Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: ACCOUNTING STANDARD :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT RATES :: Central Excise rule to resale the machines to a new company :: VAT Audit :: articles on VAT and GST in India :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: ACCOUNTING STANDARDS :: cpt :: due date for vat payment :: TDS :: empanelment
 
 
From the Courts »
 Micro Spacematrix Solution P Ltd vs. ITO (ITAT Delhi)
 CIT vs. Greenfield Hotels & Estates Pvt. Ltd (Bombay High Court)
 IndiaBulls Financial Services Ltd vs. DCIT (Delhi High Court)
 Maharao Bhim Singh of Kota vs. CIT (Supreme Court)
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)
 Ashok Prapann Sharma vs. CIT (Supreme Court)a

CIT vs. Ashwani Chopra (P&H High Court)
March, 05th 2013

A family settlement does not result in a “transfer” and compensation received to equalize inequalities in family settlement is not taxable as “income”

There was a dispute between two groups of a family. During the pendency of litigation, the parties agreed to divide the assets and businesses of the family into two lots i.e. lot-1 containing the Jalandhar and Ambala units and lot-2 containing the Delhi and Jaipur units. In terms of such settlement, lot-1 fell to the share of Group ‘A’ and lot-2 fell to the share of Group ‘B’ with the condition of payment of Rs.24 crores. A dispute regarding the date of split of the said amount was pending. The AO assessed the said sum in the hands of the assessee. This was reversed by the CIT(A) and Tribunal on the ground that the distribution of assets including the sum of Rs.24 crores was not complete as the matter was sub-judice and the amount did not accrue to the income of the group ‘A”. On appeal by the department to the High Court, the Court had to consider whether the compensation paid to the assessee to settle inequalities in partition, being a provision of “owelty” represents immovable property and is not an income exigible to tax. HELD by the High Court dismissing the appeal:

A family partition which results in an adjustment of shares and of the respective rights in the family properties is not a “transfer” in the eyes of law. When there is no transfer of asset, there is no capital gain and consequently there is no liability to pay tax on capital gains. In a family partition, a situation arises where an item of property is not capable of physical partition or is such that, if divided, it will lose its intrinsic worth. In such a case, with a view to ensure an equitable partition, the item is allotted to one party and he is asked to pay compensation in money value to the other party. This amount is called “owelty”. As the amount of compensation is only to equalize the inequalities in the partition it is nothing but a share in the immovable property itself (though paid in cash) and cannot be treated as income liable to capital gain. If such amount is to be treated as income liable to tax, inequalities would set in as the share of the recipient will diminish to the extent of tax. On facts, the payment of Rs.24 crores to Group A is to equalize the inequalities in partition of assets. The amount so paid is immovable property and is not income liable to tax (T.S.Swaminatha Odayar vs. Official Receiver AIR 1957 SC 577, CIT vs. A. L. Ramanathan 245 ITR 494 (Mad), CIT vs. Kay Arr Enterprises 299 ITR 348, CIT vs. R. Nagaraja Rao 207 Taxmann 74 (Kar) & Ziauddin Ahmed vs. CIT 102 ITR 253 (Gau), Parvathi Amma Vs. Makki Amma AIR 1962 Kerala 85 reviewed)

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - About Us

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions