1. These four gift-tax appeals filed by four assessees arise out of the common order of the AAC, C-Range, Madras, in respect of the gift-tax assessments under the Gift-tax Act, 1958 ('the Act') made on them for the assessment year 1969-70.
2. The appellants Smt. A. Ameera Parvez, Smt. Shameena Banu, Smt.
Ameera Parvez and Smt. A. Ameena Begum were co-owners along with other sisters and brothers in respect of the following properties : (i) Ajantha, 32 Royapettah High Road, Madras-14, (ii) 19 and 20 Linghi Chetty St., Madras-1, (Hi) 286 N.S.C. Bose Road, Madras-1. These brothers and sisters are children of late Haji A. Abdul Shukoor who had 11 children and these properties along with another property were purchased jointly in their names. One of the co-owners, late Mukthar Banu, died and her legal heirs were paid off and their interest taken over by payment of Rs. 1,42,000 (about) by the 10 co-owners of whom the present appellants are four. Hence, the four properties came to be co-owned by 10 persons. There arose (as stated in the preamble to the document) disputes and it was decided by the co-owners to sort out the inter se ownership between them in respect of the three properties and a family arrangement was arrived at and recorded in a document executed on 12-8-1968. The result of this family arrangement was that the three above properties which were hitherto co-owned between 10 persons were thereafter owned as under :Ajantha, 32 Royapettah High Road, Madras - 4 persons286 N S.C. Bose Road, Madras - 4 persons19 & 20 Linghi Chetty Street, Madras - 2 persons The four appellants in this case have in view of the above arrangement, now become the co-owners of 286 N.S.C. Bose Road, while the other sisters and brothers are the co-owners of the other two properties. The GTO valued these three properties in his own way, and has come to the conclusion that the four appellants suffered loss in this arrangement and had, therefore, become donors to the extent of Rs. 52,740 each. It was the contention of the assessees that there was no gain or loss for any of the co-owners and that the surrender of their interest by the four appellants in the two properties was for adequate consideration, in view of the enlargement of their interest in the other one. The GTO rejected the contention. The AAC upheld his view, but also varied the valuations with reference to some more materials and held that the value of the gift should have been adopted at Rs. 62,940 as against Rs. 52,740 in each case. In the result, he enhanced the assessment. The .
assessees have come up in appeal.
3. The learned counsel claimed that there was no element of gift either in the sense of an ordinary gift or even as a deemed gift under the gift-tax law. Family arrangement merely sorted out the respective rights and that there was absolutely no basis for assuming that any one had either got or given up anything. From the point of view of appellants in this case, the collective enjoyment between ten persons in respect of the three properties was substituted by collective enjoyment of one property by four persons who are appellants in this case. It is difficult to ascertain one-tenth valuation in co-ownership properties by merely dividing the total value of the property by ten.
In this view, he claimed that even the values placed on the properties by the authorities had no firm basis. He sought to buttress his case by giving a valuation for these three properties in a manner that there was no gift even by the method followed by the authorities. At any rate, he contended that even on a question of law, there cannot be any gift involved in a family arrangement. He pointed out to the decision of the Madras High Court in the case of CGT v. Pappathi Anni  127 ITR 655 which followed a decision of the Supreme Court in Sahu Madho Das v. Pandit Mukand Ram  2 SCR 22. This case dealt with a partition between mother and son where the son had really no legal right in respect of a property settled by the mother. Even in such a case, the High Court held that there was no gift. He also relied upon a decision by the Gauhati High Court in the case of Ziauddin Ahmed v. CGT  102 ITR 253 where the facts are near identical with the assessee's case in respect of another Mohammedan family. The Jearned departmental representative relied upon the orders of the authorities below. He pointed out that gift under the Gift-tax Act not only includes gift in the ordinary sense but also conversion of any property referred as deemed gift under Section 4 of the Gift-tax Act. He, therefore, contended that where a person gets something less or more, there is a deemed gift. He claimed that there is adequate basis for the valuation adopted by the authorities to justify the inference. He also sought to justify the enhancement made by the AAC on the materials contained in his order.
4. We have carefully considered the records as well as the arguments.
We are in agreement with the learned departmental representative that a gift for purposes of the Gift-tax Act could well be a deemed gift which may not always be a gift in the ordinary sense. When there is an exchange of property rights, it is possible that there may be an element of bounty, which may well qualify for the treatment as deemed gift under Section 4(1) of the Act. However, in order to presume a deemed gift in a family (property) arrangement, we should imagine that the element of bounty as well as its extent should be spelt out clearly and distinctly. We are, however, not able to agree with the authorities that a clear case of such a bounty has been established in the case before us. In this case, we are concerned with an arrangement between ten co-owners regarding the three properties whose value according to the ITO himself is about 16.5 lakhs. In sorting out the rights over the three properties, the GTO has presumed that the four sisters have gifted property rights to the extent of Rs. 2 lakhs (Rs. 50,000 each) to their other sisters and brothers. The first appellate authority has tried to add something more to the property by a long drawn-out process of reasoning. The assessees' counsel had filed some calculations by assigning a different set of valuations to these properties, to show that the division was equal. Probably, by a third method, the very donors could be shown to be donees. In other words, we are not able to find any demonstrable element of bounty spelt out in the family arrangement executed by the parties on 12-8-1978. The difference sought to be suggested could well be attributed to the vagaries involved in valuation of the immovable properties located in different places.
Valuation of an interest in a co-owned property, is even less capable of precision. The assessees are entitled to succeed merely on this factual basis.
5. Even on the argument that there cannot be a gift in a family arrangement, the assessees' are entitled to succeed. The Madras High Court in Pappathi's case (supra) found that even where property rights were assigned to a party who did not have a share in the same, there was no element of gift in such a family arrangement between the parties because the mere bonafide belief that there was right took it out of liability to gift-tax (sic). In coming to this conclusion, the High Court approved the reliance placed by the Tribunal on the decision of the Supreme Court in Sahu Madho Das's case (supra) wherein it was held that a family arrangement is based on the assumption that there is an antecedent title on the part of the parties and the arrangement merely acknowledges and defines what that title is. Relinquishment of his claim on interest in respect of some of the properties by one party in such a case, is not really relinquishment of his rights in the sense of giving up his rights so as to attract gift-tax liability. If such an element of bounty could not be inferred, where there was only a pretended or semblance of a right and not a legal right, merely on the ground that such a pretended or semblance of a right is a bonafide one, there cannot obviously be a gift-tax liability in the case of the assessees, where the right is indisputable. It was suggested before us that the view of the Supreme Court in Sahu Madho's case (supra) and the Madras High Court in Pappathi's case (supra) could possibly be taken as a view based upon the Hindu law where the rights of the coparceners at any particular point of time prior to family arrangement cannot be predicated. We find that the decision of the Madras High Court in Pappathi's case (supra) was in relation to a settled property and, hence, it cannot be stated that the decision of the High Court was rendered only in context of the Hindu law. Further, the Gauhati High Court in the case of Ziauddin Ahmed (supra) found that a family arrangement, where there was a transfer at less than full market value, did not give rise to gift-tax liability on the ground that such a bonafide transaction does not amount to a transfer. It does not create an interest and each party takes a share in such an arrangement in pursuance of the pre-existing title. This decision also held that all that is necessary is only to show that the parties are related and have possible claim to constitute a valid family arrangement. As pointed out earlier, the facts in the assessee's case are such that the title to the claim is not only 'legal' but also undisputed. The Gauhati High Court's decision also relates to the Mohammedan family. This also shows that the fact that the family arrangement is in respect of Mohammedan family does not justify a different treatment. The Gauhati High Court has also referred to a later decision of the Supreme Court in the case of Ram Charan Das v. Girjanandini Devi  3 SCR 841 where the Supreme Court observed as under : ...Courts give effect to a family settlement upon the broad and general ground that its object is to settle existing or future disputes regarding property amongst members of a family. The word 'family' in the context is not to be understood in a narrow sense of being a group of persons who are recognised in law as having a right of succession or having a claim to a share in the property in dispute...(p. 850) The assessees are, therefore, entitled to succeed merely on the ground that it is a bonafide family arrangement. In this view, it is not necessary to go into the merits of different valuations placed by the GTO and the AAC, in any detail, since, even as concluded in the immediately preceding paragraph, valuation being subjective, the variations as between the assessees and the revenue are not such, as to warrant an inference of gift in the fact of the assessee.?' case. The assessees are, therefore, entitled to succeed in any view.