[2020] 113 taxmann.com 5 (Delhi – Trib.)

Where assessee had received property from his brothers on account of Family Settlement and Release Deed was also executed in which it was nowhere recorded that assessee paid any consideration to his other three brothers, there being no commercial transaction, provisions of section 56(2)(vii)(b) were not attracted

INCOME TAX: Where assessee had to contribute funds towards family settlement to balance settlement between brothers and explained that source of such funds was loan taken from Bank, it could not be treated as undisclosed income of assessee

Section 56 of the Income-tax Act, 1961 – Income from other sources – Chargeable as (Family settlement of property) – Assessment year 2015-16 – Assessee during year filed its return of income declaring total income of Rs. 1.28 crore – Assessing Officer on perusal of Memorandum of Family Settlement (MFS) noted that assessee had acquired Bungalow at New Delhi, due to relinquishment of rights in said property by three brothers of assessee for Rs.NIL – Assessing Officer noted that assessee had got sanctioned a bank loan of Rs. 15 crore and disbursement was made by bank of Rs. 12 crore, Rs. 4 crore to each of three brothers and this meant that brothers were paid a sum against relinquishment of their rights in property – Thus, taking into consideration that property had been purchased by assessee from brothers for Rs. 12 crore and there being difference of Rs. 28 crore, in stamp value determined by Registrar for this property, Assessing Officer made addition of difference under section 56(2)(vii)(b) – Commissioner (Appeals) confirmed addition under section 56(2)(vii)(b) – On appeal, it was found that in pursuance of Family Settlement, assessee and his three brothers had distributed various properties among themselves and necessary rights and title were transferred in favour of each brother which would show that parties had entered into genuine transaction – Further, Release Deed was also executed, in which it was nowhere recorded that assessee paid any consideration to his other three brothers – Moreover, loan as considered by authorities below of Rs. 12 crore received by assessee had been received after execution of aforesaid Release Deed and thus, there was no question of parting with any consideration for execution of Release Deed – Whether thus, there being no commercial transaction in distribution of property, provisions of section 56(2)(vii)(b) were not attracted – Held, yes

Section 69B of the Income-tax Act, 1961 – Undisclosed investments (Immovable property) – Assessment year 2015-16 – Whether where assessee had to contribute funds as part of Family Settlement to balance settlement between brothers and explained that source of such funds was loan taken from Bank, it could not be treated as undisclosed income of assessee and accordingly provisions of section 69B would not be applicable – Held, yes

Govind Kumar, Khemka