Kunal R. Gupta Vs ITO (ITAT Mumbai)
It is settled law that when parties entered into family arrangement, validity of the family arrangement is not to be judged with reference to whether the parties should raised dispute or rights or claimed rights or a certain properties had in law any such right or not.
I am of the view that it is settled law that when parties entered into family arrangement, validity of the family arrangement is not to be judged with reference to whether the parties should raised dispute or rights or claimed rights or a certain properties had in law any such right or not. This position is explained by Hon’ble Supreme Court in the case of Maturi Pullaiah v. Maturi Narasimham, AIR 1966 SC 1836 (SC), wherein Hon’ble Court as under:-
“17. Briefly stated, though conflict of legal claims in present or in future is generally a condition for the validity of a family arrangement, it is not necessarily so. Even bona fide disputes, present or possible, which may not involve legal claims will suffice. Members of a joint Hindu family may, to maintain peace or to bring about harmony in the family, enter into such a family arrangement. If such an arrangement is entered into bona fide and the terms thereof are fair in the circumstances of a particular case, Courts will more readily give assent to such an arrangement than to avoid it.” (p. 1841)
From the above judgment of Hon’ble Supreme Court, it is clear that even the conflict of legal claims in present or future is a condition for validity of family arrangement, it is not necessary so. Even future dispute if any possible that can be the reasons for family settling the property by way of family arrangement. Even, Hon’ble Supreme Court in the case of Kale vs. Deputy Director of Consolidation, AIR 1976 (SC) 807, as laid down the principles which are essential for family arrangement.
“(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;” (p. 813)
I am of the view that it is settled law that when parties entered into family arrangement, the validity of the family arrangement is not to be judged with reference to whether the parties who raised disputes or rights or claimed rights to certain properties had in law any such right or not. A perusal of the record in the present case before me, establishes that a dispute was there in the family as per memorandum of family arrangement cum compromised deed and family arrangement was arrived at was documented much prior to the sale of the property in 2011. The family arrangement was made in 2004. In view of these, I treat the family arrangement as genuine and distribution of sale consideration according to the same is to be assessed as capital gains. The consequential benefits and deductions are to be allowed as per law.
