ORDER
T.V. Rajagopala Rao, Judicial Member
1. These are appeal and cross appeal filed by the assessee as well as the department respectively. They are directed against the order of the Appellate Assistant Commissioner, Gift-tax, dated 30-11-1984 and they relate to assessment year 1978-79.
2. In this case the donor is one Smt. K. Subbalakshmi. At the time of the gift or its registration she was not married but she was married later. Smt. K. Subbalakshmi executed a gift-deed on 25-3-1978 and also registered it on 28-3-1978. This was registered as document No. 2855 of 1978 in Rajahmundry Sub-Registry. The important recitals of the said deed contained the following. The done is the brother of the donor and both of them are the issues of late Sri I. Suryanarayana Murthy, an advocate at Rajah-mundry. Sri Murthy died on 11-8-1977. Their mother died still earlier while both the donor and the done were in their teen ages. It is stated that after the death of the mother all her properties were handed over to the donor and she has been in possession of the same. Admittedly late Sri Murthy died intestate leaving behind him both ancestral as well as self-acquired properties. As far as the self-acquired properties are concerned both the donor and the donee inherited them in equal shares soon after the death of their father. It is stated in the deed of gift (styled as relinquishment) that there is dispute between the donor and donee as regards the quality of the properties in the hands of late Sri Suryanarayana Murthy and regarding the rights held by the donor and the donee in those properties and those disputes were amicably settled at the instance of relatives and friends. Under the recitals of the deed the donor agreed to accept Rs. 25,000 from the donee and agreed to relinquish her half share both in the joint as well as self-acquired properties held by late Sri Suryanarayana Murthy.
3. It is not out of place to mention that the donee Sri I.V. Ramanamurthy is an advocate by profession. He had filed the estate duty return of his father as an accountable person and he also participated actively in the gift-tax proceedings for and on behalf of the donor. Under the stipulations of the document, out of Rs. 25,000 an amount of Rs. 20,000 was said to have been paid to the donor for purposes of her marriage expenses and the further amount of Rs. 5,000 was agreed to be paid at the time of registration. Smt. K. Subbalakshmi was married on 2-4-1978 when she was aged about 37 years.
4. The Gift-tax Officer held that Smt. K. Subbalakshmi was entitled to l/4th right in the joint family properties and half share in the self-acquired properties left behind by her late father. The value of the joint family properties held by her late father was Rs. 61,778 whereas the value of the self-acquired properties amounted to Rs. 2,60,487. According to the Gift-tax Officer the value of the correct share of the properties which was inherited by the assessee was Rs. 1,45,688. Against this she released all her rights in these properties for a consideration of Rs. 25,000. According to the Gift-tax Officer she released Rs. 1,20,688 in favour of her brother and it is liable to gift-tax. The assessee contended before the Gift-tax Officer that there was a family settlement and it was outside the purview of the Gift-tax Act. The contentions put forward by the assessee were not accepted by the Gift-tax Officer and he held the value of the taxable gift at Rs. 1,35,940 as per his assessment dated March 1983 was received by the assessee on 7-3-1983.
5. The assessee went in ‘appeal before the Appellate Assistant Commissioner, Visakhapatnam. It was contended before him that in order to avoid family disputes the family arrangement in question was entered into and it was evidenced by release deed. Because it was a family arrangement there is no question of any transfer attracting gift-tax provisions. On the strength of the decisions in GWT v. H.H. Vijayaba Dowager Maharani Saheb of Bhavnagar Palace [1979] 117 ITR 784 (SC), Ramacharan Das v. Girija Nandini Devi AIR 1966 SC 323 and Kale v. Dy. Director of Consolidation AIR 1976 SC 807 it was contended that if for avoiding disputes a family settlement is reached that itself constitutes adequate consideration and therefore gift-tax would not be attracted in such a situation. It was also argued before the Appellate Assistant Commissioner that even separate property belonging to the parties to the family settlement can be subject-matter of settlement. The Appellate Assistant Commissioner held that in view of the Andhra Pradesh High Court decision in CWT v. Mukundgirji [1983] 144 ITR 18 as soon as the death of the father of the donor and the donee by virtue of operation of Section 8 of the Hindu Succession Act the respective shares belonging to the donor as well as the donee would remain as their respective separate properties. He further felt and held the view that so far as the share of the donor in the self-acquired properties of her father is concerned this is her separate property and it is not permissible to include it in the family settlement. In other words, he held that the assessee’s share of Rs. 1,30,243 is her separate property and cannot be considered as part of family settlement. The rest of the property valuing Rs. 61,778 is joint family property and this obviously formed part of the subject matter of the family settlement. He further held that this is a transfer made for inadequate consideration and not without consideration. Inadequacy of the consideration was arrived at Rs. 1,07,829 and from this he deducted the proportionate estate duty payable over the separate property which works out to Rs. 6,052. He gave a further basic exemption of Rs. 5,000 and arrived at the figure of net taxable gift at Rs. 96,777. Thus, the Appellate Assistant Commissioner gave a relief of Rs. 39,160 to the assessee and partly allowed the appeal.
6. Both the parties having been aggrieved now filed appeal as well as the cross appeal and thus the matter stands for our consideration. We have heard Shri V.A. Ramayya, the learned counsel for the assessee and Shri T.R.S. Anjaneyulu, the learned departmental representative. On behalf of the assessee a paper book containing 16 pages was filed and also a Photostat copy of the decision in GIT v. R. Ponnammal was also filed. Having considered the whole record and also having regard to every submission made to us by the rival parties we are of the opinion that the order of the Appellate Assistant Commissioner is perfectly justified, legally correct and it does not call fer any interference from us. Our reasons are as follows.
7. In our opinion, the recital in the release deed dated 25-3-1978 that a dispute arose between the parties to the document with regard to the character of the properties held by their father and they have been disputing their respective rights in those properties is a false recital. Their father died on 14-8-1977. Their mother died 20 years earlier in 1955. At the time of death of the father the donor was 36 years of age. We can say that she became over-aged for marriage purposes as she belonged to Brahmin community. Having some property is not enough. It is also required that somebody must act as guardian at the time of her marriage. It is significant that her marriage was performed on 2-4-1978. Therefore it is reasonable for us to presume that by 25-3-1978, the date of the document, the bridegroom must have been selected and the date of marriage also must have been fixed. At that juncture, the donee who is an advocate, felt that it was the weakest moment which he can cash in from his own sister. Therefore, feeling it opportune to magnify his role in the marriage of his sister he might have demanded that unless the whole property inherited by her is given away to him he is not going to act as guardian and does not concern himself with her marriage. Being a Hindu lady, caught between the devil and deep sea, it is natural on her part to accept for every proposal made by her brother. It is significant that even the registration of the document was not allowed to go beyond the marriage date but was finished in post-haste on 28-3-1978 only two days after the execution of the deed. Therefore, in our opinion, the document is vitiated by undue influence also. Further, there is one strong circumstance which would go to prove that the assessee never doubted the character of the properties held by her late father, Sri I.V. Ramanamurthy, an advocate, the donee herein, filed his affidavit dated 27-2-1982 before the Assistant Controller of Etate Duty, Kakinada, which was given GIR No. 2081-S. In that affidavit he admitted that he was the person liable to file the estate duty account of his late father. The estate duty account itself was filed before the Assistant Controller of Estate Duty, Kakinada, on 28-2-1978. As per the Estate Duty statement signed and filed by the donee the total value of the self-acquired properties of his late father was admitted to be Rs. 1,86,013.32. From that liabilities were excluded, his share in the joint family properties was added and the value of the liabilities attached to his share of joint family properties were deducted and also the lineal descendant’s share was deducted and ultimately the value of the estate was arrived at as follows :
Rs.
Value of the self-acquired properties 1,86,013.32
Liabilities
Amount payable to Timmaraju Hymavathamma
w/o Siva Rao, Srikakulam
3,600.00
1,82,413.32
Rs.
Value of the joint family properties 60,271.91
Less : Provision of marriage expenses
of unmarried member of the family 10,000.00
50,271.91
Less: Lineal descendant's share 25,035.85 25,035.85
-------------
2,07,449.18
The only two items of movable properties shown as joint family properties in the estate duty return by the donee herein are the following;
Rs.
Fixed deposits as per details 59,071.71
Silverware 100 tolas at Rs. 14 per tola 1,400.00
-------------
60,471.71
Giving the particulars of the fixed deposits separately only six fixed deposits were mentioned whose principal and interest amounting to Rs. 59,071.71 is given. The estate duty assessment was completed on 16-9-1978 on a total value of Rs. 2,35,025. If really donee wanted to dispute either the character of the property or his share in the property held by his father would he file statement of account before the Assistant Controller of Estate Duty clearly admitting what is the value of his father’s self-acquired properties and what is value of the joint family properties held by his father? When there is no dispute on 28-2-1978 with regard to the nature of the properties held by his father how can it suddenly arise on 25-3-1978 within one month thereafter. Further the father of the parties died on 14-8-1977. The account of the estate was furnished on 28-2-1978, at least within six months after the death of the father. At page 921 of Mulla’s Hindu Law it is clearly stated that inheritance can never be kept in abeyance and in elaboration of this principle the following is what is stated by the learned author:
One governing principle of Hindu Law is that inheritance can never be in abeyance. On the death of a Hindu the person who is then his nearest heir or persons who are then his nearest heirs and as such succeed simultaneously to his property, become entitled at once to the property left by him. The right of succession vests in such heir or heirs immediately on the death of the owner of the property.
The same principle underlies the provisions of this Act. Devolution of the property of a male or female intestate upon the heirs declared by the various provisions takes place immediately on the death of the owner and it is in no manner controlled or affected by the fact of postponement or absence of actual physical partition of the property. The share of each heir becomes vested in him and if the heir dies before such partition his or her share will pass to and become vested in such persons as are his or her heirs.
Thus, it is clear that the heirs inherited as tenants-in-common but not as joint tenants.
8. Section 8 of the Hindu Succession Act states that the property of a male Hindu dying intestate shall devolve firstly upon the heirs being the relatives specified in Class I of the Schedule. In Class I, the relatives listed, inter alia, are son, daughter, widow, mother etc. According to s. 10 of Hindu Succession Act after excluding the share of the widow the surviving sons and daughters and mother of the intestate shall take one share each. Here, in this case, the deceased has no widow, he being the widower. He has no mother. He has got one son and one daughter. Therefore, according to Sections 8 and 10 of the Hindu Succession Act they get equal shares in the self-acquired properties left behind by their father.
9. According to the Andhra Pradesh High Court decision in Mukundgirji’s case (supra) the share devolved upon the son on inheritance from the separate property of his father would be held by him as his separate property but not as joint family property. In those circumstances, the question is whether there can be any scope for a family settlement to be reached. It is also significant in this connection that the title of the document is mentioned as a release deed but not as a deed of family settlement.
10. In Vemulapalli Purnachandra Rao v. State of A.P. [1977] 1 APLJ 132, the case was under the Andhra Pradesh Land Reforms (Ceiling on Agricultural Holdings) Act, 1973. Partition list and partition deed marked as Exs. A12 and A13 respectively whereunder some immovable properties were given to a daughter at the time of marriage towards Pasupukumkuma was sought to be canvassed as a valid document in the absence of registration. One of the arguments advanced was that Exs. A12 and A13 referred to in that case evidence a family arrangement or settlement under which the daughters of the petitioner were allotted some lands towards Pasupukumkuma at the times of their marriages and, therefore, they are valid. Repelling the said argument the Andhra Pradesh High Court held as follows :
Moreover, a family arrangement to be valid and operative must have been entered into with the object of settling some property arising out of conflicting claims to property existing at the time or likely to arise in future. There must be a dispute or atleast an apprehension of dispute in order to avoid which the family arrangement must have been concluded. There should be some consideration for a family settlement to be valid. In the instant case, it is not established that the daughters had raised any dispute at the time of the partition or that the daughters are parties to family arrangements sought to be evidenced by the partition list. Therefore, the contention that there was a family arrangement has to be negatived as such an arrangement was not set up or established by the evidence on record.
In this case, in view of the fact that when an account of estate duty of the deceased was filed as late as on 28-2-78 there was no dispute at all as to the nature of the properties held by the deceased and therefore it is highly improbable to believe the recital that by 25-3-1978 such a dispute arose between the son and the daughter of the deceased. Further, even on the date of death of the deceased, the donor in this case had inherited 1/2 share in the self-acquired properties and 1/4 share in the joint family property left behind by her father on the date of his death. In view of the clear provisions of s. 8 and s. 10 of Hindu Succession Act we are not prepared to accept that there was any bona fide dispute between the donor and the donee as to their respective rights in the properties left behind by their father. Further we also record that the sequence of events would clearly leave us in no doubt to conclude that in all probability the so-called relinquishment deed dated 25-3-1978 should have been brought about by use of undue influence against the donor and therefore it is also vitiated.
11. In Kale’s case (supra) the essentials of a family settlement were listed out in a concretised form or in the form of the following propositions :
(1) The family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family ;
(2) The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence ;
(3) The family arrangements may be even oral in which case no registration is necessary ;
(4) It is well settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and therefore does not fall within the mischief of s. 17(2)(sic) [s.l7(l)(b) ?] of the Registration Act and is, therefore, not compulsorily registrable ;
(5) The members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld and the Courts will find no difficulty in giving assent to the same ;
(6) Even if bona fide disputes present or possible, which may not involve legal claims are settled by a bona fide family arrangement which is fair and equitable the family arrangement is final and binding on the parties to the settlement.
In our view what is the share of the donor and the donee in the self-acquired property as well as the joint family property held by the father was determined even on the next moment of his death viz., 14-8-1977. Both the donor and the donee inherited the properties as tenants in common and if donor wants to give some of her properties to the donee she is free to do so. But it is to be considered only as a gift but not as a relinquishment. Our above observations are confined only to the self-acquired properties of the father. But as regards the joint family properties are concerned there is likelihood of the son disputing the quantum share of the daughter and hence in our view there is a scope for settlement of disputes between them. Therefore, as far as the joint family properties are concerned the impugned document can operate as a valid family settlement. In a family settlement there is no question of transfer of title from one to other and therefore there is no question of gift.
12. On behalf of the assessee the following decisions are relied upon:
1. Sahu Madho Das v. Mukand Ram AIR 1955 SC 481.
2. Laxmi Narain v. Bansi Lal AIR 1965 All. 522.
3. Ramacharan Das’s case (supra).
4. Ziauddin Ahmed v. CGT [1976] 102 ITR 253 (Gauhati).
5. H.H. Vijayba Dowager Maharani Saheb of Bhavnagar Palace’s case (supra).
The learned departmental representative relied upon the following judgments :
1. Kale’s case (supra).
2. AIR 1979 AP 417 (sic).
3. Mukundgirji’ s case (supra) ; and
4. CWT v. Chander Sen [1986] 161 ITR 370 (SC).
It is argued by the learned departmental representative that if there is no real dispute or claim the transaction might amount to a transfer. In support of this proposition he cited the following decisions : Sashi Kantha Acharjee v. Promode Chandra Roy AIR 1932 Cal. 600, Savitri Devi v. Kamal Singh AIR 1955 Pat. 456 and AIR 1968 Pat. 486 (sic).
The learned departmental representative argued that even regarding l/4th share in the joint family property the assessee had got absolute rights in view of Sections 6 and 8 of Hindu Succession Act and so even with regard to the joint family property left behind by the deceased there cannot be any bona fide dispute. However, we are of the opinion that there can be a bona fide dispute regarding the quantum of share entitled to by the assessee herein and under the circumstances we already held that the family settlement is valid as far as the joint family properties in the hands of the father of the assessee is concerned.
In the result, we fail to see any merit in either of these appeals and hence these are dismissed.