Purvez A. Poonawalla Vs ITO (ITAT Mumbai)
Explore the legal battle: Purvez A. Poonawalla’s settlement with R.K.Bavasa, challenging the will of late Mrs. Mani Cawasa Bamji. Tax implications discussed.
Admittedly the assessee was the legal heir of the deceased late Mrs. Mani Cawasa Bamji being the son of a pre-deceased sister of the deceased. He together with Mr. Dinshaw Jamshedji Mistry , brother of the deceased were alone entitled to the estate of late Mrs. Mani Cawasa Bamji in the event of intestacy of late Mrs. Mani Cawasa Bamji. It was because of the fact that the assessee was entitled a half share in the asset of late Mrs. Mani Cawasa Bamji that a citation was issued to the assessee by Hon’ble Bombay High Court before granting the Probate in respect of the last will of late Mrs. Mani Cawasa Bamji to Mr. Dinshaw Jameshedji Mistry. The assessee promptly filed the caveat opposing the grant of Probate in favour of Mr. Dinshaw Jamshedji Mistry and consequently the proceedings became a testamentary suit. In such proceedings it was the duty of Mr. Dinshaw Jamshedji Mistry to establish that the will of late Mrs. Mani Cawasa Bamji was the last will and that was executed in accordance with law and that the testatatrix executed the will in a sound and disposing state of mind. The assessee also obtained an order of injunction restraining Mr. Dinshaw Jamshedji Mistry from dealing with estate of the deceased in any manner. After the death of Mr. Dinshaw Jamshedji Mistry Mr. R.K.Bavasa became the party to the testamentary suit in respect of Mr. Dinshaw Jamshedji Mistry and settled the issue with the assessee by a sum of Rs.5,08,80,000/-. It was thereafter that the Court accepted the terms of settlement and allowed Mr. R.K.Bavasa to deal with some of the properties of the estate of the deceased. Later on the assessee also withdrew his caveat on 25/11/2005. It is thus clear that the sum in question was received by the assessee in consideration of giving up his rights to contest the will of late Mrs. Mani Cawasa Bamji. As rightly contended on behalf of the assessee the consideration referred to in the provisions of section 56(2)(v) of the Act have to be understood as per the definition of consideration as given in the Indian Contract Act, 1872 in section 2(d). The assessee has abstained from contesting the will and this constitute the consideration for payment by Mr. R.K.Bavasa to the assessee. Thus the amount received by the assessee is not without any consideration. Therefore, the provisions of section 56(2)(v) of the Act were not applicable. In that view of the matter we hold that the receipts by the assessee from Mr. R.K.Bavasa cannot be treated as income under section 56(2)(v) of the Act.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal by the assessee against the order dated 20/10/2009 of CIT(A)-27, Mumbai relating to assessment year 2006-07. The grounds of appeal raised by the assessee read as follows:
“1.On the facts and in the circumstances of the case and in law the CIT(Appeals) 27/ 16(1)/2 erred in confirming the addition of Rs. 3,73,95,334/- as an amount chargeable under section 56(2)(v) of the Income Tax Act.
2. The CIT(Appeals) 27/ 16(1)/2 failed to appreciate that the withdrawal by the appellant of his caveat thereby enabling Mr. Rajesh Karsandas Bhavsar(hereinafter referred to as the “said Bhavsar”) to apply for and obtain Letters of Administration to the estate of the deceased Mr. Mani Cawas Bamji and also to apply for and obtain probate of the will of the deceased Mr.Dinshaw Jamshedji Mistry was the consideration which made the said Bhavsar pay the said amount of Rs. 4,78,80,000 to the Appellant and in any event was to be regarded as received by way of inheritance.
3. The CIT(Appeals) 27/16(1)/2 erred in holding that the Appellant” willingly offered to surrender the amount for taxation and also submitted as cheque of Rs.1,60,46,844/- dated 28/11/07 drawn HSBC Bank, Mumbai.”
4. The CIT(Appeals) 27/ 16(1)/2 failed to appreciate that the amount of Rs. 1,60,46,840/- was collected by Mr. Karun Kant Ojha, Deputy Director of Income Tax (Investigation), Unit-II(2) Room 437,Scindia House, N.M. Road, Ballard Pier, Mumbai – 400 038 and was recovered from the Appellant under duress, without any formal notice to the Appellant, without any jurisdiction over the Appellant, outside of and in breach of the Income Tax Act and the Law.
5. The CIT(Appeals) 27/ 16(1)/2 erred in directing the assessing officer to consider the addition of Rs. 1.047 crores for the assessment year 2004-05.
6. The CIT(Appeals) 27/ 16(1)/2 erred in holding that the appellant is not the legal heir of the testatrix Mrs. Mani Cawas Bamji.”
2. The assessee is an individual. The facts and circumstances under which the present appeal of the assessee arises for consideration are as follows. One Mrs. Mani Cawas Bamji was a childless widow and she died in Bombay on 6/01/2001. She possessed considerable movable properties in the form of shares, debentures and fix deposits and also immovable property known as Avasia House in her sole name at Nepean Sea Road, Mumbai. During her life time she had allegedly executed a will dated 2/5/1997. She left behind as legal heirs entitled to succeed her properties, the assessee being son of a pre-deceased sister and a brother one Mr. Dinshaw Jamshedji Mistry. Under the will dated 2/5/1997 she had bequeathed all her properties to her brother Mr. Dinshaw Jamshedji Mistry, who was also appointed as one of the executors in the will. There were three executors named in the aforesaid will. It appears two of the other executors renounced their executorship. Mr. D.J Mistry, the brother of the deceased, filed a petition before the Hon’ble Bombay High Court for grant of probate of the last will testamentary of Mrs. Mani Cawas Bamji. The same was numbered as petition 387 of 2001. As already stated the assessee was admittedly a person entitled to succeed to the property of the deceased Mrs. Mani Cawas Bamji by virtue of section 55 r.w. Part II, Schedule II of the Indian Succession Act, 1925. The assessee, therefore, received a citation from Hon’ble Bombay High Court in the petition for grant of probate filed by Mr. Dinshaw Jamshedji Mistry. The assessee filed a caveat against the grant of probate in respect of the last will and testamentary of Mrs. Mani Cawas Bamji. In the affidavit filed in support of the caveat the assessee set out the various reasons as to why alleged will dated 2/5/1997 is not valid. On such objection being filed Petition No.387 of 2001 was converted into a testamentary suit being TIL suit No.27 of 2001.
3. The assessee also filed a notice of motion for restraining Mr. Dinshaw Jamshedji Mistry by an order of injunction from transferring, disposing, alienating etc. of the shares, operating bank lockers and dealing with properties of the deceased Mrs. Mani Cawas Bamji. The Hon’ble High Court by order dated 2 1/2/2000 restrained Mr.Dinshaw Jamshedji Mistry from dealing with properties of the deceased.
4. On 28/9/2002 Mr. Dinshaw Jamsheji Mistry died. During his life time he had executed his last will and testament dated 29/10/2001 appointing Mr. Rajesh K. Bhavsar as the sole executor and legatee. Mr.Rajesh K.Bhavsar got himself impeded as plaintiff in PIL Suit No.27 of 2001 before Hon’ble Bombay High Court for granting of probate of the last will testament of Mrs. Mani Cawas Bamji in place of Dinshaw Jamsheji Mistry they agreed to comprise their disputes was dated 22/11/2002. There is no dispute that this sum of Rs. 5,08,80,000/- later reduced by Rs.30,00,000/- and ultimately the assessee received a sum of Rs. 4,78,80,000/- in the following manner.
For Fin. Year 2003-04 (Asst. Year 2004-05)
