within the meaning of W.T. Act. Looking to the totality of the facts and circumstances of the case and reasons recorded by learned CIT(A) in her impugned order. We are of the opinion that her order is legally and factually correct and no interference is called for. We, therefore, decline to interfere." 14. It seems that before the CWT(A) the dispute was raised as to whether the entire land was one and appurtenant to the bungalow "Mohan Niwas" which was claimed to be exempt Under Section 5(1)(iv)/5(1)(v) of the Wealth-tax Act. In that connection, the assessee's submission was that the entire plot of land was one property and the CWT(A) gave a 12 point finding thereon. Though the Tribunal agreed that it was not a single unit, it did not deal with or conform to the finding of the CWT(A) as to whom the property really belonged; namely, whether to HUF or individually to the assessee. In my opinion, rightly so, as the question was not in dispute before the Tribunal and that fact is further evident by the order in MA No. 13/Ahd/2001 dated 25-4-2001 wherein it is specifically stated that the issue was though raised before the Tribunal by way of additional ground but was not pressed.
15. Let me examine the effect of the above 12 point finding of the CWT(A): (i) The first point only suggests that there was no evidence as to the fact that the property was purchased out of HUF funds. It does not suggest that the sources were of the individual either.
(ii) The second point is that the gift made by the assessee could not have been made by him as karta if that was an HUF property. Gift was made in 1968 when Mrugesh was major and, therefore, the gift deed was signed by him along with the assessee who signed the deed as guardian of Bhadresh. This fact as stated above, does not suggest that it was individual property of the assessee. On the contrary, it may suggest that it could be the property of Mrugesh and Bhadresh.
(iii) The third point is that the assessee had been showing the property in his individual return as his property but that also by itself is not conclusive proof of the fact compared to other weighty evidence namely the property stood in the name of two sons and three daughters and the prohibition of any claim being made by the assessee under the Benami Transaction (Prohibition) Act, 1988.
(iv) The fourth point is that it was only after the award, which was agreed by the parties to be given without reasons, the property was declared HUF property. There is specific provision of law contained in Section 31(3) of the Arbitration Act and also a Supreme Court decision in the case of Bungo Steel Furniture (P) Ltd. v. Union of India AIR 1967 (SC) 378 not requiring the reasons to be recorded.
Section 31(3) of the Arbitration Act suggests that reasons are to be given unless agreed to by the parties otherwise. That is the reason the Arbitrator incorporated a clause in the award which reads as under:- "As the parties have agreed before me that my Award need not contain any reasons I refrain from giving the same in support of the Award." (v) The fifth point is that the assessee agreed to the award without challenge by any of the parties. That is in so far as the assessee is concerned, was a wise decision, lest he be not exposed to have any right in the said property.
(vi) The sixth point conforms it to be a family settlement which could have been without recourse to court proceedings. Family settlement excludes the transaction out of the concept of transfer and deemed gift Under Section 4(2) of the Gift-tax Act. Intervention of the court is a subtle way of settling disputes without future retractions and fall-outs.
(vii) The seventh point is that the award was given on 30^th March, 1995 and the property was sold on 1^st April, 1995 without two days even without waiting for the award being confirmed by the court which, according to the CWT(A), happens only in collusive transactions. When the dispute was settled amongst the parties by way of settlement, there is no scope of its being not approved and made rule of the court and if the parties agree to sell the property at the earliest opportunity to expedite the deal and the realisation thereof, no inference could be drawn from this fact that it was a collusive agreement or an inference that it happens only in collusive agreement.
(viii) The eighth point is that the agreement for sale within two days suggests that the outcome of the award was pre-determined. By the very existence of the agreement by way of settlement, the outcome of the award was naturally to follow. No inference therefrom can be drawn this way or that way and surely not an adverse one.
(ix) The ninth point states that there was no HUF in existence prior to the award, in absence of any asset, property or sources of income and, therefore; as to wherefrom it could acquire movable properties was a fact overlooked by the arbitrator. When the award is made a rule of the court, it is binding not only on the parties but even to the third parties as well except only in those cases where it is reopened in accordance with the procedure laid down in the law.
Again, as aforesaid, it could only be a ground for saying that the movable assets were not the property of the HUF for which there is no dispute either in the wealth-tax proceedings or these gift-tax proceedings.
(x) The tenth point is that the arbitrator has exceeded his jurisdiction as he has reallocated even the gifted property to the three daughters of the assessee which could happen only in case of a collusive deal. Firstly, when the parties have agreed by way of a family settlement and the award is made a rule of the court it would not be warranted to say that it was a collusive deal and factually also the allocation is made of the property mentioned in Schedule-I admeasuring 2454 sq. meters of non-agricultural land along with existing bungalow constructed therein known as Mohan Niwas bearing private sub-plot No. 417/1/1, 417/1/2 and 417/1/4 forming part of the bigger plot No. 417/1. The gifted property was of 505 sq. meters (604 sq. yards) was bearing property sub-plot No. 417/1/3 and was not included in the award given by the arbitrator. Therefore, factually also the observation of the CWT(A) was not correct and that is evident by Schedule 1 attached to the award.
(xi) The eleventh point is that the assessee and his two sons have taken different stands in ULC proceedings. This fact is not against the assessee but on the contrary, it goes in favour of the assessee i.e. the real position about the ownership was fluid and not certain - a valid ground for entering into a family settlement or an arrangement.
(xii) The twelfth point is that the arbitrator instead of allocating movable property to all, allocating only to the assessee which shows that there was no genuine dispute. The dispute was for the claim in Mohan Nivas property and that was main, dominant and substantial part of the property in which they have taken 1/3^rd share. If they did not take any share in the small property of insufficient value, it does not mater much or make the award invalid which is again an agreed one without any dissent.
16. In view of the above, in my opinion, the discussion in wealth-tax proceedings is of no help in determining the issue about the absolute ownership of the assessee and in holding on that basis that there was a gift within the meaning of Section 4(2) of the Act. It only throws some light that it was not HUF property before settlement through arbitration award. On the contrary, it definitely gives conflicting positions the parties have taken at various occasions and that there was a cloud upon the absolute right of the assessee over the property and that too rather more in view of the other family members.
17. On the facts and circumstances of the case, in my opinion, it is a case of family settlement through arbitration award. In the case of Ram Charan Das v. Girja Nandini Devi and Ors. (supra) the question was for determining the legal effect of the deed similarly described in the paper book as a deed of partition. The court held that the compromise entered into by the parties to the previous suit and embodied in the decree was in substance family arrangement and, therefore, binding on all the parties to it. It observed that courts give effect to a family settlement upon the broad and general ground that its object is to settle existing or future disputes regarding properly amongst members of a family. The consideration for a family settlement is expectation that such a settlement will result in establishing or ensuring amity and goodwill amongst the relations. That consideration having passed by each of the "disputants" the settlement consisting of recognition of the right asserted by each other cannot be impeached thereafter. It was also held that the transaction of a family settlement entered into by the parties who are members of a family bona fide to put an end to the dispute among themselves, is not a transfer. It is not also a creation of an interest. For, in a family settlement each party takes a share in the property by virtue of the Independent title which is admitted to that extent by the other parties. Every party who takes benefit under it need not necessarily be shown to have, under the law, a claim to share in the property. All that is necessary to show is that the parties are related to each other in some way and have a possible claim to the property or a claim or even a semblance of a claim on some other ground as say affection. This case is on all fours with the case of the assessee.S. Shanmugam Pillai and Ors. v. K. Shamugam Pillai and Ors. AIR 1972 (SC) 2069 it was even held that although conflict of legal claims in praesenti or in futuro is generally a condition for the validly of family arrangements, it is not necessarily so. Even bona fide disputes present or possible, which may not involve legal claims would be sufficient. Members of a joint Hindu family may, to maintain peace or to bring about harmony in the family, enter into such a family arrangement. If such an agreement is entered into bona fide and the terms thereto are fair in the circumstances of a particular case, the courts would more readily give assent to such an agreement than to avoid it.Kale and Ors. v. Deputy Director of Consolidation and Ors. AIR 1976 SC 807, the Supreme Court held that family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family, that the said settlement must be voluntary and should not be induced by fraud, coercion or undue influence and that the family arrangement may be even oral in which case no registration is necessary. The registration would be necessary only if the terms of the family arrangement are reduced into writing.
Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and is, therefore, not compulsorily registrable. Paragraph 28 of this order reads as under:- "28. There is yet one more intrinsic circumstances which shows that the compromise was an absolutely bona fide transaction. It would appear that at the time of compromise respondent 5 Ram Pyari was faced with a situation when her marriage in 1955 was not so far proved. If she was absolutely certain that her marriage had taken place in 1955 she would not have agreed to the terms at all. On the other hand if she thought that she might not be able to prove that her marriage took place in 1955 and if it was shown that she had married before 1955 then she would be completely disinherited and would get nothing at all with the result that the appellant Kale would get the entire property. On the other hand the appellant must have similarly thought that a bird in hand is worth two in the bush.
So long as Ram Pyari was alive he would not be able to enjoy the property and would have to wait till her death. It was, therefore, better to take half of the property immediately as a permanent tenure holder and give the half to the daughters of Lachman, namely, Har Pyari and Ram Pyari. Thus under the terms of the compromise both the parties got substantial benefits and it was on the whole a very fair and equitable bargain. In these circumstances, therefore, the parties struck a just balance and a fair and beneficial settlement which put an end to their disputes." 20. A similar situation was appearing in this case before the family settlement. The assessee was faced with a situation when the property did not stand in his name. It stood in the name of his two sons. Benami Transactions (Prohibition) Act, 1988 debarred him from claiming any right therein, if he was able to prove that the sons were benami holders of the property. In these circumstances, when he wanted to dispose of the property, he had no alternative but to agree for settlement more so when one of the sons had already moved to the court.
By this settlement he at least had 1/3^rd right in immovable property and the entire movable property to his credit. No mala fide, therefore, can be implied.
21. This issue directly came up in connection with tax proceedings before the Madras High Court in the case of CIT v. R. Ponnammal (supra) wherein the High Court held as under:- "When the parties enter into a family arrangement, the validity of the family arrangement is not to be judged with reference to whether the parties who raised disputes or rights or claims in certain properties had in law any such right or not. The members of a joint family may, in order to maintain peace and bring about harmony in the family, enter into a family arrangement and if the arrangement is entered into bona fide and the terms thereof are fair, courts will normally give assent to such an arrangement rather than avoid it. Even if a party to the settlement has no title under the arrangement but 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. Held, that, in the instant case, it was found as a fact that the family arrangement had been brought about by the intervention of the panchayatdars and this clearly shows that the sons and daughters of the assessee were laying claims to the property which the assessee got under the will of her father and it was not relevant at the time when the family arrangement was entered into to find out as to whether such claims if made in a court of law would be sustained or not. If the assessee found it worthwhile to settle the dispute between herself, her sons and daughters by making the family arrangement, the said arrangement could not be ignored by a tax authority. In view of the finding of the Tribunal, the family arrangement dated December 17, 1971, had to be held to be a valid piece of document and,hence, the Tribunal was right in its view that no transfer of property was involved within the meaning of Section 2(xxiv) of the Gift-tax Act and, hence, there was no liability to gift-tax either under Section 4(1)(a) or under Section 4(2) and consequently no question of inclusion of the income of the minor in the hands of the assessee would also arise." 22. I am, therefore, of the opinion that it was bona fide case of family settlement and, therefore, does not amount to transfer and consequently the provisions of Section 4(2) of the Gift-tax Act, 1958 would not be applicable.
23. The second issue made out by the learned Accountant Member is that the assessment is to be quashed even on the ground that the gift in any case did not take place in the year under consideration in view of the consent given by the assessee to the award and decree passed by the court on 18-7-1995 which conclusively determines the rights of the parties. The learned Judicial Member has not given any specific finding on this. However, as he has upheld the assessment order levying of gift-tax for asst.year 1995-96, it gives rise to a difference as to whether the gift-tax if leviable at all, is leviable for asst.year 1995-96 or A.Y.1996-97. It is true that a consent decree was passed by the court on 18-7-1995 which falls in asst.year 1996-97 but one should not forget about the fact that the arbitration reference was by consent of the parties and award was given without reason by the consent of the parties. Thus, the consent of the assessee and other parties was already there on 30-3-1995 which fell in asst.year 1995-96.
Furthermore, more clinching issue is that the award was acted upon by the parties before 31-3-1995 when the parties have taken this position in their respective returns showing only the allocated share in the property and also incorporated this fact in agreement for sale dated 1-4-1995 and the registered sale deed dated 20-4-1996. I, therefore, hold that if there was a gift at all, arising out of this transaction of family settlement, it was in the previous year relevant to asst.year 1995-96 and for asst.year 1996-97 as elaborately stated in the question No. 1, a separate point of difference prepared by the learned Judicial Member stating that (i) Arbitrator in his award dtd.30-3-95 held that the property in question is of HUF and in this award itself the arbitrator made complete partition of the property; (ii)n the valuation date 31-3-95 relevant to the A.Y.1995-96 assessee Dr. K.M. Shah, Individual did not declare the same in his individual return of wealth on the basis of arbitration award given by Shri S.N. Soparkar on 30-3-1995 and two sons of the assessee declared the property allocated by Arbitrator in their returns of wealth for the A.Y.1995-96 and subsequent years, and (iii) On 1-4-1995 assessee and his two sons and three daughters without waiting for decree of Court on arbitration award entered into an agreement for sale of the property in question namely: "Mohan Niwas" in Final Plot No. 417/1.
24. As regards the second and third questions proposed by the learned Judicial Member, in my opinion, the issue stands covered by the Madras High Court decision in the case of R. Ponnammal (supra). As discussed above, as the family settlement was a bona fide one and not a collusive deal nor was so upheld by the Tribunal in wealth-tax appeals of the assessee. The reference to the ITAT order in wealth-tax appeals for asst.years 1991-92 to 1994-95 in the question by the learned Judicial Member, in my opinion has no bearing as this issue was not decided in wealth-tax proceedings as discussed above.