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Santokh Singh Vs. Gift-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1985)14ITD445a(Delhi)
AppellantSantokh Singh
RespondentGift-tax Officer
Excerpt:
.....in the properties at malcha marg and rajinder nagar, new delhi. according to the assessee, the family settlement arrived at between the various co-owners was bonafide one and as such it was not correct to say that the provisions of section 4(1)(c) of the gift-tax act, 1958 ('the act') are attracted. the gto was not satisfied with the said explanation. according to him, the assessee had surrendered his share of properties in question and as such provisions of section 4(1)(c) are attracted. the value of the deemed gift was estimated at rs. 6,28,050. after giving statutory exemption of rs. 5,000 the value of the deemed gift was determined at rs. 6,23,050.2. the learned commissioner (appeals) was of the view that there was no bona fide settlement. according to him, the whole transaction.....
Judgment:
1. The assessee is an individual. The accounting period relevant to the assessment year 1978-79 ended on 31-3-1978. During the course of assessment proceedings, it was found that there was a settlement amongst the co-owners of the properties of which the assessee was also a party. A copy of the memorandum dated 7-7-1979 was filed by the assessee which stipulates the arrangement of the properties settled amongst the various co-owners. According to the ITO, in terms of this memorandum of agreement, the assessee surrendered his rights as co-owner in the properties at Malcha Marg and Rajinder Nagar, New Delhi. According to the assessee, the family settlement arrived at between the various co-owners was bonafide one and as such it was not correct to say that the provisions of Section 4(1)(c) of the Gift-tax Act, 1958 ('the Act') are attracted. The GTO was not satisfied with the said explanation. According to him, the assessee had surrendered his share of properties in question and as such provisions of Section 4(1)(c) are attracted. The value of the deemed gift was estimated at Rs. 6,28,050. After giving statutory exemption of Rs. 5,000 the value of the deemed gift was determined at Rs. 6,23,050.

2. The learned Commissioner (Appeals) was of the view that there was no bona fide settlement. According to him, the whole transaction was a sham. Thus, the learned Commissioner (Appeals) agreed with the finding of the GTO.3. Before the Tribunal, on behalf of the appellant, it was contended that finding of the learned Commissioner (Appeals) is not correct. That on the death of Sajjan Singh on 11-9-1977, the share of his legal heirs in four properties in Delhi stood revised by virtue of succession as per the Indian Succession Act, 1925. The co-owners, who were closely related to each other, had feared and raised doubts that some disputes or differences might arise amongst themselves or later amongst their legal heirs with respect to co-owned properties and all the co-owners with a view to keep harmony and maintain peace amongst the family members desired a settlement and rearrangement of shares. On the occasion of kirya ceremony of Sajjan Singh- all the co-owners agreed to a settlement and rearrangement of the shares in the properties and that it was as a result of this arrangement and settlement that the appellant, Santokh Singh, who was the maternal uncle of other co-owners, namely, Mohinder Singh, Amrik Singh, Hari Singh, sons of late Sajjan Singh, and Smt. Shakuntala, married daughter of Sajjan Singh and, thus, the only outsider decided to abandon his share in the two co-owned properties, namely, 7B, Rajindra Park, New Delhi, and 130, Malcha Marg, New Delhi, in favour of the other family members and offspring of late Sajjan Singh in a bonafide manner. After the settlement he shifted to Patiala to stay with his three sons.

Subsequently, this settlement was reduced into writing in the shape of memorandum of agreement on 7-7-1979. According to the counsel, the gift-tax authorities have wrongly invoked the provisions of Section 4(1)(c) and held that the value of the assessee's interest in the two properties surrendered by him was a deemed gift to be brought to tax in his hands. Reliance was placed on the ratio of decisions in the cases of Ziauddin Ahmed v. CGT [1976] 102 ITR 253 (Gauhati).

4. The departmental representative supported the order of the Commissioner (Appeals). According to him, the settlement took place on the back date. The memorandum of agreement is dated 7-7-1979 but it was made applicable from 11-9-1977. It was also contended that it does not stand to reason that in the settlement Santokh Singh would surrender his right in such a way which was alleged in the present case. The evidence produced by the assessee is not reliable. Thus, it was contended that there was no material to show that the settlement is bonafide.

5. We have heard the parties and perused the entire material on record.

The facts of the case as stated in the order of the Commissioner (Appeals) are not disputed. The assessee has filed affidavits of Mohinder Singh, Amarjit Singh, Gurmit Singh, Amrik Singh, Hari Singh, Santokh Singh, Smt. Shakuntala and Gurdial Singh. All these persons are co-sharers in the properties in dispute. There is also affidavit of B.L. Kashyap who is an outsider. In his affidavit he stated that settlement amongst the co-owners of the properties in dispute at the time of kirya ceremony of late Sajjan Singh was arrived at. Affidavit of Sunder Singh, an outsider, also shows that at the time of kirya ceremony of Sajjan Singh there took place a family settlement. In this affidavit, it was clearly stated that at the time of settlement it was mutually agreed that the shares in the properties were allotted as under :1. 7-B, Rajindra Park, a. Mohinder Singh 50 per cent New Delhi b. Amarjit Singh 25 per cent c. Gurmit Singh 25 per cent2. 130, Malcha Marg, Amrik Singh 100 per cent New Delhi3. 154, Golf Links, Hari Singh 100 per cent New Delhi4. C-552, Defence Colony, a. Smt. Shakuntala 50 per cent New Delhi b. Manmohan Singh 40 per cent c. Brij Nandan Singh 10 per cent That Santokh Singh abandoned all his shares and interest in the properties, 7-B, Rajindra Park, New Delhi, and 130, Malcha Marg, New Delhi.

In the affidavit it was also stated that Santokh Singh abandoned all his shares in the property No. 7-B, Rajindra Park, New Delhi, and 130, Malcha Marg, New Delhi. To the same effect are the affidavits filed by the co-owners. Even in the memorandum of agreement dated 7-7-1979 these facts were clearly stated. The GTO or the Commissioner (Appeals) never brought on record any material to show that the affidavits filed by the assessee were not reliable. On the other hand, all the affidavits are quite detailed and there is nothing on record as to why such affidavits should not be accepted. There is also nothing on record to show that memorandum of agreement is not genuine.

6. It is settled law that apparent state of affairs should be accepted as correct unless contrary is proved. The gift-tax authorities did not bring on record any evidence to show that these materials were not genuine. On the face of overwhelming evidence it can hardly be accepted that these documents are not genuine.

7. In the affidavits and even in the memorandum of agreement it was clearly stated that family settlement was arrived in order to avoid any differences or disputes that might arise amongst the co-owners of the properties. Santokh Singh in his affidavit clearly stated that he bonafidely abandoned his share in the properties in order to avoid disputes, differences or misunderstanding which may arise amongst all the co-owners for all times to come. It was also stated that it was necessary because the properties which had been respectively allotted on reallocation were in their possession and the title deeds also were registered in the names of respective co-owners. It was also stated that no formal deed was considered necessary because the title deeds were already registered in the respective names. If all the aforesaid material is taken into consideration, it is established that family settlement was bonafide and genuine.Ram Charan Das v. Girja Nandini Devi AIR ... 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. 329) In the decision in Smt. Mt. Hiran Bibi v. Mt. Sohan Bibi AIR 1914 PC 44, it was pointed out that in a family settlement each party takes a share in the property by virtue of the independent title which is admitted to that extent by the other parties. It is not necessary, as would appear from the decision in Rangaswami Gounden v. Machiappa Gounden AIR 1918 PC 196, that every party taking benefit under a family settlement must necessarily be shown to have, under the law, a claim to a share in the property. All that is necessary is that the parties must be related to one another in some way and have a possible claim to the property or a claim or even a semblance of a claim on some other ground as, say, affection.

9. Looking to the aforesaid facts and the ratio of the decisions of the cases referred to above, we are of the view that the settlement of dispute in the family was bonafide and genuine. Under the circumstances the provisions of Section 4(1)(c) are not attracted. The finding of the Commissioner (Appeals) to the contrary is not correct. Accordingly, the additions are deleted.


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