IN THE HIGH COURT OF BOMBAY AT GOA
\nTAX APPEAL NO.4 OF 2012
\nP.P. Mahatme, Power of Attorney
\nLorna Margaret Pinto,
\nGabmar Apartments,
\nVasco Da Gama. \u2026 Appellant.
\nV\/s.
\nAsst. Commissioner of Income-tax
\nCircle-2, Margao. \u2026 Respondent.
\nMr. Mihir Naniwadekar with Mr. Purushottam Karpe, Advocates for
\nthe Appellant.
\nMs. Amira Abdul Razaq, Standing Counsel for the Respondent.
\nCoram : M.S. Sonak &
\nC.V. Bhadang, JJ.
\nReserved on : 6th November, 2019.
\nPronounced on : 8th November, 2019
\nJ U D G M E N T : (Per M.S. Sonak, J.)
\nHeard Mr. Mihir Naniwadekar with Mr. Purushottam
\nKarpe for the Appellant and Ms. Amira Razaq, Standing Counsel
\nfor the Respondent.
\n2. This Appeal was on board for final hearing, along with Tax
\nAppeals No.3\/2012, 9\/2012 and 10\/2012. All these appeals involve
\nidentical issues of both, law and fact. However, the learned Counsel
\nfor the parties requested that this Appeal be treated as the lead
\n2 txa4-12-dt.08-11-19
\nAppeal. The learned Counsel for the parties agree that the decision
\nin this Appeal will govern the fate of the remaining three appeals, as
\nwell.
\n3. This Appeal was admitted on 13.2.2012, on the following
\nsubstantial questions of law :
\ni. Whether on the facts and in the circumstances of the
\ncase, the Appellate Tribunal is right in holding on a
\nperverse view that the change of position by mere
\nclarification by the Assessing Officer regarding status of the
\nassessee, which is contrary to the reasons recorded under
\nSection 148(2) and rule of law laid down by the
\njurisdictional High Court could give jurisdiction to issue
\nthe impugned notice under Section 148, which is otherwise
\nbarred by limitation?
\nii. Whether on the facts and in the circumstances of the
\ncase, the Appellate Tribunal is right in dismissing the appeal
\nbased on incorrect appreciation of facts and law and
\ntaking a perverse view that the family arrangement
\napproved by the Civil Court was not bonafide and
\nconsequently there was a transfer of assets attracting tax on
\ncapital gains ?
\n4. The Appellant is a Power of Attorney holder to Lorna
\nMargaret Pinto, who is a Non-Resident Indian (NRI), about which
\nthere is no serious dispute. The present Appellant and the Appellants
\nin connected Appeals, are sisters, who were involved in a dispute
\nrelating to an immovable property in the State of Goa. It was the
\ncase of these Appellants that the said immovable property was sought
\n3 txa4-12-dt.08-11-19
\nto be usurped by Cristovam and Alvaro, relatives of the Appellants.
\nThis led to the institution of Special Civil Suit No. 255\/1999, which
\nwas ultimately disposed of by a Consent Decree dated 17.4.1998. In
\nterms of the Consent Decree, the Appellants received an amount of
\nRs.5.50 crores during the Assessment Year 1999-2000.
\n5. In relation to the aforesaid amount, notices under Section
\n148 of the Income Tax Act, 1961 (IT Act) were issued to the
\nAppellants, seeking to reopen the assessment, inter alia, on the
\nground that the aforesaid amount was taxable \u201ccapital gains\u201d. These
\nnotices were dated 14.03.2005 and were accompanied by reasons for
\nreopening, in which, it was stated that Mr. Pradip P. Mahatme, the
\nPower of Attorney holder was proposed to be treated as the agent of
\nthe Assessee as provided in Section 163 of the IT Act.
\n6. Upon the Power of Attorney seeking clarification, by a
\ncommunication dated 22\/03\/2005, he was informed that he may file
\nreturn in response to the notice under Section 148 as the
\n‘representative assessee’ as per the provisions of Section 160(1) of the
\nIT Act for the Assessee – Lorna Pinto.
\n7. The aforesaid was, however, followed by yet another
\ncommunication dated 21.06.2005, in which, the Assessing Officer
\nclarified that the notices under Section 148, dated 14.03.2005 may
\nbe read as being served upon Mr. P.P. Mahatme as the ‘power of
\n4 txa4-12-dt.08-11-19
\nattorney holder’ of Mrs. Lorna Margaret Pinto Wallworth.
\n8. The present Appellant, as well as the Appellants in the
\nconnected Appeals, instituted Writ Petitions No.70\/2006, 71\/2006,
\n72\/2006 and 73\/2006, before this Court, questioning the notices
\ndated 14.03.2005, under Section 148 of the IT Act, inter alia, on the
\nground that the same were barred by limitation as prescribed under
\nSection 149(3) of the IT Act. These petitions were dismissed by
\nJudgment and Order dated 27\/03\/2006.
\n9. As against the aforesaid, the Appellants instituted Special
\nLeave Petition before the Hon’ble Supreme Court, which came to be
\ndisposed of by order dated 17.07.2006, which reads as follows :
\n\u201cThe short question which is involved in this special leave
\npetition is whether the petitioner herein is assessable under
\nIncome Tax Act as the agent of N.R.I. Assessee or whether
\nthe income tax assessment should be done only qua the
\nN.R.I. Assessee. The order of assessment has been passed.
\nIt is the case of the N.R.I. Assessee that the assessment is
\ntime barred. However, the assessee has not moved in
\nappeal before the appellate authority. Therefore, we direct
\nthe petitioner herein\/ N.R.I. Assessee to move in appeal
\nwithin four weeks. Delay, if any, stands condoned. The
\nobjection as to limitation will also be decided by the
\nappellate authority.\u201d
\n10. The Hon’ble Apex Court by the aforesaid order dated
\n17.07.2006, granted liberty to the Appellants to institute Appeals,
\nbecause in the meanwhile, the Assessing Officer, vide Order dated
\n5 txa4-12-dt.08-11-19
\n30\/03\/2006, had already made an assessment order, bringing to tax
\nthe aforesaid amount of Rs.5.50 crores as ‘capital gains’.
\n11. The Appellant then preferred an appeal before the
\nCommissioner of Income -tax (Appeals), which was dismissed vide
\norder dated 14.12.2007.
\n12. The Appellant then instituted further appeal before the
\nIncome Tax Appellate Tribunal (ITAT), which was also dismissed vide
\norder dated 10.06.2011.
\n13. As against the order dated 10.06.2011 made by the ITAT,
\nthe Appellant has instituted the present appeal, which came to be
\nadmitted on the aforesaid substantial questions of law.
\n14. Mr. Mihir Naniwadekar, learned Counsel for the Appellant
\nsubmits that the notices dated 14.03.2005, issued under Section
\n148 of the IT Act were clearly barred by limitation prescribed under
\nSection 149(3) of the IT Act. He submits that the notices were
\nissued to Mr. P.P. Mahatme, as the ‘representative assessee’ as per the
\nprovisions of Section 160 of the IT Act. He submits that Section
\n149(3) of the IT Act clearly provides that if the person on whom a
\nnotice under section 148 is to be served is a person treated as the
\nagent of a NIR under section 163, then, such notice shall not be
\nissued after expiry of the period of 2 years. He submits that
\n6 txa4-12-dt.08-11-19
\ntherefore, the notice dated 14.03.2005 which was issued well beyond
\nthe period of 3 years from the end of relevant assessment year, was
\nclearly barred by limitation, as then applicable.
\n15. Mr. Naniwadekar submits that merely because the
\nprovisions in Section 143(3) of the IT Act were amended with effect
\nfrom 01\/07\/2012 so as to extend the period of limitation to six years,
\nthe Revenue cannot seek to derive any advantage from such
\namendment, which is basically prospective in nature. He submits
\nthat even the explanation to Section 149(3) of the IT Act, at the
\nhighest saves assessment for the Assessment Year 2010-11 and
\nAssessment Year 2011-12. He submits that based upon the
\namendment of 2012, it was clearly impermissible for the Revenue to
\nreopen the time barred assessment on the date when the notice dated
\n14.03.2005 came to be issued in the present matters. In support of
\nthis contention, Mr. Naniwadekar relies on Union of India and
\nors. vs. Uttam Steel Limited1
\n16. Mr. Naniwadekar submits that the notices dated
\n14.03.2005 issued under Section 148 are vitiated because it is settled
\nlaw that the reasons in support of such notice cannot be
\nsupplemented at a later stage, even by filing an affidavit or producing
\nany additional material. He submits that the notice under Section
\n148 requires sanction and such a sanction is issued to the reasons
\nrecorded for reopening of the assessment which accompany the notice
\n1 (2015) 13 SCC 209
\n7 txa4-12-dt.08-11-19
\nunder Section 148 of the IT Act. If such reasons are permitted to be
\nsupplemented, as has been done in the present matter by issuance of
\nthe communication dated 21.06.2005, then the principle that the
\nreasons cannot be permitted to be supplemented or the principle
\nthat no fresh reasons can be stated, will stand breached. He submits
\nthat this is yet another reason for setting aside the notice dated
\n14.03.2005 issued under Section 148 of the IT Act. In support of
\nthis contention, he relies on Hindustan Lever Ltd. vs. R.B.
\nWadkar2
\n17. Mr. Naniwadekar, without prejudice to the aforesaid,
\nsubmits that even, otherwise, this is a clear case where the parties have
\nentered into a ‘family settlement’ or ‘family arrangement’ , which is
\nperfectly bonafide. He submits that the consideration received under
\nthe family settlement, even upon transfer of right and interest in the
\nfamily property, is not taxable as capital gain under Section 145 of
\nthe IT Act. He submits that in fact, in such a situation there is really
\nno transfer or relinquishment of any right to the immovable property
\nas such. In any case, the proceeds received on the basis of such
\nfamily settlement or family arrangement cannot be brought to tax as
\ncapital gains. He submits that from the material on record, it is more
\nthan apparent that there was a bona fide family settlement arrived at
\nbetween the members of the Assessees’s family who have received the
\namount of Rs.5.50 crores, as a consequence of such family settlement
\n2 268 ITR 332
\n8 txa4-12-dt.08-11-19
\nalone. He submits that the Revenue has exceeded its jurisdiction in
\ntreating such amount as capital gains and bringing the same to tax.
\nIn support of this contention, Mr. Naniwadekar relies on the
\nfollowing decisions :
\ni) Commissioner of Income-tax, Mumbai vs. Schin P. Ambulkar 3;
\nii) Kale and others vs. Deputy Director of Consolidation and
\nothers4;
\niii) Commissioner of Income-tax vs. Kay Arr Enterprises 5.
\n18. Ms. Razaq, learned Standing Counsel for the Respondent
\ndefends the impugned order on the basis of the reasoning reflected
\ntherein. She points out that the Appellants had actually challenged
\nthe notice dated 14.03.2005 by instituting writ petitions before this
\nCourt, which writ petitions came to be dismissed vide Judgment and
\nOrder dated 27\/03\/2006. She submits that the order made by the
\nHon’ble Apex Court on 17.07.2006, at the highest leaves open the
\npoint of limitation. However, it is not permissible for the Appellant
\nto once again question the notices under Section 148 of the IT Act
\non any ground other than limitation.
\n19. Ms. Razaq submits that in any case, the principle in
\nHindustan Lever Ltd. (supra) will clearly not apply in the present
\ncase, because, the Revenue has neither added to, nor supplemented
\n3 [2014] 42 taxmann.com 22 (Bom)
\n4 [1976] 3 SCC 119
\n5 299 ITR 348 (Mad)
\n9 txa4-12-dt.08-11-19
\nthe reasons accompanying the notice dated 14.03.2005 under Section
\n148 of the IT Act. She points out that the reasons remained the
\nsame and the communication dated 21.06.2005 merely clarified that
\nthe notices were served upon Mr. P.P. Mahatme in his capacity as the
\npower of attorney holder for the Assessee and not as the
\nrepresentative assessee. She, therefore, submits that there is no any
\ninfirmity whatsoever in the notice dated 14.03.2005 issued under
\nSection 148 of the IT Act.
\n20. Ms. Razaq submits that once it is accepted that the notices
\nwere issued to Mr. P.P. Mahatme only as the power of attorney
\nholder on behalf of Assessees who are NRIs, the period of limitation
\nwhich will apply, is six years and not merely two years as urged on
\nbehalf of the Appellant. She submits that in any case, the
\namendment of 2012, when read with the Explanation, makes it clear
\nthat the notice issued on 14.03.2005, was well within the
\nprescribed period of limitation. She submits that the explanation
\nmakes it clear that the amendment of 2012 will be applicable for
\nany assessment year beginning on or before the 1st day of April 2012.
\nShe, accordingly, submits that the first substantial question of law be
\ndecided against the Appellant and in favour of the Revenue.
\n21. Ms. Razaq submits that this is not at all a case of any
\nbonafide family settlement, because the material on record
\noverwhelmingly establishes that the parties with whom the Assessees
\n10 txa4-12-dt.08-11-19
\nhave chosen to settle the dispute had no preexisting right in the
\nimmovable property which was the subject matter of the dispute. She
\npoints out that the decisions relied upon by the Appellant are in the
\ncontext of family settlements, in which preexisting rights of the
\nparties were realigned or adjudicated upon. She submits that this is
\nan essential distinguishing feature which has been noted by not less
\nthan three authorities, who have recorded the concurrent findings of
\nfact. She submits that the concurrent findings of fact so recorded,
\nsuffer from no perversities and, therefore, warrant no interference in
\nexercise of limited jurisdiction under Section 260A of the IT Act.
\nShe relies on the following decisions in support of her contentions :
\na) Union of India vs. Playworld Electronics (P.) Ltd. 6 ;
\nb) Banarsi Lal Aggarwal vs. Commissioner of Gift-tax 7
\nc) B.A. Mohota Textiles Traders (P.) Ltd. vs. Deputy
\nCommissioner of Income-tax, Special Range-28; and
\nd) Commissioner of Income-tax vs. B.M. Kharwar 9
\n22. Rival contentions now fall for our determination.
\n23. The first point which arises for determination is in the
\ncontext of the first substantial question of law, namely whether on
\nthe facts and in the circumstances of the present case, the ITAT was
\n6 1989 taxmann.com 651 (SC)
\n7 230 ITR 114 (Punjab & Haryana)
\n8 397 ITR 616 (Bombay)
\n9 72 ITR 603 (SC)
\n11 txa4-12-dt.08-11-19
\nright in holding that the notice dated 14.03.2005 issued under
\nSection 148 of the IT Act, was legal and valid.
\n24. Challenge to the notice dated 14.03.2005 issued under
\nSection 148 of the IT Act is based upon the following two grounds :
\n(i) that the issuance of communication dated 21.6.2005, in which, it
\nis stated that the notice dated 14.03.2005 should be read as addressed
\nto Mr. P.P. Mahatme, as power of attorney holder of the Assessee,
\ninstead of ‘representative assessee’ of Mrs. Lorna Pinto, amounts to
\nadding or supplementing the reasons originally accompanying the
\nnotice dated 14.03.2005 and it is urged that such supplementing of
\nreasons is impermissible, in terms of the law laid down in Hindustan
\nLever Ltd. (supra).
\n(ii) In any case, the issuance of notice dated 14.03.2005 under
\nSection 148 of the IT Act is barred by limitation prescribed under
\nSection 149(3) of the IT Act. It is further urged that the notice,
\nwhich was already barred by limitation in terms of law in force in the
\nyear 2005, cannot be revived by virtue of an amendment which came
\ninto force on 1.7.2012, in which the period of limitation was
\nextended from two years to six years. In support of this precise
\ncontention, reliance was placed on Uttam Steel Limited (supra).
\n25. On the first aspect as aforesaid, we note that this was
\nprecisely the challenge raised by the Appellants by instituting Writ
\nPetitions No.70\/2006, 71\/2006, 72\/2006 and 73\/2006, in which, the
\n12 txa4-12-dt.08-11-19
\nnotice dated 14.03.2005 was squarely challenged. This ground was
\nspecifically rejected in the Judgment and Order dated 27\/03\/2006.
\nThereafter, the Appellants instituted Special Leave Petition, in
\nwhich, liberty was granted to the Appellants to raise the issue of
\nlimitation. There was no specific liberty granted to the Appellants to
\nquestion the notice dated 14.03.2005 on the ground that the
\ncommunication dated 21.6.2005 amounts to supplementing or
\nadding to the reasons accompanying the notice dated 14.03.2005.
\nThus, we are not too sure whether the Appellant was justified once
\nagain in raising the aforesaid ground before the authorities or for that
\nmatter, before this Court.
\n26. In any case, even, upon evaluation of such ground, we are
\nsatisfied that the view taken by the authorities, warrants no
\ninterference. This is because the communication dated 21.06.2005
\nnowhere supplements or adds to the reasons accompanying the
\nnotice dated 14.03.2005. All that communication dated 21.6.2005
\nclarifies is that the notice was issued to Mr. P.P. Mahatme in his
\ncapacity as the power of attorney holder of the Assessee. There is
\nreally no dispute that Mr. P.P. Mahatme was indeed the power of
\nattorney holder of the Assessee. In these circumstances, the principle
\nin Hindustan Lever Ltd (supra) is certainly not attracted. In the said
\ndecision, reasons which found no place in the notice proposing to
\nreopen the assessment, were sought to be introduced by means of an
\naffidavit or making oral submissions in response to the challenge to
\n13 txa4-12-dt.08-11-19
\nsuch notice. It is, in these circumstances that the Hon’ble Apex
\nCourt, held that the reasons cannot be supplemented by filing an
\naffidavit or oral submissions, so as to supply material particulars in
\nwhich the said notice was lacking. Therefore, even on merits, we see
\nno ground to differ from the view taken by the authorities on the
\nissue of validity of the notice dated 14.03.2005, issued under Section
\n148 of the IT Act.
\n27. On the second aspect again, we are satisfied that the notice
\ndated 14.03.2005 under Section 148 of the IT Act was issued within
\nthe prescribed period of limitation as obtained on the date of its
\nissuance. Section 149(3) of the IT Act, inter alia, provides that if the
\nperson on whom a notice under section 148 is to be served is a
\nperson treated as the agent of the NRI under section 163, then, the
\nnotice on such agent of the NRI, shall not be issued after the expiry
\nof a period of two years from the end of the relevant assessment year.
\nIn this case, however, from the clarification contained in the
\ncommunication dated 21.6.2006, it is apparent that the notice issued
\nto Mr. P.P. Mahatme, was not in his capacity as the agent of the
\nNRI-Assessee, but the same was issued to him as the power of
\nattorney holder of the NRI-Assessee. In such a situation, the period
\nof limitation for issuance of the notice was always 6 years. Therefore,
\nthe notice dated 14.03.2005 being within 6 years from the end of
\nrelevant assessment year, which is 1999-2000, was well within the
\nperiod of limitation, as then prevalent.
\n14 txa4-12-dt.08-11-19
\n28. The provisions of Section 149(3) of the IT Act were
\namended by the Finance Act, 2012 with effect from 1\/7\/2012. The
\namendment extended the period of limitation for issuance of notice
\nunder Section 148, even upon the agent of the NRI, from 2 years to
\n6 years.
\n29. Explanation to Section 149(3) again introduced by the
\nFinance Act, 2012, reads as follows :
\n\u201cExplanation.\u2014For the removal of doubts, it is hereby
\nclarified that the provisions of sub-sections (1) and (3), as
\namended by the Finance Act, 2012, shall also be applicable
\nfor any assessment year beginning on or before the 1st day
\nof April, 2012\u201d.
\n30. Looking to the width of the aforesaid explanation, it is not
\npossible to accept Mr. Naniwadekar’s contention that the extended
\nperiod of limitation will apply only to the assessments for the
\nAssessment Year 2010-11 or 2011-12. The explanation refers to any
\nassessment year beginning on or before the 1st day of April, 2012.
\nThe explanation has been introduced specifically for the purpose of
\nremoval of doubts or to clarify the position with regard to the
\napplicability of the amended provisions.
\n31. Mr. Naniwadekar had placed reliance upon paragraph
\n10.1 in Uttam Steel Limited (supra) which, in turn, refers to the
\n15 txa4-12-dt.08-11-19
\ndecision in S.S. Gadgil vs. Lal and Co. reported in AIR 1965 SC
\n171. In the said decision, it is true that the Hon’ble Apex Court held
\nthat the subsequent amendment will not assist the Revenue to
\ncommence a proceeding even though at the date on which the notice
\nfor commencement was issued, when such notice was barred by
\nlimitation. However, Hon’ble Apex Court added that such provision
\nmust be read subject to the rule that in the absence of an express
\nprovision or clear implication, the legislature does not intend to
\nattribute to the amending provision a greater retrospectivity than is
\nexpressly mentioned, nor to authorise the Income Tax Officer to
\ncommence proceedings which before the new Act came into force
\nhad by the expiry of the period provided, become barred.
\n32. In the present case, the explanation to Section 149 of the
\nIT Act makes all the difference. The explanation, is an express
\nprovision that the legislature intended the amendment to apply for
\nany assessment year, beginning on or before 1st day of April, 2012.
\nThe ruling in Uttam Steel Limited (supra), or for that matter, in S.S.
\nGadgil (supra) is, therefore, distinguishable.
\n33. In any case, it is clarified that even, without resort to the
\namendment of 2012, in the facts and circumstances of the present
\ncase, it is quite clear that the notice dated 14.3.2005 was issued well
\nwithin the period of limitation, as prevalent on the date of issuance
\nof such notice.
\n16 txa4-12-dt.08-11-19
\n34. For the aforesaid reasons, the first substantial question of
\nlaw is required to be answered against the Appellant and in favour of
\nthe Revenue.
\n35. In so far as the second substantial question of law is
\nconcerned, it is necessary to note that the Assessing Officer,
\nCommissioner of Income-tax (Appeals) and the ITAT have
\nconcurrently held that notwithstanding the nomenclature of the
\nsettlement, or the fact that the settlement is incorporated in the
\nConsent Decree, the same is not a family settlement as such, the
\nprinciple in Sachin Ambulkar (supra) is inapplicable. This means
\nthat the three authorities have basically returned a finding of fact
\nthat the settlement in this case, is not a family settlement as such, so
\nas to regard the income derived therefrom by the Appellant as
\ninexigible to capital gains tax.
\n36. The family settlement referred to in Sachin Ambulkar
\n(supra) was a settlement amongst family members in the context of
\ntheir ‘preexisting right’. In this context, the ITAT whose decision
\nwas questioned by the Revenue in the case of Sachin Ambulkar
\n(supra), had held that since the settlement ‘only defines a preexisting
\njoint interest as separate interests, there is no conveyance, if the
\narrangement is bonafide’ . Since there is no conveyance, there is no
\nneed for registration of such arrangements, when orally made, even if
\n17 txa4-12-dt.08-11-19
\nlater on reduced to writing. The ITAT, thereafter, followed the
\ndecision of the Hon’ble Apex Court in the case of Maturi Pullaiah
\nvs. Maturi Narasinham, reported in AIR 1966 SC 1836 and held
\nthat where there is no transfer of assets in the family arrangement and
\nthe amount received by the Assessee is part of the family
\narrangement and not towards the transfer of any capital assets, such
\namount cannot be regarded as a capital gain and no capital gains tax
\nliability arises. In Sachin Ambulkar (supra), this Court declined to
\ninterfere with the view taken by the ITAT by observing that the
\ndecision of the ITAT ‘is based on facts. Hence no question of law
\narises’.
\n37. The findings of fact, in the present case, concurrently
\nrecorded by all the three authorities indicate that there was no issue
\nof any ‘preexisting right’ as between the Appellants, Cristovam and
\nAlvaro, who are alleged to have usurped the immovable property
\nbelonging to the Appellants. In fact, the record which has been
\nassessed in detail by the the Commissioner of Income-tax (Appeals),
\nestablishes that the properties of Xavier Pinto were allocated to his
\nthree sons Jose, Rosario and Antonio who, in turn, had one son each
\nby name of Alvaro, Cristovam and Anthony. Anthony migrated to
\nEngland along with his father Antonio. Margaret (present assessee)
\nis the wife of Anthony. They had three daughters Lorna, Julia and
\nSiobhan who are the Appellants in the connected Appeals. Since
\nthere was already a partition of the properties owned by Xavier Pinto
\n18 txa4-12-dt.08-11-19
\nbetween his three sons Jose, Rosario and Antonio sometime in 1950s,
\nobviously Alvaro and Cristovam had no right whatsoever in the
\nimmovable properties exclusively belonging to Antonio and after his
\ndemise, his son Anthony. After demise of Anthony, the properties
\nwere exclusively inherited by the present Appellants, who are the wife
\nand daughter of said Anthony.
\n38. In fact, it was the case of the Appellants that Alvaro and
\nCristovam had no right whatsoever to the immovable property in
\nquestion, which was partitioned in favour of their predecessor-in-title
\nfor almost three generations. Since, there was no issue of any
\n‘preexisting right’ as such between the Appellants and the said
\nCristovam and Alvaro, it can really not be said that the settlement
\narrived at between the Appellants and the said two persons qualify the
\nsame as bonafide family settlement, in order to infer therefrom that
\nthe consideration received was not some capital gains. These are all
\nfindings of fact, recorded by the three authorities. These findings
\nare duly borne from the material on record and even the interferences
\ndrawn cannot be said to be vitiated by any perversity as such.
\n39. The decision in Kale and others (supra) is quite
\ndistinguishable, because in the present case, there is clear and cogent
\nmaterial available on record to establish that Cristovam and Alvaro
\nhad no right in the immovable property which was the subject matter
\nof dispute and consequently the settlement between the Appellant
\n19 txa4-12-dt.08-11-19
\nand the said two persons can hardly be described as a family
\nsettlement. The settlement may be enforceable inter-parties now that
\nthe same is incorporated in the consent terms, based upon a consent
\ndecree may have been issued. However such settlement, cannot be
\ncalled as a family settlement or family arrangement, as is understood
\nin the case of Kale and others (supra) or in the case of Sachin
\nAmbulkar (supra). Merely because dispute involved some family
\nmembers and such dispute is ultimately settled by filing consent
\nterms, the same cannot be styled as a family arrangement or family
\nsettlement and on such basis, it cannot be held that the consideration
\nreceived as a result of such settlement, does not constitute capital
\ngain.
\n40. The decision in the case of Kay Arr Enterprises (supra), also
\nrelies upon the decisions in Kale and others (supra), and Maturi
\nPullaiah (supra). Again, in the said case as well, the view taken is that
\nthe family settlement was nothing, but a realignment of preexisting
\nright and thus, there was no liability for payment of any capital gains
\ntax .
\n41. This Court, in the case of B.A. Mohota Textiles Traders (P.)
\nLtd. (supra) has, however, taken a view different from the view taken
\nby Madras High Court in Kay Arr Enterprises (supra). This Court
\nhas held that a family settlement through the Court which required
\nthe Assessee Company to transfer shares held by it in another
\n20 txa4-12-dt.08-11-19
\ncompany in favour of certain family members, will be required to pay
\nthe capital gains tax, since the Assessee was a separate legal entity
\nbeing incorporated as a limited company. The substantial question of
\nlaw was, accordingly, decided in favour of the Revenue and against
\nthe Assessee.
\n42. In Banarsi Lal Aggarwal (supra), the Assessee constructed
\na property by taking loans from his family members. As he failed to
\nrepay the loan, the family members claimed a share in the property.
\nThe Assessee gave them 3\/4th share in a family settlement by way of a
\nCourt Decree and claimed that this being a family settlement, no gift
\ntax was chargeable. The Division Bench of Punjab and Haryana
\nHigh Court, however, held that merely because the loans were not
\nrepaid by the Assessee to his family members, it could not create a
\ntitle in them in the property which would entitle them to claim
\npartition by way of family settlement of the property in question.
\nBased upon such reasoning, the High Court upheld the view taken
\nby the ITAT that there was no valid family settlement amongst the
\nmembers of the family and based upon such settlement, levy of gift
\ntax could not have been avoided. The High Court considered and
\ndistinguished the decision in Kale and others (supra).
\n43. For all the aforesaid reasons, we are satisfied that the
\nfindings of fact recorded concurrently by the three authorities suffer
\nfrom no infirmity, so as to give rise to the second substantial question
\n21 txa4-12-dt.08-11-19
\nof law framed in this matter. Accordingly, even the second substantial
\nquestion of law is required to be answered against the Appellant and
\nin favour of the Revenue.
\n44. As a result, this Appeal fails and is, hereby, dismissed.
\nThere shall be no order as to costs.
\nC.V. Bhadang, J. M.S. Sonak, J.<\/p>\n","protected":false},"excerpt":{"rendered":"
The settlement between the Appellant and the said two persons can hardly be described as a family settlement. The settlement may be enforceable inter-parties now that the same is incorporated in the consent terms, based upon a consent decree may have been issued. However such settlement, cannot be called as a family settlement or family arrangement, as is understood in the case of Kale and others (supra) or in the case of Sachin Ambulkar (supra). Merely because dispute involved some family members and such dispute is ultimately settled by filing consent terms, the same cannot be styled as a family arrangement or family settlement and on such basis, it cannot be held that the consideration received as a result of such settlement, does not constitute capital gain.<\/p>\n