COMMISSIONER OF INCOME TAX v. MINOR SHANTHI CHANDRAN. (CIT v. MINOR KAVITHA CHANDRAN)
HIGH
COURT OF MADRAS
S. V. Subramanian, for C. V. Rajan, for the Applicant :
None, for the Respondent
ORDER
R. JAYASIMHA BABU, J. :
The question referred to us is "Whether, on the facts and circumstances
of the case and having regard to the provisions of section 49 of the IT Act, the
Tribunal is right in law in holding that the value of shares as mentioned
in the family settlement deed and not the cost to the previous owner,
should be taken as the cost of acquisition of share obtained by the assessee
in the family settlement ?
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2. The assessee while they were minors and unmarried, being the daughters of one Jagadish
Chandran, received certain shares from Premier Cotton Spinning Mills Ltd., under the
settlement effected by their father on 2nd March, 1977. In that settlement the value of
the shares mentioned was higher than the amount for which the said Jagadish Chandran had
acquired the shares. Subsequently in the asst. yr. 1982-83, the assessees sold those
shares and derived a capital gain therefrom.
3. The assessees contended before the assessing authority that the cost
of acquisition of the shares which they were entitled to deduct under
section 48 (ii) of the Act
should be taken as the amount mentioned in the settlement deed. The ITO
did not accept their contention and hold that under section 49 of the Act, it was
the cost to the previous owner that was required to be regarded as a cost
of acquisition. The CIT(A) having held otherwise in appeal, the ITO appealed
to the Tribunal which confirmed the order of the appellate authority.
The Tribunal held that the shares had been obtained by the two daughters
for a consideration and the consideration was in the view of the Tribunal
their right to receive their marriage expenses.
4. Sec. 9 of the Act
deals with the cost with reference to certain modes of acquisition and
provides that where the capital asset became the property of the assessee
in any of the modes mentioned in sub-cls. (i) to (vi), the cost of acquisition
of the asset shall be deemed to be the cost for which the previous owner
of the property acquired it, as increased by the cost of any improvement
of the assets incurred or borne by the previous owner or the assessee
as the case may be.
5. The sub-clauses of section
49 (1) of the Act refer to the distribution of assets on the total
or partial partition of an HUF; the assets received under a gift or will;
the assets received by way of succession; inheritance or devolution, the
assets received on the distribution of assets on the dissolution of a
firm; BOI or other AOP; the assets received on the distribution of assets
on the liquidation of a company; and to the assets under a transfer to
a revocable or an irrevocable trust, etc.
6. In a partition, the consideration for the partition is the mutual relinquishment the
rights of the parties in the joint family properties in which each has share, the fact
that the daughters have a right to maintenance and marriage expenses and would have been
entitled to a share at a partition does not render the value of the shares allotted to
them under a settlement deed, the price for which they had sold or relinquished their
rights over the properties of the family. The family settlement in this context is
analogus to a partition. It is the cost to the previous owner that is to be taken into
account as the cost of acquisition of shares and not the amounts mentioned in the family
settlement deed by the settlor.
7. The question referred to us is, therefore, answered in favour of the Revenue and
against the assessee.
