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Kay Arr Enterprises vs The Jt. Commissioner Of I.T., Special ... on 26 July, 2005 cites

Maturi Pullaiah And Anr. vs Maturi Narasimham And Ors. on 1 March, 1966

A large business house has controlled by many companies but to avoid litigation among families, they have reached at a family arrangement to rearrange the share holdings between the elders of the families as it was necessary to control the 1 companies effectively by the major share holders to produce better profit and exert effective supervision both in the administration and production for the functioning of the companies. Shri K. Rajagopal and his family members were one part of Lakshmi Group of companies and other part was Shri G.K. Sundaram and his family members. A family arrangement was reached between Sri K. Rajagopal and Sri G.K. Sundaram to rearrange the share holdings among these two families of Lakshmi Group of companies. This was done due to various difficulties in managing the various companies as a group and for the purpose of betterment of respective companies and management by the elders of the family, Sri K. Rajagopal and family by way of this family arrangement transferred their interests in the Lakshmi Mills Ltd. and Lakshmi Card Clothing Mfg. Co. Ltd. to the family of Shri G.K. Sundaram in lieu of this family arrangement Shri G.K. Sundaram transferred entire share holdings in Vijayeswari Textile Mills to the assessee firm and Sri K. Rajagopal and family. This family arrangement was effected verbally and it was not reduced in writing. 6.1. During the course of argument, the learned Counsel for the assessee relied on the case laws which are discussed as under: He relied on the decision of the Hon'ble Supreme Court in the case of Maturi Pullaiah and Anr. v. Maturi Narasimham and Ors., AIR 1966 [SC] 1836 (V 53 the learned Counsel for the assessee 369} wherein the Hon'ble Apex Court has held as under:
Supreme Court of India Cites 7 - Cited by 136 - K S Rao - Full Document

Kale & Others vs Deputy Director Of Consolidation Ors on 21 January, 1976

As regard to the admission of this transaction as a transfer and accordingly paid capital gain, it is well settled in law that admission is best evidence of a point in issue and though not conclusive, is decisive of the matter unless successfully withdrawn or proved erroneous. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is always open to the person who made the admission to show that it is incorrect. In the present case, the admission is not made by the assessee rather the other party has accepted the transaction as a transfer and accordingly paid capital gains tax that will not de bar the assessee from contesting the issue from the facts and circumstances of the case. It is clear that this is an admission of other party which will not bind the present assessees, Accordingly, we reject this argument of the Revenue. In view of the above discussion and after considering the case laws of the Hon'ble Apex Court and Jurisdictional High Court, we are of the view that the rearrangement of share holdings in the companies to avoid possible litigation among family members seems to be a prudent arrangement which is necessary to control the companies effectively by the major share holders to produce better prospects and active supervision. Accordingly, the same cannot be held as a transfer of shares which is exigible to capital gain tax. No doubt this family arrangement is not reduced into writing and there is no need to reduce this family arrangement in writing compulsorily and it need not be registered in view of the ratio of the decision of the Hon'ble Supreme Court in Kale and others (supra). From the above, it is clear that these two families are part of bigger families which is very clear from the family tree produced above. Accordingly, we hold that these transactions are not exigible to capital gain tax. Accordingly, the orders of the authorities below are reversed.
Supreme Court of India Cites 26 - Cited by 687 - S M Ali - Full Document

Commissioner Of Income-Tax vs Al. Ramanathan on 12 December, 1998

Held, that the dispute arose in the family and the family arrangement was arrived at in consultation with the panchayatdars and accordingly realignment of interest in several properties resulted. The family arrangement was arrived at in order to avoid continuous friction and to maintain peace among the family members. The family arrangement was governed by the principles which were not applicable to dealings between strangers. So such re-alignment of interest by way of effecting family arrangements among the family members would not amount to transfer. The Tribunal found that the family arrangement was a bona fide one inasmuch as it was made voluntarily and not induced by any fraud or collusion and the conduct of the parties was consistent with the bona fide family arrangement particularly when it was arrived at in the present of panchayatdars. The family arrangement involved in the above case did not amount to transfer. Therefore, no capital gains arose."
Madras High Court Cites 6 - Cited by 16 - R J Babu - Full Document

Commissioner Of Income-Tax vs R. Ponnammal on 22 January, 1986

The expression "family" had a very wide connotation and it is not as held by the learned Departmental Representative that there is no family as such but the word "family" in the context of a family arrangement is not to be understood in a narrow sense of being a group of persons who are recognized in law as having a right of succession or having a claim to a share in the property in dispute. If it is settled in one between near relations then the settlement of such a dispute can be considered as a family arrangement. From the above case laws, it is clear that a compromise or family arrangement is based on the assumption that there is an antecedent title of some sort in the parties and the agreement acknowledges and defines what that title is, each party relinquishing all claims to property other than that falling to his share and recognizing the right of the others, as they had previously asserted it to the portions allotted to them respectively. These observations do not mean that some title must exist as a fact in the persons entering into a family arrangement. They simply mean that it is to be assumed that the parties to the arrangement had an antecedent. It is also to be noted that a family arrangement by which the property is equitably divided between the various contenders so as to achieve an equal distribution of wealth instead of concentrating the same in the hands of a few is undoubtedly a milestone in the administration of social justice. That is why the term "family" has to be understood in a wider sense so as to include within its fold not only close relations or legal heirs but even those persons who may have some sort of antecedent title, a semblance of a claim or even if they have a spes succession is so that future disputes are sealed for ever and the family instead of fighting claims inter se and wasting time, money and energy on such fruitless or futile litigation is able to devote its attention to more constructive work in the larger interest of the country. The Courts have, therefore, leaned in favour of upholding a family arrangement instead of disturbing the same on technical or trivial grounds. Where the Courts find that the family arrangement suffers from a legal lacuna or a formal defect the rule of estoppel is pressed into service and is applied to shut out plea of the person who being a party to family arrangement seeks to unsettle a settled dispute and claims to revoke the family arrangement under which he has himself enjoyed some material benefits. 9.1. As regard to another aspect of estoppel that the other family i.e. G.K. Sundaram and family declared these transactions as transfers and paid capital gains tax then that estoppel will not apply in this case.
Madras High Court Cites 14 - Cited by 29 - Full Document
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