Madras High Court
Commissioner Of Income-Tax vs Shanthi Chandran And Anr. on 25 April, 1999
Equivalent citations: [2000]241ITR371(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT R. Jayasimha Babu, J.
1. The question referred to us is "whether, on the facts and circumstances of the case and having regard to the provisions of Section 49 of the Income-tax Act, 1961, the Appellate Tribunal is right in law in holding that the value of shares as mentioned in the family settlement deed and not the cost to the previous owner, should be taken as the cost of acquisition of shares obtained by the assessee in the family settlement ?"
2. The assessees while they were minors and unmarried, being the daughters of one Jagadish Chandran, received certain shares from Premier Cotton Spinning Mills Ltd., under the settlement effected by their father on March 2, 1977. In that settlement, the value of the shares mentioned was higher than the amount for which the said Jagadish Chandran had acquired the shares. Subsequently, in the assessment year 1982-83, the assessee sold those shares and derived a capital gain therefrom.
3. The assessees contended before the assessing authority that the cost of acquisition of the shares which they were entitled to deduct under Section 48(ii) of the Act should be taken as the amount mentioned in the settlement deed. The Income-tax Officer did not accept their contention and held that under Section 49 of the Act, it was the cost to the previous owner that was required to be regarded as the cost of acquisition. The Commissioner having held otherwise in appeal, the Income-tax Officer appealed to the Tribunal which confirmed the order of the appellate authority. The Tribunal held that the shares had been obtained by the two daughters for a consideration and the consideration was in the view of the Tribunal their right to receive their marriage expenses.
4. Section 49 of the Act deals with the cost with reference to certain modes of acquisition and provides that where the capital asset became the property of the assessee in any of the modes mentioned in Sub-clauses (i) to (iv), the cost of acquisition of the assets shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.
5. The sub-clauses of Section 49(1) of the Act refer to the distribution of assets on the total or partial partition of a Hindu undivided family ; the assets received under a gift or will ; the assets received by way of succession, inheritance or devolution, the assets received on the distribution of assets on the dissolution of a firm, body of individuals or other association of persons ; the assets received on the distribution of assets on the liquidation of a company ; and to the assets under transfer to a revocable or an irrevocable trust, etc.
6. In a partition, the consideration for the partition is the mutual relin-quishment of the rights of the parties in the joint family properties in which each has a share. The fact that the daughters have a right to maintenance and marriage expenses and would have been entitled to a share at a partition does not render the value of the shares allotted to them under a settlement deed, the price for which they had sold or relinquished their right over the properties of the family. The family settlement in this context is analogous to a partition. It is the cost to the previous owner that is to be taken into account as the cost of acquisition of shares and not the amounts mentioned in the family settlement deed by the settlor.
7. The question referred to us is, therefore, answered in favour of the Revenue and against the assessee.