COMMISSIONER OF GIFT-TAX Vs. S. N. ZAMAN

JUDGEMENT

(1.) ON the application of the Revenue under s. 26(1) of the GT Act, 1958 (for short, 'the Act'), the following questions have been referred by the Tribunal for opinion of this Court :

(2.) FOR the purpose of answering the questions the facts may be narrated as follows : Rahim Buksh, father of the assessees, started a business in his individual capacity. Subsequently, this business was converted into a partnership firm under a deed of partnership dt. 1st Oct., 1966, under the name, R. B. Stores, and was registered as such on 24th Oct., 1967. In this partnership business, Rahim Buksh and his two sons were partners. Rahim Buksh held 40 per cent share in the business. He also owned 1/4th share in the house property in the Police Bazar, Shillong. Remaining three -fourths of the property had been acquired by his two sons out of their individual sources. On 5th Dec., 1979, the said partnership firm was dissolved and the accounts were made up to that time. The capital of Rahim Buksh was Rs. 1,40,424. This was equally divided between the two sons. On the same day, i.e., 5th Dec., 1979, a family agreement was made between Rahim Buksh and his two sons and was registered. On 30th July, 1980, Rahim Buksh filed a gift -tax return showing Rs. 1,40,423 being the amount of capital in his name as on 5th Dec., 1979, in the firm of R. B. Stores. The date of gift was shown as 4th Dec., 1979. Rahim Buksh died on 28th Jan., 1982. Thereafter his legal representative filed a gift -tax return showing the gift as nil. It was stated in the return that the share of the deceased in the firm of R. B. Stores and the property at Police Bazar, Shillong, had been given away to his sons, S. N. Zaman and S. M. Elahi, by way of family settlement dt. 5th Dec., 1979. The GTO rejected the contention that there was no gift and that the properties had been transferred by virtue of family settlement dt. 5th Dec., 1979, and distinguished the decision in Ziauddin Ahmed (supra). The GTO, therefore, made an assessment on 40 per cent share of the capital of the deceased in the firm, R. B. Stores and also included 1/4th share value of the property. On appeal, the AAC upheld the contention of the assessee that the agreement dt. 5th Dec., 1979, was a family settlement, that the donees had filed a nil return for the transfer of property did not constitute a gift and that such transfer had taken place by a registered deed of family settlement. The Revenue preferred an appeal before the Tribunal. Before the Tribunal it submitted that there should be dispute between the parties in consequence whereof settlement should be made for mutual interest and this essential ingredient was not present in the present case. In support of its contention, the Revenue relied on the decision of the Supreme Court in the case of CGT vs . N. S. Getti Chettiar : [1971]82ITR599(SC) and in the case of Ram Laxman Sugar Mills vs . CIT : [1967]66ITR613(SC) . The Tribunal finding that all the ingredients for a valid family settlement were present in the present case and that the averments in the agreement dt. 5th Dec., 1979, having not been questioned, applying the ratio of the decision of this Court in the case of Ziauddin Ahmed vs. CGT (supra) upheld the AACs order dismissing the appeal filed by the Revenue. Thereafter, on the request of the Revenue, the above questions have been referred by the Tribunal for opinion of this Court.

(3.) IN order to appreciate the submission of Mr. Joshi, it is to be seen what constitutes a family settlement. Family settlement is made just to avoid dispute to maintain the honour and dignity of a family. It is neither a partition nor an exchange. Now the question is whether the dispute must be in existence at the time of family settlement. The Supreme Court in Ram Charan Das vs . Girja Nandini Devi : [1965]3SCR841 held thus :