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1. One Sri Gulraj Gupta had purchased a property bearing No. 20, Barakhamba Road, New Delhi, in the name of his wife, Smt. Lilawati Gupta; He died some time in 1940 leaving behind his widow, Smt. Lilawati Gupta, two sons, Sarvasri Hans Raj Gupta and Devraj Gupta, and one daughter, Smt. Vimla Lal, who is the respondent-assessee before us. After the death of Sri Gulraj Gupta his sons resisted the exclusive claim made to this property by Smt. Lilawati Gupta and one of them, that is, Sri Devraj Gupta, filed a suit for separate possession by partition in respect of this property, being Suit No. 70 of 1966. The defendants in the suit were Smt. Lilawati and Sri Hans Raj Gupta After contest a preliminary decree for partition was passed on 11th April, 1967. The property was held to be the joint property of the parties to the suit and each of them was declared to be the owner of one-third share therein. Smt. Lilawati Gupta lived separately in one-third portion of the house. Thereafter, in final decree proceedings an advocate was appointed as Commissioner for effecting partition of the property. The Commissioner made an interim report and his final report was awaited. During the pendency of the proceedings, Smt. Lilawati died on 22nd November, 1969.

7. The AAC did' not accept these contentions and, agreeing with the ITO, held that the relinquishment by the assessee of her rights, title and interest in the disputed property amounted to a transfer within the meaning of Section 2(47) of the Act and the capital gain arising as a result thereof were liable to be taxed.

8. Still aggrieved, the assessee took up the matter in further appeal before the Income-tax Appellate Tribunal, Delhi Bench, at New Delhi. On her behalf the same contentions were urged which were placed before the AAC. The Appellate Tribunal, agreeing with the AAC, held that the assessee did acquire a right, in the disputed property under the will of Smt. Lilawati Gupta. However, in the opinion of the Appellate Tribunal: " After the death of Smt. Lilawati Gupta and Smt. Subhadra Devi the property was held by the assessee, her two brothers and nephews as co-owners" and " as it was considered impracticable and inexpedient to divide the property by metes and bounds owing to practical difficulties, it was decided by this body of individuals owning the property to hand over the property in equal shares to Hans Raj Gupta on the one hand and Devraj Gupta and his sons on the other and pay the value of her share in the property to Smt. Vimla Lal. In other words, what was given to the assessee was only the monetary value of her share in the property instead of partition of the property which, in the circumstances of the case, it was riot practicable to carry out". Another finding recorded by the Appellate Tribunal is that these co-owners did not constitute " an association of persons " but constituted a body of individuals owning the property, and " the expression contained in Section 47(ii) of the Act would apply to the above distribution ". Accordingly, the Appellate Tribunal excluded the aforesaid amount of Rs. 60,180 from out of the total income of the assesses for the year under consideration.

13. As noted above, in the suit for partition the disputed property had been held to be joint property of the mother and her two sons. A preliminary decree had been passed and final decree proceedings were pending. In those proceedings the Commissioner had submitted an interim report and his final report was awaited. Pending those proceedings the mother died. It has been found as a fact that the mother had been actually residing in a portion of the disputed property. She executed . a will of her one-third share in this property on January 31, 1968. By means of that will she bequeathed two-thirds of her share to her daughter, Smt. Vimla Lal, and the remaining one-third to her daughter-in-law, Smt. Subhadra Devi, and during her lifetime she had permitted the assessee to stay in the portion of the property belonging to her with a stipulation that she paid Rs. 100 per month to Smt. Subhadra Devi for the use and occupation of the portion bequeathed to her. "After her death when the assessee set up this will, one of her brothers questioned it. The matter was ultimately settled by compromise. The assessee relinquished her right, title and interest in the disputed property which she had received under her mother's will in favour of her brother, Sri Hans Raj Gupta, and the nephews, Prem Raj Gupta and Pradeep Kumar Gupta, and by way of consideration received Rs. 2,10,000 and Rs. 1,84,000. The former amount was by way of compensation for loss of residence and the latter by way of liquidated damages. According to the Appellate Tribunal the occasion for this transaction was that it was considered " impracticable and inexpedient to divide the property by metes and bounds owing to practical difficulties". The compromise deed does not contain any such reason. Anyhow this observation does not mean that the property was incapable of partition, as was urged before us on behalf of the assessee by her counsel, Sri G. C. Sharma. It was thus not a case of division of assets for the reason that the property was incapable of partition. The occasion was " to facilitate the partition by metes and bounds in two equal shares ". Even that partition was not effected by this document. All it evidenced was that the assessee relinquished and/or surrendered all her right, title and interest in this property and for the same she received cash consideration. Therefore, it is not possible to hold that there was any "distribution of capital assets". We would come to the other aspect a little later. All that this transaction indicates is that the assessee relinquished and/or surrendered all her right, title of interest in the disputed property in favour of her brother and nephews. It is not known how this property was ultimately partitioned between those persons. Anyhow it cannot be said to be a case of distribution of capital assets. It is clearly a case of relinquishment or extinguishment of the rights of the assessee in the disputed property.

21. Our answer to this question, therefore, is that the Appellate Tribunal erred in holding that the disputed transaction is exempted from levy of capital gain under Section 47(ii) of the Act.

22. Coming to question No. 1 it would be seen that while considering question No. 2 we have already held that the assessee did not constitute a body of individuals owning the disputed property and further that the impugned transaction did not amount to a distribution of a capital asset on the dissolution of such body of individuals. We have also held that by means of this transaction the assessee relinquished all her right, title and interest in the disputed property in favour of her brothers and nephews. Now, the expression "transfer" is defined in Section 2(47) in relation to a capital asset to include sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law. Inasmuch as the impugned transaction amounted to a relinquishment of all her right, title and interest in the disputed property by the assessee, it would be covered within this definition and the view taken by the Tribunal to the contrary is erroneous. There were three co-owners of this property, viz., Smt. Lilawati, Sri Hans Raj Gupta and Sri Devraj Gupta, each having 1/3 share therein. Smt. Lilawati bequeathed her 1/3 share to her daughter, the present assessee and to her daughter-in-law, Smt. Subhadra Devi, in the proportion of 2/3 and 1/3. In other words, after the death of Smt. Lilawati, the assessee became the co-owner of a specific share in this property and that was to the extent of 2/3 of 1/3. It would not be correct to say, as contended on behalf of the assessee by Sri Sharma, that the assessee did not acquire any right in the property in dispute on the death of Smt. Lilawati and that whatever right she had in this property was created in her favour by means of the compromise dated 15th December, 1970, and that simultaneously with the acquisition of the right she relinquished it and thus at no point of time did she hold the property before its transfer. The correct position is that immediately on the death of Smt. Lilawati the assessee acquired a right, title and interest in the disputed property as legatee of the deceased and that was to the extent of 2/3 share in her mother's 1/3 share. This creation of right would not be defeated merely because Sri Hans Raj Gupta challenged the genuineness of the will. She, however, relinquished her right, title or interest in this property by means of the compromise dated 15th December, 1970. Thus, she was a co-owner of the property along with her brothers and nephews and her share was ascertained and definite and when she relinquished that share the transaction would be a transfer within the meaning of Section 2(47) of the Act. Our answer to this question, therefore, is in the affirmative.