Income Tax Appellate Tribunal - Hyderabad
Late M Ram Reddy , Hyderabad vs Assessee on 28 March, 2013
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, V/s. Income-tax Officer, Ward-
Rep. By son & LR 11(2), Hyderabad.
M. Bhaskar Reddy,
Hyderabad.
PAN:AHZPR9928G (Respondent)
(Appellant)
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 not required to be adjudicated upon.
3. In ground Nos. 2 and 3, the assessee has assailed the decision of departmental authorities in taxing the entire sale consideration received from sale of land in 2 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== 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 30-7-2009 declaring income of Rs.7,14,400/-. Initially, the return was processed u/s 143(1) of the Act. Subsequently, however assessee's 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 gain, the Assessing Officer further noted that the assessee 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 available on records, the Assessing Officer noted that during the impugned financial year, the assessee along with some other co-owners had sold an immovable property for a consideration of about Rs.42,70 crores and the share of the assessee in the sale consideration was much more than what has been shown in the return of income. He therefore reopened the assessment of the impugned assessment year by issuing a notice u/s 148 of the Act. During the re-assessment proceedings, the assessee 3 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== appearing before the Assessing Officer furnished the information as was called for. Further, the assessee stated that during the previous year, he had sold his 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 agricultural 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 that by a certificate dated 24-22-1993 of Revenue Divisional 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 virtue of operation of law, these persons have become absolute owners of the said property. He further noted 4 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== that HUDA acquired certain portion of the above land in survey No.588 and the remaining land was identified 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 the 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 consideration 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 noted 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 have offered the capital gain to tax, the Assessing Officer 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 liable to capital gain tax but since their status is HUF and 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.
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======================
7. The Assessing Officer on going through the details of sale consideration shared between the family 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 no bar for an individual to throw his individual property 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 Reddy China Venkata Reddy vs. Lakki Reddy Lakshmana, still the provisions of section 64(2) of the Act contemplate that where a coparcener throws his separate property into stock of the family and thereby converts it into joint family property or where such property is subsequently partitioned among the family members including the coparcener's minor children, there is no direct or indirect transfer by the coparcener to his wife or minor children nor a transfer by him for the benefit of the wife or minor children. Accordingly, in case 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 coparcener who vested it and the same will not be assessable as the income of the joint family.
8. The Assessing Officer relying upon a decision of the Allahabad High Court in the case of Mulkraj Vs. CIT 129 ITR 387 and of the Karnataka High Court in 6 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== case of Gopal Ram Narain Vs. CIT 175 ITR 32 held that the amount of sale consideration received by the assessee shall have to be assessed in his individual hands only and not in the hands of the members of his 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 observed 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 long term capital gain derived by him among the members of his family cannot be accepted and not sustainable in the eyes of law. He accordingly proceeded to assess the entire sale consideration of Rs.3,28,35,500/- as the income of the assessee in his individual capacity and proceeded to compute the capital gain thereon. While computing the capital gain, the Assessing Officer also did not accept the assessee's claim of cost indexation from 1981 as well as his claim that 60% of the land having been given on patta without any consideration, 7 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== 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 the date of transfer of the asset and as such is not eligible 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 Officer submitted that as per the family arrangement made through the partition deed dated 11-11-2005 property was distributed amongst the his members of his family 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 with 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 Officer are distinguishable from the facts of the case. The case laws relied upon by the Assessing Officer are relatable to the issue of capital gains on partition of the family, whereas in this case, the family partition is regarding the claiming of the status for the family members involved. However, the fact remains that the appellant 8 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== under reference has chosen the status of individual for offering the taxes, by considering a part of the sale consideration received by the appellant and his family 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 scope for settlement of the property, held in individual capacity. To this extent the ratio of case law in this case of CIT vs. Bibijan Begum, applies to the facts of the case. Further, though it is a fact that even oral partitions 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 are demarcated and alienable or saleable separately, and the said partition deeds and sale deed dated 15.09.2008 confirm these facts. Further, the said partition deeds were not registered, but only written 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 reason for which the family arrangement was not accepted is due 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 the share of the land as per the partition deed and the sale consideration shown in their hands, the partition deed 9 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== 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 hands of the assessee.
12. We have heard the parties, perused the materials on record as well as the findings of the lower authorities on this issue. The primary ground on which the CIT (A) as well as the Assessing Officer have refused to accept the assessee's contention with regard to the family arrangement effected through partition deed dated 11-11-2005 is due to the fact that the said document has not been registered with the registering authority for stamp duty purpose. It is the contention of the learned AR before us that the non-registration of the family arrangement deed would not in any way dilute its effect as it is an arrangement between the family members for resolving the dispute with regard to the property which is existing or which may arise 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 per the family arrangement. In this context, the learned AR referred to the registered sale deed dated 15-7-2008 wherein all the family members are parties and have sold the property falling into their respective shares as per the family arrangement independently. The learned AR submitted that since the family arrangement took place in the year 2005 and property 10 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== 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 same cannot be ignored and the entire sale consideration 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 Hon'ble
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 deed not being a registered document is merely a colourable device to reduce the legitimate tax liability of the assessee.
14. Having considered the submissions of the parties, the undisputed facts are, so far as the existence of the family arrangement deed is concerned, it is not disputed by the department. However, they have not accepted it on the ground that it is not registered. In this context, let us examine the ratio laid down in the 11 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== decision cited before us to find out whether non registration of the deed of family arrangement would render it ineffective. The Hon'ble Supreme Court in case of Kale and Others vs. Dy. Director of Consolidation (supra) made certain important observations which would be the guiding principle to decide the issue on hand. The Hon'ble Supreme Court observed as under:-
"A family arrangement is an agreement between 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 security of the family by avoiding litigation or by saving-its honour.
The agreement may be implied from a long course. Of dealing, but it is more usual to embody or to effectuate the agreement in a deed to which the term "family arrangement" is applied.
Family arrangements are governed by principles which 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 view of the matter is most for the interest of families, and has regard to considerations which in dealing with transactions between persons not members of the same family, would not be taken into account. Matters which would be fatal to the validity of similar transactions between strangers are not objections- to the binding effect-of family arrangements".
In other words to put the binding effect and the essentials of a family settlement in a concretised form, the matter may be reduced into the form of the following propositions:
(1) The familysettlement 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;
(2) The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence:
(3) The family arrangement may be even oral in which case no registration is necessary;
(4) It is well-settled that registration would be necessary only if the
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====================== 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 pre pared after the family arrangement had already been made either for the purpose of the record or for in formation 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 therefore does not fall within the mischief of s. 17(2) of the Registration Act and is, therefore, not compulsorily registrable;
(s)The members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property 'It which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims 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 family arrangement will be upheld and the Courts will find no difficulty 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 family 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 enunciated and adroitly adumbrated in a long course of decisions of this Court as also those of the Privy Council and other High Courts, which we shall discuss presently. In Lala Khunni Lal & Ors. v. Kunwar Gobind Krishna Narain and Anr.(i) the statement of law regarding the essentials of a valid settlement was fully approved of by their Lordships of the Privy Council. In this connection the High Court 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 us to have been a settlement between the several members of the family of their disputes, each one relinquishing all claim in respect of all property in dispute other than that falling to his share, and recognizing. the right of the others as they had previously asserted it to the portion allotted to them respectively. It was in this light, rather than as conferring - a new distinct title on each other, that the parties themselves seem to have regarded the arrangement, and we think that it is the duty of the Courts to uphold and give full effect to such an arrangement."
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======================
15. The Hon'ble Court finally held as under :-
"In view of our finding that the family settlement did not contravene any provision of the law but was a legally valid and 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 High Court that the compromise required registration was also wrong in view of the clear fact that the mutation petition filed before the Assistant Commissioner did not embody the terms of the family arrangement but was merely in the nature of a memorandum meant for the information 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 arrangement was not registered it could be used for a collateral purpose, 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 conduct of the parties who having taken benefit under the settlement keep their mouths shut for $even years and later try to resile from the settlement. In Shyam Sunder 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 Hon'ble 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., property 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 representatives shall take three shares. We both parties, having agreed that whenever anyone of us or anyone of our representatives desires at any time that the family properties should be partitioned according to the above mentioned shares and that till such time our family shall continue to be joint subject to the 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. It did not 14 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== also affect the interests of the parties in immovable properties in praesenti. What in effect it said was that that the parties would continue to be members of the joint Hindu family and that Narasimha would manage the family properties as before, and that when they effected a partition in future Venkatramaiah would get 2 shares and Narasimha would get 3 shares in the properties thou in existence or acquired thereafter. 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 interest in immovable properties in praesenti in favour of the parties mentioned therein. If so, it follows that the document was not hit by Section 17 of the Indian Registration Act.
22. The principle underlying Section 17 of the Registration Act is well settled. The decisions cited at the Bar are only application of the said principle to the facts of each case. The decision of the Judicial Committee in (1911) 38 Ind App 104(PC), relates to an instrument of 1884 which wasintended to effect partition immediately and, therefore, it was held that it was void as regards immovable property. The decision in Rajangam Ayyar v. Rajangam Ayyar 50 Ind App 134 : AIR 1922 PC 266, turned upon the terms of Ex. AY whereunder two brothers severed themselves in status and agreed to have a document executed for effectuating the partition. Dealing with the document, the Judicial Committee held that the document did not by itself create, assign, limit or extinguish any right or interest in immovable property but only created a right to obtain another document. The decision in Hari Sankar Paul v. Kedar Nath Saha , was relied upon by analogy. There an agreement in writing which contained all the essentials of the transaction of a mortgage was held to be a document hit by Section 17(1)(b) of the Registration Act. It was held to be a document containing the bargain made between the parties and constituting a transfer of the property by way of mortgage and, therefore, it required registration. Further citation is unnecessary.
23. For the foregoing reasons, we hold that the document, Ex. B- 1, does not require registration."
17. The Hon'ble Delhi High Court in the case of Rajesh Chandra Sood vs. Umesh Chandra Sood (supra) while 15 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== considering the effect of non registration of the family arrangement deed held as under:-
" In Roshan Singh and Ors., v. Zile Singh and Ors., reported in (1988) 2 S.C.R. page 1106 the Supreme Court after noticing various earlier decisions held that the true principle is that if the arrangement of compromise is one under which a person having an absolute title to the property transfers his title in some of the items thereof to the others, the formalities prescribed by law have to be complied with, since the transferees derive their respective title through the transferor. If, the other hand, the parties set up competing titles and the differences are resolved by the compromise, there is no question of one deriving title ' 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 created or declared by the document for the first time. It is assumed that the title had always resided in him or her so far as the property falling to his or her share is concerned and therefore to conveyance is necessary. -. » In the present case, the petitioner and the respondent were the two sons of late Smt. Lilawati Sood and, therefore, they were and are the only heirs of said Smt. Lilawati Sood under 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 right. 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 aforesaid previousness of half undivided share in the property. What the family settlement intended to do was to ascertain the portion of their share with definite identification, and the mode of acquiring possession by the petitioner and, therefore, the said document cannot be treated to be a document of title requiring registration.
Even if it is assumed for the purpose of argument that the said document created right and title to the property, the clause relating to arbitration agreement could be looked into by the Court without there being any registration of the said document. In Damodar Valley Corporation v. K.K. Kar, of the said judgment the Supreme Court referred to the decision of 16 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== Union of India v. Kishorilal Gupta, and mentioned with approval the decision recorded by Hon'ble Mr. Justice Subba Rao (as his Lordship then was) that an arbitration clause is a collateral term of a contract as distinguished from its obstantive terms. It was also 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 arbitration clause is a collateral term of contract. In that view of the matter such a clause could be looked into by the Court being a matter of collateral purpose without their being any registration in respect of the same. Therefore, even if the arbitration agreement is a transaction affecting such immovable property under Section 49(c) of the Registration Act, then the 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, sought to rely upon several decisions in support his contention that the family arrangement not being a registered document was illegal and void and, therefore, arbitration clause also perished with it. In support of the said contention he mainly relied upon the decision in Union of India v. Kishorilal Gupta (supra). In my considered view the said decision instead of helping the respondent helps the petitioner as dealt with hereinabove. In the present case the family arrangement cannot be said to be void and non est as was before the Supreme Court in Unjon of India v. Kishori Lal Gupta (supra). The respondent himself did not challenge the legality and validity of the said family arrangement in the present proceedings at all and the said document is an admitted document nor a plea was taken that the said document is not even admissible the same being not registered. The decisions relied upon by the counsel appearing for the respondent, therefore, shall have no application 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 Department (supra) after following the ratio laid down by the 17 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== Hon'ble Supreme Court in the case of Kale and Others (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 family arrangement entered into with a view to resolve family disputes, which is bonafide, voluntary and not 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 the family arrangement it is clear from the circumstances 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 that family arrangement entered into with a view to resolve family dispute, which is bonafide, voluntary and not induced by fraud, coercion or undue influence does not require registration. Such family arrangement by itself would convey right, title and interest in immovable property without any further requirements. Reverting back to the facts of the present case, it is claimed by the assessee that the family arrangement as per the 18 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== 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 per 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 proved by the assessee, whether it is a genuine and authentic document. Furthermore, as can be seen from the order of the CIT (A), he has also refused to accept the family 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 deed 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 was actually acted upon. There is no evidence on record to show that the family members actually became owners of the properties falling into their irrespective shares as per the family arrangement. At least no document has been produced before us to establish ownership of the property in the name of the family members as per the partition deed. As it appears, no such evidence was also produced before the authorities below. In these circumstances, it is difficult to accept the 19 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
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====================== assessee's claim of division of property as per the partition deed dt. 112005. Accordingly, we uphold the decision of the authorities below in taking the entire 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 issue of rejection of claim of indexation from 1981.
21. Briefly the facts are, in course of the assessment proceeding the assessee pleaded that since the land in question was under the protected tenancy of the assessee's family prior to 1981, the fair market value of the property as on 1-4-1981, the fair market value of the property as on 1-4-1981 of Rs.94,600/- should 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 Officer dt. 24-2-1993. The assessee along with 12 others had purchased land admeasuring Ac.14.05 guntas for a consideration of Rs.27,200. The CIT (A) also confirmed 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 any infirmity in the order of the revenue authorities. Though the assessee has contended that the land in question was received by assessee's family earlier to 20 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
Son & LR M. Bhaskar Reddy, Hyderabad..
====================== 1981, hence fair market value of the property as on 1/4/1981 should be taken for indexation, but there are no material on record to show that assessee's family 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 year 1992-93 as a result of purchase from the original owners. In this view of the matter the ground raised by the assessee is dismissed.
23. The next issue as raised in ground No.5 is relating to denial of exemption u/s 54F of the Act on the ground 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 the discussions made by the CIT (A) in paragraph 5.13.1 of his order proves otherwise. The assessee has not been able to controvert the finding of the CIT (A) with supporting evidence. Further, since we have already held in earlier part of the order, that the assessee has not been able to prove that the so called family arrangement was actually acted upon, the assessee's claim that after the family arrangement the assessee was not the owner of any residential house cannot be 21 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
Son & LR M. Bhaskar Reddy, Hyderabad..
====================== accepted. In the aforesaid circumstances, we uphold the order of the CIT (A) on this issue.
25. The next issue as raised in ground No.6 relates to assessee's 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 capital 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 family 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 assessee. The Assessing Officer after examining the provisions 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 his 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 Officer 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 land appears to be logical and appropriate. Hence, we do 22 ITA no.1052 of 2013 Late M. Ram Reddy, rep.
Son & LR M. Bhaskar Reddy, Hyderabad..
====================== not find any reason to interfere with the order of the CIT (A) on this issue. The ground raised is dismissed.
27. In the result, the appeal filed by the assessee stands dismissed.
Oder pronounced in open Court on 17 .01.2014.
Sd/ - /-
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, Uppal,
Hyderabad.
2 Income-tax Officer, Ward-11(2), IT Towers, AC Guards, Masabtank,
Hyderabad.
3 CIT(A)-VI, Hyderabad
4 CIT-V, Hyderabad.
5. ITAT, Departmental Representative, Hyderabad Jmr*