MUTUAL FUND INVESTMENT: Getting the Basics Right
The idea that a fund with lower NAV is better than one with a higher NAV because it is cheaper is wrong.
By Dhirendra Kumar
Over the last 10 months, the way mutual funds are sold to individual investors in India has changed completely. While the impact on fund companies and fund distributors has often been discussed in the press, these changes have also made it necessary for investors to have a somewhat different approach while investing in funds. The changes that have happened are almost all beneficial for investors, but they do require investors to avoid some likely pitfalls.
In terms of outcomes, the biggest change that has happened is that the fund industry has shifted sharply from trying to sell new
fund offers to selling older, existing funds. There are a set of reasons for this. Entry load has been abolished. Fund companies now have to finance new fund marketing from their own pockets, rather than be able to dip into the fund’s assets. And SEBI has gotten tough about giving approvals to new funds unless fund companies can genuinely prove that the fund is substantially different from older ones. These changes are not all new or sudden but have accumulated over time. However, the coming together of all these factors means that current advertising and marketing campaigns ask investors to buy existing funds on the basis of their track records rather than fanciful features.
In general, this is a welcome development which makes me very happy. However, over the last few weeks I have realised that this also marks the return of into wider usage of one of the more harmful myths about mutual funds—that of low NAV being a desirable factor. Many investors believe that a fund with lower NAV is better than a fund with higher NAV. Apparently this belief is encouraged by some fund salesmen. I regularly come across people to whom fund are recommended on the basis of NAV level. This is a very basic issue and it’s sad that there are investors who are confused about something as basic as this.
The idea that a fund with lower NAV is better than one with a higher NAV because it is cheaper is wrong. In fact, it is so wrong that it would be a mistake for me to call it merely wrong. It is a ridiculous and a harmful idea, arising from an utter misunderstanding of what a mutual fund is and what NAV is. If you ever come across a fund salesman who even hints at suggesting that lower NAV is good, you should, without any second thoughts, conclude that he is either a fakeor a charlatan or a complete incompetent.
Here’s a simple way of understanding the underlying principle. The NAV simply reflects how much a fund has gained since it was launched and depends entirely on how well the fund manager has managed the fund’s portfolio of investments. For example, if the market has been gaining at 20 per cent a year then a one year old fund will have an NAV of Rs 12 and a two-year old fund with the same portfolio will have an NAV Rs 14.40.
The first one is not cheaper in any sense and its lower NAV has no bearing at all on how much it will gain in the future. Future gains will depend on their portfolios. For example, if they are managed in an identical manner, then your gains will be identical. If the two were to gain 30 per cent over the next two years, then the NAV of the first one will rise from Rs 12 to Rs 15.60 and the second one from Rs 18.72. There is no difference between the two. Rs one lakh invested in both will in each case become Rs 1.3 lakh. The only use of NAV is to compare with the past NAV of the same fund. That’s what tells you how much a fund has gained. Comparing it to the NAV of another fund is useless.
Saturday, March 13, 2010
Domino’s opens 300th store in India
FROM STOCKWATCH.IN
The Michigan-based pizza delivery and Italian fast food company Domino’s has reached the 300th mark in number of stores in the country. With this the company has also opened the 9,000th store across the globe. The company also informed that there will be no end to its hunger for opening more and more outlets across the nation. As of now, 25 Indian cities are already connected with the Domino’s Pizza chain. Now it is targeting small towns like Gangtok and Siliguri. Chief Executive of Jubilant FoodWorks, Ajay Kaul said that the company is the largest food chain brand in India. This has been achieved due to more number of outlets. Domino’s won’t hesitate to carry on similar aggressive marketing policies in coming time. FoodWorks is the master franchisee of Domino’s Pizza chain in India. Kaul has also informed that the compounded annual growth of the company was 42 per cent in the previous five years. However, Global Chief Executive of Domino’s, Patrick Doyle has expressed his contentment on the 9,000th store opening. He anticipated that, by 2011 the 10,000th store will be operative on earth.
FROM STOCKWATCH.IN
The Michigan-based pizza delivery and Italian fast food company Domino’s has reached the 300th mark in number of stores in the country. With this the company has also opened the 9,000th store across the globe. The company also informed that there will be no end to its hunger for opening more and more outlets across the nation. As of now, 25 Indian cities are already connected with the Domino’s Pizza chain. Now it is targeting small towns like Gangtok and Siliguri. Chief Executive of Jubilant FoodWorks, Ajay Kaul said that the company is the largest food chain brand in India. This has been achieved due to more number of outlets. Domino’s won’t hesitate to carry on similar aggressive marketing policies in coming time. FoodWorks is the master franchisee of Domino’s Pizza chain in India. Kaul has also informed that the compounded annual growth of the company was 42 per cent in the previous five years. However, Global Chief Executive of Domino’s, Patrick Doyle has expressed his contentment on the 9,000th store opening. He anticipated that, by 2011 the 10,000th store will be operative on earth.
Gujarat pharmaceutical companies
Sikkim still an attractive destination.
Total National production of Pharma is Rs.90,000 crores annualy
by:Sohini Das & Chitra Unnithan
“We have not done the right thing in shifting our units to hill states, and will now concentrate on our production units in Ahmedabad.” said I A Modi, chairman of Cadila Pharmaceuticals Ltd, which had shifted production worth Rs 250 crore from Ahmedabad to its Samba facility near Jammu in 2006.
Gujarat had seen exodus of many pharmaceutical units to tax-exempted states such as HP, Uttarakhand and Sikkim, as pharma is a cost-sensitive business. The state’s share in national pharma production, once 42 per cent, fell below 20 per cent after the pharma tax-free zones were formed.
“Pharma production in Gujarat is picking up now. We hope by the end of this year, the state’s share would reach around 35 per cent of national pharmaceutical production, which is around Rs 90,000 crore,” said Chirag Doshi, secretary, Indian Drug Manufacturers’ Association.
The graph, he said, is back on its upward curve for the past two years, for two reasons. One, the deadline for tax exemption in most hill states is nearing the deadline. Two, the excise duty is now down to 4 per cent from 16 per cent in 2006-07, so the hill states are not as attractive, he told Business Standard on the sidelines of a pharma event in Ahmedabad.
“Gujarat did see a migration of units in the pharma sector. However, the reversal has already started. We have been able to re-capture one third of India’s drugs and formulations market,” Jaynarayan Vyas, the state government’s minister of health and family welfare had said recently.
Today, Sikkim is home to as many as 14 major pharma companies, with significant investments in the state. These include units by Cipla, Sun Pharma, Zydus Cadila, Alembic, IPCA, Alkem Lab, Intas Pharma, Torrent Pharmaceuticals and Unichem.
The attractiveness of the hill states lie in the multitudes of tax benefits they have to offer. These include excise duty exemption on finished products, income tax exemption and capital investment subsidy on investment in plant and machinery, among others. This led to nearly 180 pharma units flocking to Baddi, making it a pharma manufacturing hub. As for Sikkim, it was included in the ‘North East Industrial and Investment Promotion Policy, 2007’, as a part of which all new units and existing ones going for expansion in the state get a fulll exemption from income tax and excise duty, apart from a 30 per cent subsidy on investment in plant and machinery, together with interest subsidy at 3 per cent on capital loan and even reimbursement of 100 per cent insurance premium.
Industry sources indicated that once the tax-related policies in Special Economic Zones (SEZs) become clear, export oriented units like Zydus Cadila would look at concentrating more on Gujarat-based SEZs.
Most pharma companies are in the process of setting up SEZs, where one can avail tax benefits. This is another reason for the homeward move of the state’s pharma majors.
A slew of SEZs for the pharma industry have been planned by various players like Zydus Group, J B Chemicals, Dishman Pharma and Cadila Healthcare. Together, they aim to draw investment of Rs 10-15,000 crore in the next couple of years, according to industry sources.
Dishman Pharma is planning to invest Rs 500-600 crore in its SEZ over the next five years, that would be developed by Dishman Infrastructure Ltd (DIL) with an investment of Rs 400 crore.
“Work on the first phase will start in the first week of January and will take 15 months to complete,” J R Vyas, managing director of Dishman Pharma said. The company plans to build four facilities for contract manufacturing in the first phase. Torrent Pharma would invest Rs 350 crore to set up a facility at the Dahej SEZ and has started work on land development. This SEZ is a 50:50 joint venture between the Gujarat Industrial Development Corporation (GIDC) and ONGC. Already, 28 companies have finalised their plans for setting up manufacturing units in the area.
Cadila Pharma has plans to set up around seven to eight units in the coming PhaEZ near Ahmedabad over the next six years, with an estimated investment of around Rs 600-700 crore. About 30 units, involving investment of Rs 1,500-3,000 crore, are expected to come up in the PhaEZ Park.
Zydus Infrastructure has filled up Phase-I of its SEZ with nine units at an investment of Rs 200 crore. The 49.5 hectare SEZ already has a few operational units like Oxygen Bio, Fischer Scientific and Femicare. The company is now looking at developing the 67-hectare Phase-II of the SEZ. Besides a few joint venture units, Zydus Cadila is aiming to invest Rs 100 crore for manufacturing transdermal patches and various injectables.
Sikkim still an attractive destination.
Total National production of Pharma is Rs.90,000 crores annualy
by:Sohini Das & Chitra Unnithan
“We have not done the right thing in shifting our units to hill states, and will now concentrate on our production units in Ahmedabad.” said I A Modi, chairman of Cadila Pharmaceuticals Ltd, which had shifted production worth Rs 250 crore from Ahmedabad to its Samba facility near Jammu in 2006.
Gujarat had seen exodus of many pharmaceutical units to tax-exempted states such as HP, Uttarakhand and Sikkim, as pharma is a cost-sensitive business. The state’s share in national pharma production, once 42 per cent, fell below 20 per cent after the pharma tax-free zones were formed.
“Pharma production in Gujarat is picking up now. We hope by the end of this year, the state’s share would reach around 35 per cent of national pharmaceutical production, which is around Rs 90,000 crore,” said Chirag Doshi, secretary, Indian Drug Manufacturers’ Association.
The graph, he said, is back on its upward curve for the past two years, for two reasons. One, the deadline for tax exemption in most hill states is nearing the deadline. Two, the excise duty is now down to 4 per cent from 16 per cent in 2006-07, so the hill states are not as attractive, he told Business Standard on the sidelines of a pharma event in Ahmedabad.
“Gujarat did see a migration of units in the pharma sector. However, the reversal has already started. We have been able to re-capture one third of India’s drugs and formulations market,” Jaynarayan Vyas, the state government’s minister of health and family welfare had said recently.
Today, Sikkim is home to as many as 14 major pharma companies, with significant investments in the state. These include units by Cipla, Sun Pharma, Zydus Cadila, Alembic, IPCA, Alkem Lab, Intas Pharma, Torrent Pharmaceuticals and Unichem.
The attractiveness of the hill states lie in the multitudes of tax benefits they have to offer. These include excise duty exemption on finished products, income tax exemption and capital investment subsidy on investment in plant and machinery, among others. This led to nearly 180 pharma units flocking to Baddi, making it a pharma manufacturing hub. As for Sikkim, it was included in the ‘North East Industrial and Investment Promotion Policy, 2007’, as a part of which all new units and existing ones going for expansion in the state get a fulll exemption from income tax and excise duty, apart from a 30 per cent subsidy on investment in plant and machinery, together with interest subsidy at 3 per cent on capital loan and even reimbursement of 100 per cent insurance premium.
Industry sources indicated that once the tax-related policies in Special Economic Zones (SEZs) become clear, export oriented units like Zydus Cadila would look at concentrating more on Gujarat-based SEZs.
Most pharma companies are in the process of setting up SEZs, where one can avail tax benefits. This is another reason for the homeward move of the state’s pharma majors.
A slew of SEZs for the pharma industry have been planned by various players like Zydus Group, J B Chemicals, Dishman Pharma and Cadila Healthcare. Together, they aim to draw investment of Rs 10-15,000 crore in the next couple of years, according to industry sources.
Dishman Pharma is planning to invest Rs 500-600 crore in its SEZ over the next five years, that would be developed by Dishman Infrastructure Ltd (DIL) with an investment of Rs 400 crore.
“Work on the first phase will start in the first week of January and will take 15 months to complete,” J R Vyas, managing director of Dishman Pharma said. The company plans to build four facilities for contract manufacturing in the first phase. Torrent Pharma would invest Rs 350 crore to set up a facility at the Dahej SEZ and has started work on land development. This SEZ is a 50:50 joint venture between the Gujarat Industrial Development Corporation (GIDC) and ONGC. Already, 28 companies have finalised their plans for setting up manufacturing units in the area.
Cadila Pharma has plans to set up around seven to eight units in the coming PhaEZ near Ahmedabad over the next six years, with an estimated investment of around Rs 600-700 crore. About 30 units, involving investment of Rs 1,500-3,000 crore, are expected to come up in the PhaEZ Park.
Zydus Infrastructure has filled up Phase-I of its SEZ with nine units at an investment of Rs 200 crore. The 49.5 hectare SEZ already has a few operational units like Oxygen Bio, Fischer Scientific and Femicare. The company is now looking at developing the 67-hectare Phase-II of the SEZ. Besides a few joint venture units, Zydus Cadila is aiming to invest Rs 100 crore for manufacturing transdermal patches and various injectables.
National Archives of India
Alok Deshwal**
The National Archives of India is celebrating its 110th Foundation Day on 11 March 2010, as a repository of non-current records of the Government. It was on 11 March 1891 that the Department was established as Imperial Record Office at Imperial Secretariat Building, Calcutta, with G.W. Forrest as the first Officer-in-Charge of the Department.
Following the transfer of capital from Calcutta to New Delhi in 1911, it was imperative that the Imperial Record Office (IRD) would also be transferred to the new capital. The present building which was designed by Edwin Lutyens became the permanent abode of records of the Government in 1926. After Independence, the IRD was rechristened as National Archives of India and Head of the Organisation was designated as Director of Archives from Keeper of Records. Dr. S.N. Sen, who succeeded A.F.M. Abdul Ali and held office till 1949 gave an overall orientation to the activities of Imperial Records Department/National Archives of India. For the first time, records were thrown open for bonafide research in 1939 and by 1947 all pre 1902 records were available for consultation. A Conservation Research Laboratory (CRL) was established in 1940 to conduct researches into problems relating to conservation which was, Dr Sen’s visionary contribution. Training in Archives Keeping was introduced in 1941 and in 1944, a scheme of Post War Re-organisation of Archives offices in India was laid down by the Indian Historical Records Commission. In 1947, the Departmental Journal The Indian Archives came into existence which contains research papers on source material of modern Indian history, conservation of documents, records-management, reprographics, archival awareness and all other allied aspects of functional archives.
Thus, National Archives of India marched towards the path of progress after Independence to play a more dynamic and inspiring role in the archival field of the entire country. It witnessed manifold expansion of its activities since then in the field of accession of public records, acquisition of private papers/ collections and library material, records management, research and reference, publication, training, conservation, reprography, outreach programmes, coordination at national and international level and expansion of office at regional areas. The Department witnessed further impetus to its status in June 1990 when the office of the Director of Archives was re designated as Director General of Archives. At present National Archives of India is an attached office under the Ministry of Culture and has a Regional Office at Bhopal and Records Centres at Jaipur, Puducherry and Bhubaneswar.
National Archives of India has in its custody, a rich collection of Private Papers which have been acquired mainly through donations and gifts from a variety of sources. These papers constitute a valuable supplement to the information contained amongst public records. Major collections of Private Papers are those of Mahatma Gandhi, Dr. Rajendra Prasad, Dadabhai Naoroji, M R Jayakar, Maulana Azad, G.K. Gokhale, Sardar Patel, P.D. Tandon, Minoo Masani, etc. It also houses the files of the Indian National Army.
A rich collection of about 1.5 lakhs documents is available among the Oriental Records (OR) comprising manuscripts, parwanas, hukums, kharitas, farmans, etc., in Persian, Arabic, Urdu etc., Among the rare and valuable collections of documents are the Fort William College Collection, Inayat Jang Collection, Mathura Documents, Gujarat documents, Haldiya Papers etc., All these papers are available for consultation as per the Public Record Rules, 1997.
Oriental Records Division has a large collection of Records comprising of rare manuscripts, single unit documents and rare books in Persian, Arabic, Urdu, English, Hindi, Modi, Rajasthani, Marathi, Turkish, Bangla and in many other languages and in various scripts. Some of the major collections are:
The Inayat Jung collection numbering to 1,37,000 approximately, is the Official Mughal Documents. It consists of reports, day to day accounts and revenue figures which were sent regularly to the Diwan of the Deccan by the individual Diwans of the six provinces of the Deccan. Collection can be found of the following Emperor’s - Aurangzeb (period covered 1658-1707); Azam Shah (1707); Shah Alam Bahadur Shah I (1707- 12); Jahandar Shah (1712- 13); Farrukh Seyar (1713- 19); Rafiud Darajat (1719); Rafiud Daulah (1719); Muhammad Shah (1719-48); Ahmad Sha (1750-52) and Shah Alam II (period covered 1768-74).
The Haldia Collection in Persian and Urdu are 1060 documents. These documents throw light on the political role of the Haldia family in Rajasthan.
There are approximately 14,000 other documents in different oriental languages especially in Persian and Urdu. These documents are related to different regions and deal with different aspects of polity, society and culture. For example:-
· A collection of 149 documents which throw light on Emperor Akbar’s policy of religious tolerance as he gave hundreds of Bighas of land grants to 35 temples in Mathura.
· Another collection of 125 documents furnishes details of the qanungoi and other offices held by a zamindar family of Sonepat during 18th - 20th century.
· Another collection of 150 documents throw light on the revenue grants in Bihar under the Mughals.
· A large collection of documents belong to Sandila and Jais region which deal with revenue free grants to individuals, religious heads etc. These documents also bring to light the agrarian structure and the role of various classes in the agrarian economy under the Mughals.
· A collection of 63 documents deal with the urban structures particularly in Gujurat.
· A collection of 70 documents gives information about the spread of slavery with special reference to Allahabad region.
· A collection of 133 documents are related to maths in Gujurat (Pakistan).
· Another collection deals with the Deccan States about the revenue grants, jagir administration etc.
· Another 25 Photostat documents deal with the establishment of Mughal administration in the Cooch Behar region.
· A collection of 125 documents gives information on the rising fortunes of a zamindar family in Malwa region.
· Another collection of 150 shed light on the local administration in Tonk and interference of the East India Company in its day to day working.
· A collection of 31 documents reflect the British policy towards the lakhiraj revenue free grants in Orissa.
The National Archives of India has acquired about 400 manuscripts mainly in Arabic Persian , Urdu, Sanskrit, Sharda and Bangla etc., on different subjects such as religion, history, lexicon, literature, biography, agriculture and medical science etc. by way of purchase or gift. The manuscripts are dating back to 10th century down to the 20th century.
It has also acquired by way of purchase or gift about 300 books in Persian, Urdu, Hindi and other Oriental Languages which deal with different subjects like religion, history, literature, biography, agriculture and medical science, travelogues etc.
An important collection of OR Division is Fort William College Collection of books and manuscripts. This important collection has been inherited from the British East India Company through its prestigious College of Fort William at Calcutta. Major part of the collection was taken back to India Office library, London and remaining manuscripts and books were transferred to the then Imperial Record Office (Presently National Archives of India). The collection comprises of about 200 manuscripts and 1000 books and has very important works. This valuable collection in Arabic, Persian, Sanskrit and Bengali cover subjects like, religion, lexicon, epistolography, literature, history, animal husbandry, astrology, medical sciences etc. The chronological range of this collection is 10th century to 19th century. Some of the worth mentioning titles are: Tarfsir Fath al-Aziz, Jawahar al Tafsir, Fatwa-i-Alamgiri, Fatawa Ibrahim Shahi, Fath al-Qadir, Futuhat-i-Makkiya, Tasawwuf-i-Shi’i, Razm Nama, Bhagwat Gita, Zabur, Zakhirat al-Muluk, Dabistan-i-Mazahib, Shamail al-Nabi, Bahar-i-Ajam, and many more important works of Lexicons. (All the collection of documents, manuscripts and books are arranged as per their Accession Nos. except the Fort William College Collection of Books and Manuscript (recently transferred from NAI library to OR Div.) which is kept as per their Serial Nos.)
The NAI has Oriental Records in Microfilm Rolls of 4,000 Manuscripts of Rampur Raza Library, 16,000 exps. of Miscellaneous Oriental Records and one Roll of Central Asian Antiquities Museum Microfilm
The National Archives of India Library presently has in its custody over 1,70,000 publications comprising Rare books, Reports, Parliamentary Papers and Debates, Monographs, Gazettes, Gazetteers, Travelogues, Native Newspapers, Journals etc., which constitute a most valuable supplementary source of information to the material contained among official records. These publications cover a variety of subjects like modern history and politics, culture, demography, archives, economics, social science, gender studies, tribal studies etc. With the rapid strides being made in information technology, the Library is gearing itself to adopt modern technology to facilitate the task of scholars and make its services more user friendly. (PIB Features)
**110th Foundation Day of National Archives of India
RTS/VN
SS-55/SF-55/10.03.2010
*Dy. Director (M&C), Press Information Bureau, New Delhi
Alok Deshwal**
The National Archives of India is celebrating its 110th Foundation Day on 11 March 2010, as a repository of non-current records of the Government. It was on 11 March 1891 that the Department was established as Imperial Record Office at Imperial Secretariat Building, Calcutta, with G.W. Forrest as the first Officer-in-Charge of the Department.
Following the transfer of capital from Calcutta to New Delhi in 1911, it was imperative that the Imperial Record Office (IRD) would also be transferred to the new capital. The present building which was designed by Edwin Lutyens became the permanent abode of records of the Government in 1926. After Independence, the IRD was rechristened as National Archives of India and Head of the Organisation was designated as Director of Archives from Keeper of Records. Dr. S.N. Sen, who succeeded A.F.M. Abdul Ali and held office till 1949 gave an overall orientation to the activities of Imperial Records Department/National Archives of India. For the first time, records were thrown open for bonafide research in 1939 and by 1947 all pre 1902 records were available for consultation. A Conservation Research Laboratory (CRL) was established in 1940 to conduct researches into problems relating to conservation which was, Dr Sen’s visionary contribution. Training in Archives Keeping was introduced in 1941 and in 1944, a scheme of Post War Re-organisation of Archives offices in India was laid down by the Indian Historical Records Commission. In 1947, the Departmental Journal The Indian Archives came into existence which contains research papers on source material of modern Indian history, conservation of documents, records-management, reprographics, archival awareness and all other allied aspects of functional archives.
Thus, National Archives of India marched towards the path of progress after Independence to play a more dynamic and inspiring role in the archival field of the entire country. It witnessed manifold expansion of its activities since then in the field of accession of public records, acquisition of private papers/ collections and library material, records management, research and reference, publication, training, conservation, reprography, outreach programmes, coordination at national and international level and expansion of office at regional areas. The Department witnessed further impetus to its status in June 1990 when the office of the Director of Archives was re designated as Director General of Archives. At present National Archives of India is an attached office under the Ministry of Culture and has a Regional Office at Bhopal and Records Centres at Jaipur, Puducherry and Bhubaneswar.
National Archives of India has in its custody, a rich collection of Private Papers which have been acquired mainly through donations and gifts from a variety of sources. These papers constitute a valuable supplement to the information contained amongst public records. Major collections of Private Papers are those of Mahatma Gandhi, Dr. Rajendra Prasad, Dadabhai Naoroji, M R Jayakar, Maulana Azad, G.K. Gokhale, Sardar Patel, P.D. Tandon, Minoo Masani, etc. It also houses the files of the Indian National Army.
A rich collection of about 1.5 lakhs documents is available among the Oriental Records (OR) comprising manuscripts, parwanas, hukums, kharitas, farmans, etc., in Persian, Arabic, Urdu etc., Among the rare and valuable collections of documents are the Fort William College Collection, Inayat Jang Collection, Mathura Documents, Gujarat documents, Haldiya Papers etc., All these papers are available for consultation as per the Public Record Rules, 1997.
Oriental Records Division has a large collection of Records comprising of rare manuscripts, single unit documents and rare books in Persian, Arabic, Urdu, English, Hindi, Modi, Rajasthani, Marathi, Turkish, Bangla and in many other languages and in various scripts. Some of the major collections are:
The Inayat Jung collection numbering to 1,37,000 approximately, is the Official Mughal Documents. It consists of reports, day to day accounts and revenue figures which were sent regularly to the Diwan of the Deccan by the individual Diwans of the six provinces of the Deccan. Collection can be found of the following Emperor’s - Aurangzeb (period covered 1658-1707); Azam Shah (1707); Shah Alam Bahadur Shah I (1707- 12); Jahandar Shah (1712- 13); Farrukh Seyar (1713- 19); Rafiud Darajat (1719); Rafiud Daulah (1719); Muhammad Shah (1719-48); Ahmad Sha (1750-52) and Shah Alam II (period covered 1768-74).
The Haldia Collection in Persian and Urdu are 1060 documents. These documents throw light on the political role of the Haldia family in Rajasthan.
There are approximately 14,000 other documents in different oriental languages especially in Persian and Urdu. These documents are related to different regions and deal with different aspects of polity, society and culture. For example:-
· A collection of 149 documents which throw light on Emperor Akbar’s policy of religious tolerance as he gave hundreds of Bighas of land grants to 35 temples in Mathura.
· Another collection of 125 documents furnishes details of the qanungoi and other offices held by a zamindar family of Sonepat during 18th - 20th century.
· Another collection of 150 documents throw light on the revenue grants in Bihar under the Mughals.
· A large collection of documents belong to Sandila and Jais region which deal with revenue free grants to individuals, religious heads etc. These documents also bring to light the agrarian structure and the role of various classes in the agrarian economy under the Mughals.
· A collection of 63 documents deal with the urban structures particularly in Gujurat.
· A collection of 70 documents gives information about the spread of slavery with special reference to Allahabad region.
· A collection of 133 documents are related to maths in Gujurat (Pakistan).
· Another collection deals with the Deccan States about the revenue grants, jagir administration etc.
· Another 25 Photostat documents deal with the establishment of Mughal administration in the Cooch Behar region.
· A collection of 125 documents gives information on the rising fortunes of a zamindar family in Malwa region.
· Another collection of 150 shed light on the local administration in Tonk and interference of the East India Company in its day to day working.
· A collection of 31 documents reflect the British policy towards the lakhiraj revenue free grants in Orissa.
The National Archives of India has acquired about 400 manuscripts mainly in Arabic Persian , Urdu, Sanskrit, Sharda and Bangla etc., on different subjects such as religion, history, lexicon, literature, biography, agriculture and medical science etc. by way of purchase or gift. The manuscripts are dating back to 10th century down to the 20th century.
It has also acquired by way of purchase or gift about 300 books in Persian, Urdu, Hindi and other Oriental Languages which deal with different subjects like religion, history, literature, biography, agriculture and medical science, travelogues etc.
An important collection of OR Division is Fort William College Collection of books and manuscripts. This important collection has been inherited from the British East India Company through its prestigious College of Fort William at Calcutta. Major part of the collection was taken back to India Office library, London and remaining manuscripts and books were transferred to the then Imperial Record Office (Presently National Archives of India). The collection comprises of about 200 manuscripts and 1000 books and has very important works. This valuable collection in Arabic, Persian, Sanskrit and Bengali cover subjects like, religion, lexicon, epistolography, literature, history, animal husbandry, astrology, medical sciences etc. The chronological range of this collection is 10th century to 19th century. Some of the worth mentioning titles are: Tarfsir Fath al-Aziz, Jawahar al Tafsir, Fatwa-i-Alamgiri, Fatawa Ibrahim Shahi, Fath al-Qadir, Futuhat-i-Makkiya, Tasawwuf-i-Shi’i, Razm Nama, Bhagwat Gita, Zabur, Zakhirat al-Muluk, Dabistan-i-Mazahib, Shamail al-Nabi, Bahar-i-Ajam, and many more important works of Lexicons. (All the collection of documents, manuscripts and books are arranged as per their Accession Nos. except the Fort William College Collection of Books and Manuscript (recently transferred from NAI library to OR Div.) which is kept as per their Serial Nos.)
The NAI has Oriental Records in Microfilm Rolls of 4,000 Manuscripts of Rampur Raza Library, 16,000 exps. of Miscellaneous Oriental Records and one Roll of Central Asian Antiquities Museum Microfilm
The National Archives of India Library presently has in its custody over 1,70,000 publications comprising Rare books, Reports, Parliamentary Papers and Debates, Monographs, Gazettes, Gazetteers, Travelogues, Native Newspapers, Journals etc., which constitute a most valuable supplementary source of information to the material contained among official records. These publications cover a variety of subjects like modern history and politics, culture, demography, archives, economics, social science, gender studies, tribal studies etc. With the rapid strides being made in information technology, the Library is gearing itself to adopt modern technology to facilitate the task of scholars and make its services more user friendly. (PIB Features)
**110th Foundation Day of National Archives of India
RTS/VN
SS-55/SF-55/10.03.2010
*Dy. Director (M&C), Press Information Bureau, New Delhi
INDIA: A radioactive Bill fraught with big risks
BY Brahma Chellaney
The Civil Liability for Nuclear Damage Bill seeks to burden the Indian taxpayer and encumber the rights of victims of any potential radioactive release from a foreign-built plant.
The government has finally released the text of its controversial nuclear-accident liability Bill. The text not only confirms the concerns expressed earlier over key elements of the proposed law but also raises additional issues of worry.
What stands out in the Civil Liability for Nuclear Damage Bill is the extent to which it goes to aid the business interests of the foreign reactor builders. In the process, the Bill seeks to financially burden the Indian taxpayer and encumber the rights of victims of any potential radioactive release from a foreign-built plant.
A special Indian law limiting liability in amount and in time has been sought by Washington for its nuclear-exporting firms, with the largest two, Westinghouse and General Electric (GE), set to win multibillion-dollar contracts to build several commercial nuclear power reactors. To forestall lawsuits filed against American suppliers in U.S. courts by victims of a nuclear catastrophe, Washington has also pressed for exclusive jurisdiction for Indian courts so that there will be no repeat of what happened after the Bhopal gas disaster. The Bill seeks to help out the U.S. firms on these counts, going at times even beyond what American law provides.
Under the Bill, the foreign reactor builder — however culpable it is for a nuclear accident — will be completely immune from any victim-initiated civil suit or criminal proceedings in an Indian court or in a court in its home country. The Bill actually turns the legal liability of a foreign reactor supplier for an accident into mere financial compensation — that too, pegged at a pittance and routed through the Indian state operator of the plant. Foreign suppliers will have no direct accident-related liability.
The foreign builders will bask under legal immunity because the Bill channels all legal liability to the Central Government. Clause 7 states the “Central Government shall be liable for nuclear damage in respect of a nuclear incident” when such liability exceeds the Rs.500-crore liability limit of the operator or where the accident occurs “in a nuclear installation owned by it [the Indian government].” The Union government will own all foreign-built reactors.
Indeed, the Bill creates a specious distinction between the operator and the government when both are fused in the Indian context. After all, it is the Indian state which will run all foreign-built plants through its operator, the Nuclear Power Corporation of India Limited (NPCIL). Yet, throughout the Bill, the pretence of a U.S.-style separation between the operator and the government is maintained.
Under Clause 6, the maximum liability of the operator and the government combined has been set at “the rupee equivalent of 300 million special drawing rights (SDRs),” or Rs.2,087 crore ($458 million) — 23 times lower than what is provided under the equivalent U.S. law, the controversial Price-Anderson Act (labelled “Half-Price Anderson” by critics). Of this, the total liability of the operator has been limited to Rs.500 crore ($109 million). The Central government will be liable for damages in excess of Rs.500 crore but only up to Rs.2,087 crore.
In actual fact, all liability falls on the Indian taxpayer, whether it is the operator's slice or the Central government's portion. The state operator, the NPCIL, through a construction contract, can make the foreign builder legally responsible to pay compensation for an accident. But the amount payable by a foreign builder can only be up to the state operator's own liability ceiling, which is a trifling Rs.500 crore ($109 million).
So, even if the accident were triggered by wilful negligence on the part of the foreign supplier and the consequences were catastrophic, all claims would have to be filed against the Indian state — with the NPCIL required to disburse the first Rs. 500 crore and the Central government the second portion up to Rs. 2,087 crore. The NPCIL could, in turn, try to recover its Rs. 500 crore from the foreign supplier. But for the Indian taxpayer, this is a lose-lose proposition.
That raises a fundamental question: What will it do to nuclear safety to grant foreign suppliers legal immunity upfront and to shift the liability to the Indian taxpayer?
Another key issue relates to the rights of victims. The Bill ensures that victims of a disaster involving a foreign-built reactor will not be able to sue the builder in its home country. Worse still, the Bill blocks the victims from suing the foreign supplier even in Indian courts.
Only the “operator shall have a right of recourse,” according to Clause 17. The state operator can sue the foreign supplier where “such right is expressly provided for in a contract in writing” and “the nuclear incident has resulted from the wilful act or gross negligence on the part of the supplier of the material, equipment or services, or of his employee.” But such a right of recourse can only be to meet the operator's own small liability of Rs. 500 crore.
In fact, the Bill seriously shackles Indian courts. All nuclear-damage claims will be dealt with by a Claims Commissioner or a Nuclear Damage Claims Commission, and any award made “shall be final” and cannot be appealed in any court. “No civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which the Claims Commissioner or the Commission, as the case may be, is empowered to adjudicate under this Act and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act,” according to Clause 35.
By contrast, the Price-Anderson Act permits economic (but not legal) channelling of liability, thereby allowing lawsuits and criminal proceedings against the reactor builder or any other party in U.S. courts. That is a key reason why the U.S. has not joined the Vienna or Paris convention — the two main international liability instruments. But the U.S. has become party to another convention it helped draft under the auspices of the IAEA — the Convention on Supplementary Compensation (CSC), which is still not in force. The CSC, as the name suggests, is about compensation through an international fund, to be paid “supplementary” to the liability limit.
The Bill also limits liability in time, with Clause 18 stating: “The right to claim compensation for any nuclear damage caused by a nuclear incident shall extinguish if such claim is not made within a period of 10 years from the date of incident…” That provision was retained despite the Environment Ministry's note of caution — revealed by this newspaper — that the 10-year time limit was untenable because damage to human health from a serious radioactive release “involves changes in DNAs, resulting in mutagenic and teratogenic changes, which take a long time to manifest.”
And although the Finance Ministry, in its comments on the Bill, had warned the proposed law would “expose the government to substantial liabilities for the failings of the private sector,” the Bill essentially seeks to give foreign reactor builders a free ride at the Indian taxpayer's expense.
The Indian Bill, in effect, amounts to a huge hidden subsidy by protecting foreign reactor builders from the weight of the financial consequences of accidents. If the Bill is passed, the costs of doing business in India for foreign suppliers will be low but the assured profits will be high. To cover the maximum potential compensation payable for an accident, a foreign builder will need to take insurance for a mere Rs. 500 crore. What is more, the foreign builders are being freed from the task of producing electricity at marketable rates. The NPCIL will run the foreign-built reactors, with the state subsidising the high-priced electricity generated.
India is under no international obligation to pass such a law. In fact, efforts to create common international standards on liability and compensation since the Chernobyl disaster have made exceedingly slow progress. Yet the Bill's accompanying “Statement of Objects and Reasons” creates the deceptive impression that the proposed law aims to bring India in line internationally. If anything, the Bill seeks to set a wrong international precedent by its mollycoddling of foreign suppliers.
To be sure, technological improvements in reactor-safety systems have significantly lowered the risks of a major nuclear accident. Yet nuclear technology remains intrinsically dangerous, and a single catastrophe anywhere in the world will impose colossal, long-term costs and have a chilling effect on the global appeal of nuclear power. Given the nuclear safety and security issues that have been highlighted by recent incidents in India, accident liability is a matter demanding serious consideration.
The government must answer the central question: In seeking to invite U.S. reactor builders, should a poor country rush to pass a special law that skews the business terms in their favour, gratuitously burdens the Indian taxpayer and ignores the lessons of the Bhopal gas disaster?
SOURCE; tHE HINDU
BY Brahma Chellaney
The Civil Liability for Nuclear Damage Bill seeks to burden the Indian taxpayer and encumber the rights of victims of any potential radioactive release from a foreign-built plant.
The government has finally released the text of its controversial nuclear-accident liability Bill. The text not only confirms the concerns expressed earlier over key elements of the proposed law but also raises additional issues of worry.
What stands out in the Civil Liability for Nuclear Damage Bill is the extent to which it goes to aid the business interests of the foreign reactor builders. In the process, the Bill seeks to financially burden the Indian taxpayer and encumber the rights of victims of any potential radioactive release from a foreign-built plant.
A special Indian law limiting liability in amount and in time has been sought by Washington for its nuclear-exporting firms, with the largest two, Westinghouse and General Electric (GE), set to win multibillion-dollar contracts to build several commercial nuclear power reactors. To forestall lawsuits filed against American suppliers in U.S. courts by victims of a nuclear catastrophe, Washington has also pressed for exclusive jurisdiction for Indian courts so that there will be no repeat of what happened after the Bhopal gas disaster. The Bill seeks to help out the U.S. firms on these counts, going at times even beyond what American law provides.
Under the Bill, the foreign reactor builder — however culpable it is for a nuclear accident — will be completely immune from any victim-initiated civil suit or criminal proceedings in an Indian court or in a court in its home country. The Bill actually turns the legal liability of a foreign reactor supplier for an accident into mere financial compensation — that too, pegged at a pittance and routed through the Indian state operator of the plant. Foreign suppliers will have no direct accident-related liability.
The foreign builders will bask under legal immunity because the Bill channels all legal liability to the Central Government. Clause 7 states the “Central Government shall be liable for nuclear damage in respect of a nuclear incident” when such liability exceeds the Rs.500-crore liability limit of the operator or where the accident occurs “in a nuclear installation owned by it [the Indian government].” The Union government will own all foreign-built reactors.
Indeed, the Bill creates a specious distinction between the operator and the government when both are fused in the Indian context. After all, it is the Indian state which will run all foreign-built plants through its operator, the Nuclear Power Corporation of India Limited (NPCIL). Yet, throughout the Bill, the pretence of a U.S.-style separation between the operator and the government is maintained.
Under Clause 6, the maximum liability of the operator and the government combined has been set at “the rupee equivalent of 300 million special drawing rights (SDRs),” or Rs.2,087 crore ($458 million) — 23 times lower than what is provided under the equivalent U.S. law, the controversial Price-Anderson Act (labelled “Half-Price Anderson” by critics). Of this, the total liability of the operator has been limited to Rs.500 crore ($109 million). The Central government will be liable for damages in excess of Rs.500 crore but only up to Rs.2,087 crore.
In actual fact, all liability falls on the Indian taxpayer, whether it is the operator's slice or the Central government's portion. The state operator, the NPCIL, through a construction contract, can make the foreign builder legally responsible to pay compensation for an accident. But the amount payable by a foreign builder can only be up to the state operator's own liability ceiling, which is a trifling Rs.500 crore ($109 million).
So, even if the accident were triggered by wilful negligence on the part of the foreign supplier and the consequences were catastrophic, all claims would have to be filed against the Indian state — with the NPCIL required to disburse the first Rs. 500 crore and the Central government the second portion up to Rs. 2,087 crore. The NPCIL could, in turn, try to recover its Rs. 500 crore from the foreign supplier. But for the Indian taxpayer, this is a lose-lose proposition.
That raises a fundamental question: What will it do to nuclear safety to grant foreign suppliers legal immunity upfront and to shift the liability to the Indian taxpayer?
Another key issue relates to the rights of victims. The Bill ensures that victims of a disaster involving a foreign-built reactor will not be able to sue the builder in its home country. Worse still, the Bill blocks the victims from suing the foreign supplier even in Indian courts.
Only the “operator shall have a right of recourse,” according to Clause 17. The state operator can sue the foreign supplier where “such right is expressly provided for in a contract in writing” and “the nuclear incident has resulted from the wilful act or gross negligence on the part of the supplier of the material, equipment or services, or of his employee.” But such a right of recourse can only be to meet the operator's own small liability of Rs. 500 crore.
In fact, the Bill seriously shackles Indian courts. All nuclear-damage claims will be dealt with by a Claims Commissioner or a Nuclear Damage Claims Commission, and any award made “shall be final” and cannot be appealed in any court. “No civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which the Claims Commissioner or the Commission, as the case may be, is empowered to adjudicate under this Act and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act,” according to Clause 35.
By contrast, the Price-Anderson Act permits economic (but not legal) channelling of liability, thereby allowing lawsuits and criminal proceedings against the reactor builder or any other party in U.S. courts. That is a key reason why the U.S. has not joined the Vienna or Paris convention — the two main international liability instruments. But the U.S. has become party to another convention it helped draft under the auspices of the IAEA — the Convention on Supplementary Compensation (CSC), which is still not in force. The CSC, as the name suggests, is about compensation through an international fund, to be paid “supplementary” to the liability limit.
The Bill also limits liability in time, with Clause 18 stating: “The right to claim compensation for any nuclear damage caused by a nuclear incident shall extinguish if such claim is not made within a period of 10 years from the date of incident…” That provision was retained despite the Environment Ministry's note of caution — revealed by this newspaper — that the 10-year time limit was untenable because damage to human health from a serious radioactive release “involves changes in DNAs, resulting in mutagenic and teratogenic changes, which take a long time to manifest.”
And although the Finance Ministry, in its comments on the Bill, had warned the proposed law would “expose the government to substantial liabilities for the failings of the private sector,” the Bill essentially seeks to give foreign reactor builders a free ride at the Indian taxpayer's expense.
The Indian Bill, in effect, amounts to a huge hidden subsidy by protecting foreign reactor builders from the weight of the financial consequences of accidents. If the Bill is passed, the costs of doing business in India for foreign suppliers will be low but the assured profits will be high. To cover the maximum potential compensation payable for an accident, a foreign builder will need to take insurance for a mere Rs. 500 crore. What is more, the foreign builders are being freed from the task of producing electricity at marketable rates. The NPCIL will run the foreign-built reactors, with the state subsidising the high-priced electricity generated.
India is under no international obligation to pass such a law. In fact, efforts to create common international standards on liability and compensation since the Chernobyl disaster have made exceedingly slow progress. Yet the Bill's accompanying “Statement of Objects and Reasons” creates the deceptive impression that the proposed law aims to bring India in line internationally. If anything, the Bill seeks to set a wrong international precedent by its mollycoddling of foreign suppliers.
To be sure, technological improvements in reactor-safety systems have significantly lowered the risks of a major nuclear accident. Yet nuclear technology remains intrinsically dangerous, and a single catastrophe anywhere in the world will impose colossal, long-term costs and have a chilling effect on the global appeal of nuclear power. Given the nuclear safety and security issues that have been highlighted by recent incidents in India, accident liability is a matter demanding serious consideration.
The government must answer the central question: In seeking to invite U.S. reactor builders, should a poor country rush to pass a special law that skews the business terms in their favour, gratuitously burdens the Indian taxpayer and ignores the lessons of the Bhopal gas disaster?
SOURCE; tHE HINDU
Asia is the most dynamic newspaper market, says N. Ram
N. Ram, Editor-in-Chief, The Hindu, interact with students at the iauguration of a UGC-sponsored seminar on new media at St. Joseph’s College in Bangalore on Friday.
Traditional news media in India will, in three to five years, be challenged by the “ubiquitous Internet”, believes N. Ram, Editor-in-Chief of The Hindu. However, the media is yet to find a viable revenue model for online content.
Mr. Ram was delivering the keynote address at a two-day seminar, “The Emergence of New Media: Challenges and Opportunities,” organised by the St. Joseph's College here.
Recession's impact
Pointing out that an increasing number of people today read their news online, and in real time, he observed that both television and print media were in “inexorable decline” in developed countries or “mature” media markets. The situation, worsened by the recession, had resulted in about 16,000 journalists losing their jobs in the U.S. in 2008 and 2009.
Thus far, however, the developing world is still a growth area for the old media — the press, television and the languishing radio — and, although from a low base, for the new media too. In India, periodicals, dailies and television are still in a growth phase, he said. Asia is the most dynamic newspaper market; and India, China and Japan account for 60 per cent of newspaper circulation worldwide.
While discussing the emerging “centrality of the Internet”, Mr. Ram pointed out that while China had an estimated 385 million Internet users, comprising 27 per cent of its population, India lagged behind with just 82 million users, seven per cent of its population. “Nowhere else is the digital divide, between urban and rural, as stark as it is in our country,” he observed.
Journalistic principles
The great Indian “media bazaar” has many streams, multiple levels of development and types of market practices; non-uniform standards and discrepant rules of the game, he observed. Exhorting his young audience to uphold journalistic principles of truth-telling, freedom and independence, justice, humaneness and social concern, Mr. Ram said that young journalists must learn to report and write about the deprivation that exists in a large section of “rising India.”
Borrowing an idea from Rector Fr. Terence Farias's talk that likened the media and religion to a candle that could be used to either “enlighten” or destroy, Mr. Ram said: “The media can participate in agenda-building, but it has to be a worthwhile agenda that upholds the best of civilisational values.”
“Is it too much to demand from a socially intelligent media that it must discern in a free and independent way what is right, just, democratic or humane … and avoid the trap that abounds in the professional arena?” he concluded
N. Ram, Editor-in-Chief, The Hindu, interact with students at the iauguration of a UGC-sponsored seminar on new media at St. Joseph’s College in Bangalore on Friday.
Traditional news media in India will, in three to five years, be challenged by the “ubiquitous Internet”, believes N. Ram, Editor-in-Chief of The Hindu. However, the media is yet to find a viable revenue model for online content.
Mr. Ram was delivering the keynote address at a two-day seminar, “The Emergence of New Media: Challenges and Opportunities,” organised by the St. Joseph's College here.
Recession's impact
Pointing out that an increasing number of people today read their news online, and in real time, he observed that both television and print media were in “inexorable decline” in developed countries or “mature” media markets. The situation, worsened by the recession, had resulted in about 16,000 journalists losing their jobs in the U.S. in 2008 and 2009.
Thus far, however, the developing world is still a growth area for the old media — the press, television and the languishing radio — and, although from a low base, for the new media too. In India, periodicals, dailies and television are still in a growth phase, he said. Asia is the most dynamic newspaper market; and India, China and Japan account for 60 per cent of newspaper circulation worldwide.
While discussing the emerging “centrality of the Internet”, Mr. Ram pointed out that while China had an estimated 385 million Internet users, comprising 27 per cent of its population, India lagged behind with just 82 million users, seven per cent of its population. “Nowhere else is the digital divide, between urban and rural, as stark as it is in our country,” he observed.
Journalistic principles
The great Indian “media bazaar” has many streams, multiple levels of development and types of market practices; non-uniform standards and discrepant rules of the game, he observed. Exhorting his young audience to uphold journalistic principles of truth-telling, freedom and independence, justice, humaneness and social concern, Mr. Ram said that young journalists must learn to report and write about the deprivation that exists in a large section of “rising India.”
Borrowing an idea from Rector Fr. Terence Farias's talk that likened the media and religion to a candle that could be used to either “enlighten” or destroy, Mr. Ram said: “The media can participate in agenda-building, but it has to be a worthwhile agenda that upholds the best of civilisational values.”
“Is it too much to demand from a socially intelligent media that it must discern in a free and independent way what is right, just, democratic or humane … and avoid the trap that abounds in the professional arena?” he concluded
SIKKIM VAT: Contractors’ body welcomes VAT exemption assurances
GANGTOK, March 11: All Sikkim Contractors Welfare Association (ASCWA) has welcomed the State Government’s assurances to exempt third and fourth grade contractors in the State from VAT.
The ASCWA had submitted a request for such exemption to the State Finance department a couple of months ago.
“The Finance secretary has given verbal assurance to us to exempt the small contractors from VAT. We welcome this”, told ASCWA president Tenzing Bhutia to media after meeting with the Finance secretary today.
We have been informed that the State government is considering exempting contractors who are doing job works below Rs. 20 lakhs, Bhutia said. But in this scenario, the contractors have to purchase all items for the job from within the State, he added. Any item purchase from outside Sikkim will attract VAT, he said.
Similarly, we have been assured that there will be no VAT for fourth grade contractors for items below Rs. 10 lakhs, said the ASCWA president. He said that the ASCWA has been informed that some time will be required by the government to implement the exemption assurances. We have requested for swift implementation of the assurances, he said.
The decision of the government will greatly benefit the third and fourth grade employees in rural and village areas, said Bhutia.
The contractors’ body had also requested that the timeframe for filing returns by the contractors to be enhanced to one year instead of every three months guideline.
We were informed by the Finance secretary that this is Central rule and the State government cannot do anything about this, said Bhutia.
SOURCE; sIKKIM EXPRESS
GANGTOK, March 11: All Sikkim Contractors Welfare Association (ASCWA) has welcomed the State Government’s assurances to exempt third and fourth grade contractors in the State from VAT.
The ASCWA had submitted a request for such exemption to the State Finance department a couple of months ago.
“The Finance secretary has given verbal assurance to us to exempt the small contractors from VAT. We welcome this”, told ASCWA president Tenzing Bhutia to media after meeting with the Finance secretary today.
We have been informed that the State government is considering exempting contractors who are doing job works below Rs. 20 lakhs, Bhutia said. But in this scenario, the contractors have to purchase all items for the job from within the State, he added. Any item purchase from outside Sikkim will attract VAT, he said.
Similarly, we have been assured that there will be no VAT for fourth grade contractors for items below Rs. 10 lakhs, said the ASCWA president. He said that the ASCWA has been informed that some time will be required by the government to implement the exemption assurances. We have requested for swift implementation of the assurances, he said.
The decision of the government will greatly benefit the third and fourth grade employees in rural and village areas, said Bhutia.
The contractors’ body had also requested that the timeframe for filing returns by the contractors to be enhanced to one year instead of every three months guideline.
We were informed by the Finance secretary that this is Central rule and the State government cannot do anything about this, said Bhutia.
SOURCE; sIKKIM EXPRESS
Friday, March 12, 2010
Taxation of Hindu Undivided Family (HUF) and Family Arrangement
Taxation of Hindu Undivided Family (HUF) and Family Arrangement
A. INTRODUCTION :
1. The Hindu Undivided Family (HUF) is a special feature of Hindu society. Hindu Undivided Family is defined as consisting of a common ancestor and all his lineal male descendants together with their wives and unmarried daughters. Therefore a Hindu Undivided Family consists of males and females. Daughters born in the family are its members till their marriage and women married into the family are equally members of the undivided family. On the other hand at any given point of time a coparcenary is limited to only members in the four degrees of the common male ancestor.
2. Hindu : In this term are included all the persons who are Hindus by religion. Section 2 of the Hindu Succession Act, 1956, elaborately declares that it applies to any person, who is a Hindu by religion in any of its forms or developments, including a Virashaiva, a Lingayat or a follower of Brahmo, Prathana or Arya Samaj, a Buddist, Jain or Sikh. In CWT. Smt. Champa Kumari Singh (1972) 83 ITR 720, the Supreme Court held that the HUF includes Jain Undivided Family.
3. Hindu Undivided Family (HUF) is a legal expression which has been employed in taxation laws as a separate taxable entity. It is the same thing as “Joint Hindu Family”. It has not been defined under the Income Tax Act, as it has a well defined connotation under Hindu Law.
4. A Hindu Undivided Family (HUF) is a separate entity for taxation under the provisions of sec. 2(31) of the Income Tax Act, 1961. This is in addition to an individual as a separate taxable entity, it means that the same person can be assessed in two different capacities viz. as an individual and as Karta of his HUF.
B. How HUF comes into existence:
A Hindu male with his wife and children automatically constitutes the HUF. The HUF is a creature of Hindu Law. It cannot be created by acts of any party save in so far as by adoption or marriage, a stranger may be affiliated as a member thereof. An Undivided Family which is a normal condition of the Hindu society is ordinarily joint not only in estate but in food and worship. The joint family being the result of birth, possession of joint property is only an adjunct of the Joint Family and is not necessary for its constitution.
C. Basic requirements for the existence of an HUF are as follows :
(i) Only one co-parcener or member cannot form an HUF Family is a group of people related by blood or marriage. A single person, male or female, does not constitute a family. However the property held by a single co-parcener does not lose its character of Joint Family property solely for the reason that there is no other male or female member at a particular point of time. Once the co-parcener marries, an HUF comes into existence as he alongwith his wife constitutes a Joint Hindu Family as held in the case of Prem Kumar v. CIT , 121 ITR 347 (All.)
(ii) Joint Family continues even in the hands of females after the death of sole male member :
Even after the death of the sole male member so long as the original property of the Joint Family remains in the hands of the widows of the members of the family and the same is not divided amongst them; the Joint Hindu Family continues to exist. CIT v. Veerapa Chettiar, 76 ITR 467(SC)
(iii) An HUF need not consist of two male members- even one male member is enough :
The plea that there must be at least two male members to form an HUF as a taxable entity, has no force. – Gauli Buddanna v. CIT, 60 ITR 347 (SC); C. Krishna Prasad v. CIT 97 ITR 493 (SC) and Surjit Lal Chhabda v. CIT, 101 ITR 776 (SC)
A father and his unmarried daughters can also form an HUF, CIT v. Harshavadan Mangladas, 194 ITR 136 (Guj.)
Further on partition of an HUF a family consisting of a co-parcener and female members is to be assessed in the status of an HUF.
D. Nucleus of HUF:
It is many times argued that existence of nucleus or joint family property is necessary to recognize the claim of HUF status in respect of any property or income of an HUF. It has been established now that since the HUF is a creature of Hindu Law, it can exist even without any nucleus or ancestral joint family property.
E. Manager of HUF or Karta :
The person who manages the affairs of the family is known as Karta. Normally the senior most male member of the family acts as Karta. However a junior male member can also act as Karta with the consent of the other member. Narendrakumar J. Modi v. Seth Govindram Sugar Mills 57 ITR 510 (SC). However in view of the present social mores and needs of the modern progressive society this decision of the Supreme Court needs to be revised / reviewed.
Besides the same person can be taxed as both individual and Karta of an HUF . The individual and the HUF are two different units of taxation i.e. two different assesses CIT v. Rameshwarlal Sanwarmal 82 ITR 628 (SC).
F. Joint Family Property :
The following types of properties are generally accepted as joint family property :
(i) Ancestral property;
(ii) Property allotted on partition;
(iii) Property acquired with the aid of joint family property;
(iv) Separate property of a co-parcener blended with or thrown into a common family hotchpot. The provisions of sec. 64 (2) of the Income Tax Act, 1961 have superseded the principles of Hindu Law, in a case where a co-parcener impresses his property with the character of joint family property.
A female member cannot blend her separate property with joint family property but she can make a gift of it to the HUF. Pushpadevi v. CIT 109 ITR 730 (SC). A female member can also bequeath her property to the HUF, CIT v. G.D. Mukim, 118 ITR 930 ( P & H ).
G. Branches of HUF:
An HUF can have several branches or sub-branches. For example, if a person has his wife and sons, they constitute an HUF. If the sons have wives and children, they also constitute smaller HUFs. If the grandsons also have wives and children, then even they will also constitute still smaller or sub-branch HUFs. As stated above, the HUF is a creature of Hindu Law and these entities are HUFs alongwith the bigger HUF of the father or the grandfather. It is immaterial whether these smaller HUFs possess any property or not. Property can be acquired by any mode; by partition of bigger HUF or by gifts from any member of the family or even by a stranger or by will with unequivocal intention of the donor or the testator that the said gift or bequest will form the joint family property of the donee or the testatee.
An HUF can be composed of a large number of branch families, each of the branch itself being an HUF and so also the sub-branches of more branches. CIT v. M.M.Khanna 49 ITR 232 (Bom).
H. Partition of HUF :
Section 171 of the Income Tax Act, 1961 deals with assessment of an HUF, after partition. Clauses (a) of the explanation to sec.171 defines “Partition” of an HUF. Where the property admits of a physical division, then a physical division of the property thereof, but, where the property does not admit of a physical division then such division as the property admits of, will be deemed to be a “partition”.
`Partition need not be by Metes & bountes, if separate enjoyment can, otherwise the secured and such division is effective so as to bind the members. Cherandas Waridas, 39 ITR 202 (SC).
However the members of an HUF can live separately and such an act would not automatically amount to partition of the HUF. Shiv Narain Choudhary v. CWT 108 ITR 104 (All.)
A finding of partition by the assessing officer u/s. 171 of the Income Tax Act, 1961 is necessary.
Partial partition of an HUF has been derecognised by the provisions of sec. 171(9) & moreover, according to sec. 171(9), any partial partition effected after 31.12.78, is not recognized.
Motive or need for partition cannot be questioned by the Income Tax Department. T. G. Sulakhe v. CIT, 39 ITR 394 (AP).
I. Following methods or devices may prove useful in reducing the tax incidence in the case of HUF :
(i) By increasing the number of assessable units through the device of partition of the HUF;
(ii) By creation of separate taxable units of HUF through will in favour of HUF or gift to HUF;
(iii) Through family settlement / arrangement;
(iv) By payment of remuneration to the Karta and other members of the HUF;
(v) By use of loan from HUF to the members of the HUF;
(vi) Through gift by HUF to its members specially to the female members;
(vii) Through other methods / devices;
The aforesaid methods / devices are discussed in detail below as follows:
(I) Partition of HUF
In the case of certain HUFs, the tax liability can be reduced by partition of the HUF. This can be easily done in a case where the partition results in separate independent taxable units. Suppose an HUF consists of father and two sons and there are two business establishments, a house property and other sources of income with the HUF. If the members of the HUF have no other sources of income then partition of the HUF can be done by giving one business establishment to each of the sons, house property to the father and dividing the other sources in such a manner so as to make the partition equitable. Such a partition of HUF will reduce the tax liability considerably.
The position may, however, be different in a case where the members of the HUF have got high individual incomes. In such a case it is not advisable to break or partition the HUF. The HUF should be allowed to continue as a separate taxable unit.
Then there may be a case where the HUF has got only one business establishment which does not admit of a physical division. For the sake of partition the business may be converted into a partnership firm or a company. At present, rate of firm’s tax and the rate of tax in case of a company, is 30% flat, therefore conversion of HUF business into a partnership or a company is not advantageous. The incidence of , in such a case, can be better reduced by payment of remuneration to the members of the HUF.
Partial partition of HUF is also a very effective device for reducing its tax liability. Partial partition is recognized under the Hindu Law. However partial partition of an HUF has been de-recognised by the provisions of sec. 171(9) of the Income Tax Act, 1961 according to which any partial partition effected after 31.12.78, will not be recognized.
The provisions of sec. 171(9) have been declared ultra-vires by the Madras H.C. in the case of M.V.Valliappan v. ITO, 170 ITR 238. The Supreme Court has granted S.L.P. and stayed the operation of the above decision of Madras H.C. as reported in 171 ITR (St.) 52. The Gujrat H.C. has, however, held the ITAT justified in following the aforesaid decision of Madras H.C., CIT v. M. M. Panchal HUF, 210 ITR 580 (Guj.)
Notwithstanding the provisions of sec. 171(9) partial partition, can still be used as a device for tax planning in certain cases. An HUF not hitherto assessed as undivided family can still be subjected to partial partition because it is recognized under the Hindu Law and such partial partition does not require recognition u/s. 171 of the Income Tax Act,1961. Thus a bigger HUF already assessed as such, can be partitioned into smaller HUFs and such smaller HUFs may further be partitioned partially before being assessed as HUFs. Besides any HUF not yet assessed to tax can be partitioned partially and thereafter assessed to tax.
The following legal aspects in respect of partition of HUF, should also be kept in mind while the partition of HUF which are as under :-
(i) Distribution of the assets of an HUF in the course of partition, would not attract any capital gains tax liability as it does not involve a transfer.
(ii) On the basis of the same reasoning distribution of assets in the course of partition would not attract any gift tax liability, and
(iii) There would be no clubbing of incomes u/s. 64 as it would not involve any direct or indirect transfer.
(II) Creation of HUFs as separate taxable units by will in favour of or gift to HUF :
It is now well settled law that there can be a gift or will for the benefit of a Joint Hindu Family . It is immaterial whether the giver is male or female, whether he or she is a member of the family or an outsider. What matters is the intention of the donor or testator that the property given is for the benefit of the family as a whole.
Suppose there is an HUF consisting of Karta, his wife, his two sons, daughter-in-law and grand children. A gift or will can be made for the benefit of the two smaller HUFs of the sons. The bigger HUF will continue as a separate taxable unit evenafter the death of the Karta.
There may also be a case where the father or mother has got self acquired properties. They have a son and his family but there is no ancestral property as a corpus of their family. Then, father & mother or both can leave their property for the benefit of their son’s family, through their will (s).
Similar result can be obtained by means of a gift for the benefit of a joint family. It may be pointed out here that an HUF cannot be created by act of parties but a corpus can be created for an already existing HUF through the medium of a gift or will etc.
(III) Through Family Settlement / Arrangement :
Family settlements / arrangements are also effective devices for the distribution of ancestral property. The object of the family settlement should be broadly to settle existing or future disputes regarding property, amongst the members of the family. The consideration for a family settlement is the expectation that such settlement will result in establishing or ensuring amity and goodwill amongst the members of the family. Ram Charan Das v. G.N.Devi, AIR 1966 SC 323 and Krishna Beharilal v. Gulabchand, AIR 197 SC 1041. Such an agreement is intended to avoid future disputes and to bring about harmony amongst the members of the family . Sahu Madho Das v. Mukand Ram, AIR 1955 SC 481. Briefly stated though conflict of legal claims, present or future is generally a condition for the validity of family arrangement, it is not necessarily so. Even bonafide disputes, present or possible in future, which may not involve legal claims, will also suffice to effect a family arrangement.
As family arrangement does not involve a transfer, there would be no gift and capital gains tax liability or clubbing u/s. 64.
By a family arrangement tax incidence is considerably reduced or it may even be nil. Suppose a family consists of Karta, his wife, two sons and their wives and children and its income is Rs. 6,00,000/-. The tax burden on the family will be quite heavy. If by family arrangement, income yielding property is settled on the Karta, his wife, his two sons and two daughter-in-law, then the income of each one of them would be Rs.100,000/- which would attract no tax & if the assessment year is 2007-08, then the tax liability would be reduced form Rs. 100,000/- to nil.
(IV) By payment of remuneration to the Karta and / or other members of the family :
The other important measure of tax planning for an HUF is to pay remuneration to the Karta and / or other members of the HUF for services rendered by them to the family business. The remuneration so paid would be allowed as a deduction from the income of the HUF and thereby tax liability of the HUF would be reduced, provided the remuneration is reasonable and its payment is bonafide. There is no legal bar against payment of remuneration to the Karta or other members of HUF for services rendered to the family in carrying on the business of the family or looking after the interests of the family in a partnership business. Jugal Kishore Baldeo Sahai v. CIT 63 ITR 238 (SC). The payment must be for service to the family for commercial or business expediency. Jitmal Bhuramal v. CIT 44 ITR 887(SC). Remuneration paid to the Karta or other members of the HUF should be under a valid agreement. The agreement must be valid, bonafide, on behalf of all the members of the HUF and in the interest of and expedient for the family business. Further the payment must be genuine and not excessive. J. K. B. Sahai v. CIT, 63 ITR 238 (SC).
Agreement with whom to be entered:
The agreement should be between the Karta and other members of the family. The agreement need not always be in writing. An agreement to pay salary / remuneration can also be inferred from the conduct of the parties. CIT v. Raghunandan Saran, 108 ITR 818 (All.). However, it would be better if the agreement to pay remuneration is reduced in writing.
For A.Y. 2007-08, if the total income of an HUF is Rs. 5,00,000/- then income tax on HUF would be Rs.1,00,000/-. If salary is paid to four members @ Rs.1,00,000/- net income of HUF would be Rs. 5,00,000 - Rs.4,00,000 ( 4 x 1,00,000 ) = Rs.1,00,000/-, tax on it would be Rs. NIL. The income of each member would be Rs.1,00,000/-. Therefore tax on members would be NIL. Thus the tax saving would be of Rs.1,00,000/-.
The distinction between ordinary and specified HUF’s has been done away w.e.f. 1.4.1997 i.e. A.Y. 1997-98. For Assessment Year 2007-08 the rate of tax on all HUF’s would be the same as in the case of an individual. This change in the rates of tax has brought a lot of relief to specified HUF’s i.e. the HUF’s with one or more members having taxable income. After the aforesaid amendment whereby the concept of specified HUF’s has been done away with, w.e.f. A.Y. 1997-98 this method of tax planning will be much easier and it will bring more tax relief to the HUF’s.
(V) By loan to the members from the HUF :
If the business, capital or investment of the HUF is expanding then such expansion can be done in the individual names of the members of HUF by giving loans to the members from the HUF. The HUF may or may not charge interest on the loans given.
Where property was purchased by members of HUF with loan from the HUF, which was later on repaid the income from such property would be assessable as individual income of the members
L. Bansidhar and Sons v. CIT 123 ITR 58 (Delhi ).
Where after partition of an HUF, two members became partners in three firms on behalf of their respective HUFs and they also became partners in a fourth firm, the funds were obtained by means of loans from other three firms, the share incomes of the members from the fourth firm was assessable as their individual income only.
CIT v. Champaklal Dalsukhbhai, 81 ITR 293 (Bom.).
(VI) By gift of movable assets of the HUF to its female members:
The Karta of an HUF cannot gift or alienate HUF property but for legal necessity, for pious purposes or in favour of female members
of the family. Gift of immovable property within reasonable limits, can be made by a Karta to his wife, daughter, daughter-in-law or even to a son out of natural love and affection. Gift of immovable property within reasonable limits can be made only for pious purpose e.g. marriage of a daughter.
Therefore, if the HUF has excess funds or property, then, the Karta can make gift of movable assets to his wife, daughter or daughter-in-law at one go or over a period of time. However, it may be noted that with effect from 1.10.98, the applicability of Gift Tax is no more in force. Therefore, no Gift Tax will be payable by a person making the gift from on or after 1.10.98. However, w.e.f. 1.10.2004 Gift received from other than relatives exceeds
Rs.25,000/- then that amount is liable to Income Tax u/s. 57 of Income Tax Act, 1961. It may be remembered that gift for marriage or maintenance of daughter(s) is not liable to Gift Tax. Further clubbing provisions of sec. 64 would not be applicable if the gift in validly made in accordance with the rules of Hindu Law. Besides, if a gift made to the minor daughter of the Karta is valid then the provisions of sec. 60 of the Income Tax Act would not be attracted. CIT v. G. N. Rao, 173 ITR 593 (AP). Whereby, section 60 relates to transfer of income where there is no transfer of assets.
(VII) Through other Methods / Devices :
There are other methods / devices which may be used to reduce the incidence of taxation in the case of an HUF, e.g. :
(i) Vesting of individual or self-acquired property in a family hotchpots.
(ii) Family reunion after partition.
(iii) Through inheritance by succession – Bequests by Will, now recognized by sec. 30 of Hindu Succession Act, can also be utilized for tax-planning.
J. Properties received under a Will:
The status of the property would be the same as is analysed in the case of properties received by way of gifts as discussed above, that is to say, that the properties will be regarded as the properties of the Hindu Undivided Family only, if the recipient has a son.
K. Properties inherited from an ancestor on the ancestor dying
intestate:
As held by the Supreme Court in the case of CWT v. Chander Sen (161 ITR 370 ) the person inheriting the property from his ancestor, even if he has a wife and son would receive the property absolutely in his own right and his son would not have any interest in that property.
L. Unequal Distribution on partition :
The Supreme Court in the case of Commissioner of Gift-Tax v. N. S. Getti Chettiar, 82 ITR 599 held that there is no liability to Gift Tax if there is an unequal distribution of assets amongst members of the family on partition.
M. Reunion : The conditions for a valid reunion are brought
out in the case of CIT v. A. M. Vaiyapuri Chettiar and another 215 ITR 836
The condition precedent for a valid reunion under the Hindu Law are : (1) There must have been a previous state of union. Reunion is possible only among the persons who were on an earlier date members of a Hindu Undivided family ; (2) There must have been a partition in fact ; (3) The Reunion must be effected by the parties or some of them who had made the partition; and (4) There must be a junction of estate and reunion of property because, reunion is not merely an agreement to live together as tenants in common. Reunion is intended to bring about a fusion in the interest and in the estate among the divided member of an erstwhile Hindu Undivided Family, so as to restore to them the status of an HUF once again and therefore, reunion creates a right in all the reuniting coparcener, in the joint family properties which was the subject matter of partition among them, to the extent they were not dissipated before the reunion.
The reunion effected by the assessee under the deed of reunion was valid. The entire properties of the erstwhile joint family prior to the partition would be the properties of the reunited joint family. The Income Tax Officer might have the option to assess the income arising from the entire properties belonging to the erstwhile joint family prior to the partition in the hands of the reunited, Hindu Undivided Family.
Representative of HUF in a Partnership Firm :
An HUF cannot become a partner in a firm. The Karta or a member of the HUF can represent the HUF in a firm. A female member can also represent HUF in a partnership firm, CIT v. Banaik Industries 119 ITR 282 (Pat.)
Remuneration to Karta or Member from Firm :
Where remuneration was received by a member of HUF from a firm, where he was partner on behalf of HUF for managing firms business such remuneration was his individual income, CIT v. G. V. Dhakappa 72 ITR 192 (SC); Premnath v. CIT 78 ITR 319 (SC).
However, income received by a member of HUF from a firm or company is taxable as the income of the HUF, if it is earned detriment to or with the aid of family funds, otherwise it is taxable as the separate income of the member, P.N. Krishna v. CIT 73 ITR 539 (SC).
HUF and Firm :
Members of HUF can constitute Partnership without effecting a partition or without disturbing the status of joint family. Ratanchand Darbarilal v. CIT 15 ITR 720 (SC). However , on viewing at the present rate of firms tax, conversion of HUF business into partnership is not advantageous.
The Landmark decisions on the subject of HUF are as follows:
(i) Krishna Prasad v. CIT, 97 ITR 493 (SC)
On partition between father and sons, the shares which sons obtained on partition of the HUF with their father, is the ancestral property. As regards his male issues who take interest in the said property on birth. Therefore one of the sons who was not married at the time of partition will receive the property as his HUF property, however income therefrom will be taxed as the HUF income from the date of his marriage.
(ii) A.G. v. A.R. Arunachalam Chettiar, 34 ITR 421 (PC)
A Mitakshara joint family consisted of father and son. On death of a son the father and the widow of the son constitute the HUF.
(iii) Gowli Buddanna v. CIT, 60 ITR 293 (SC)
A Joint family may consist of a single male member with his wife and daughter/ s and it is not necessary that there should be two male members to constitute a joint family.
(iv) N.V. Narendranath v. CWT, 74 ITR 190 (SC)
The property received by a coparcener on partition of the HUF is the HUF property in his hands vis-Ã -vis the members of his branch i.e. with his wife and a daughter.
(v) L. Hirday Narain v. ITO, 78 ITR 26 (SC)
After the partition between the father and his sons, the father and his wife constitute a Hindu Undivided Family which gets enlarged on the birth of a son.
(vi) CIT v. Veerappa Chettiar, 76 ITR 467 (SC)
Even when a joint family is reduced to female members only it continues to be a HUF.
(vii) CIT v. Sandhya Rani Dutta, 248 ITR 201 (SC)
Female members cannot create or form an HUF by their acts even under the Dayabhaga School of Hindu Law.
(viii) Pushpa Devi v. CIT, 109 ITR 730 (SC)
The right to blend the self-acquired property with HUF property is restricted to a coparcener ( male member of HUF ) and not available to a female member. However, there is no restriction on a female member gifting her property to the HUF of her son.
(ix) Surjit Lal Chhabda v. CIT, 101 ITR 776 (SC)
The property which was thrown into the common hotchpot was not an asset of a pre-existing joint family of which the assessee was a member. It became an item of joint family property for the first time when the assessee threw what was his separate property into the common family hotchpot. Therefore, the property may change its legal incidence on the birth of the son, but until that event happens, the property, in the eye of Hindu Law, is really the property of the assessee.
II FAMILY ARRANGEMENT
A. It is arrangement between member of a family descending from a common ancestor or near relation trying to sink their differences and disputes, settle and solve their conflicting claims once and for all to buy peace of mind and bring about harmony and goodwill in the family by an equitable distribution or allotment of assets and properties amongst member of the family.
B. FAMILY IN A FAMILY ARRANGEMENT HAS A WIDER MEANING
The Supreme Court in Ram Charan Das v. Girja Nandini Devi (AIR 1996 SC 323, 329 ) held that : “ Court give effect to a family settlement upon the broad and general ground that it’s object is to settle existing or future disputes regarding property amongst members of a family. The word ‘family’ in this context is not to be understood in the narrow sense of being a group of person who are recongnised in law as having a right of succession or having a claim to a share in the property in dispute.” While it is necessary that there should be some common tie between the parties to such family arrangement, it need not be between persons who are commonly understood as constituting a Hindu Family or for that matter, a family in any restricted sense. It is not necessary that there should be a strictly legal claim as member of the same family. It is enough if there is a possible claim or if they are related, a semblance of a claim (Krishna Beharilal v. Gulabchand AIR 1971 SC 1041, 1045 ).
A family arrangement wherein an adopted son was a party was held to be valid though he turned out to be a stranger as the adoption was subsequently held to be invalid in the case of Shivamurteppa Gurappa Ganiger v. Fakirapaa Basangauda Channappagaudar (AIR 1954 Bom. 430) C.G.T. v. Smt. Gollapude Saritammn (116 ITR 930, 936 AP.)
It is possible that married daughters or sisters who are not treated as members of the family of a parent/ brother on their marriage may still be considered as members of the family for purposes of a family arrangement.
C. ESSENTIALS OF A FAMILY ARRANGEMENT
(i) The family arrangement should be for the benefit of the family in general.
(ii) The family arrangement must be bonafide, honest, voluntary and it should not be induced by fraud, coercion or undue influence.
(iii) The purpose of the family arrangement should be to resolve present or possible family dispute and rival claims not necessarily legal claims by a fair and equitable division of the property amongst various members.
(iv) The parties to the family arrangement must have antecedent title, claim or interest. Even if a possible claim in the property which is acknowledged by the parties to the settlement will be sufficient.
(v) The consideration for entering into family arrangement should be preservation of family property, preservation of peace and honour of the family and avoidance of litigation. Kale v. Deputy Director of Consolidation (AIR 1976 SC 807)
(vi) Family peace is sufficient consideration
A question arises as to what is the consideration for allotment of property under a family settlement. It is said that a family settlement is arrived at between the members of the family with a view to compromise doubtful and disputed right. It, therefore, follows that the allotment of shares under a family settlement is not what a person is legally entitled to since some of the members can be allotted a much lesser share of asset than what they are entitled to under the law, while others a much larger share than what they are entitled to , yet some others may get a share to which are not legally entitled to since the main consideration is surely and certainly purchase of peace and amity amongst the family members and such a consideration cannot be deemed as being without consideration.
Antecedent title, claim or interest or even a possible claim :
The members who may be parties to the family arrangement must have some antecedent title, claim or interest or even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld and the Court will find no difficulty in giving assent to the same. Kale v. Deputy Director of Consolidation (AIR 1976 SC 807).
But where the person, in whose favour certain properties have been transferred under the guise of a family arrangement, has no and cannot have any claim or possible claim against the transferor, & therefore, the same cannot be regarded as a family arrangement.
CED v. Chandra Kala Garg 148 ITR 737 ( All.)
CIT v. R.Ponnammal 164 ITR 706 (Mad.)
In the case of Roshan Singh v. Zile Singh (AIR 1988 SC 881) the Supreme Court held that the parties to family arrangement set up competing to the properties and there was an adjustment of the rights of the parties. By family arrangement it was intended to set at rest competing claims amongst various members of the family to secure peace and amity. The compromise was on the footing that there was an antecedent title of the parties to the properties and the settlement acknowledged and defined title of each of the parties.
A family settlement is considered as a pious arrangement by all those who are concerned and also by those who administer law. A family settlement is not within the exclusive domain of the Hindu Law but equality applies to all families governed by other religions as well. Thus, it shall apply to Muslims, Christians, Jews, Parsees and other faiths equally.
The concept of family arrangement is an age old one. It is not only applicable to Hindus but also to other communities in which there is a common unit, common mess and joint living. In the case of Bibijan Begum v. Income Tax Officer (34 TTJ 557), the Gauhati Bench of the Appellate Tribunal in a very elaborate judgement held that there is no bar for Mohammedans to effect a family arrangement. In that case the assessee had an absolute right over her Mehr property and in exchange of that land the assessee received another land over which a multi-storeyed building was to be constructed. The assessee’s two daughters and two sons had antecedent right to the properties in the capacity as her heirs though their shares were not specified. The Tribunal held that by a family arrangement the rights of those children had been specified. The family arrangement by which the assessee and her four children received 1/5th share each in the multi-storeyed building was, therefore, valid. The Tribunal therefore, held that the assessee lady could not be assessed in respect of that share of house property which was given to her children pursuant to the family arrangement.
Three parties to the settlement of a dispute concerning the property of a deceased person comprised his widow, her brother and her son-in-law. The latter two could not under the Hindu Law be regarded as the heirs of the deceased, yet, bearing in mind their near relationship to the widow, the settlement of the dispute was very properly regarded as a settlement of a family dispute – Ram Charan Das v. Girija Nandini Devi AIR 1996 SC 323 at page 329.
A family arrangement differs from partition in as much as in a family settlement there can be a division of income without the distribution of assets and there is no bar to a partial partition. The provision of section 271 of the Act, which places restriction on a partial positions do not apply to a family settlement.
The Gauhati High Court in the case of Ziauddin Ahmed v. CGT, 102 ITR 253 held that the family arrangement amongst the members of Mohammedan family is valid and therefore, the shares given by a father to his sons at less than market value in order to preserve the family peace is not liable to gift tax.
D. WHETHER DOCUMENT OR REGISTRATION IS REQUIRED FOR EFFECTING FAMILY ARRANGEMENT
Family arrangement as such can be arrived orally or may be recorded in writing as memorandum of what had been agreed upon between the parties. The memorandum need not be prepared for the purpose of being used as a document on which future title of the parties be founded. It is usually prepared as a record of what had been agreed upon so that there are no hazy notions about it in future. It is only when the parties reduce the family arrangement in writing with the purpose of using that writing as proof of what they had arranged and, where the arrangement is brought about by the document as such, that the document would require registration as it would amount to a document of title declaring for future what rights in what properties the parties possess. Tek Bhadur Bhuji v. Debi Singh AIR 1966 SC 292 . Also see Awadh Narain Singh v. Narian Mishra, AIR 1962 pat. 400; Mythili Nalini v. Kowmari, AIR 1991 Ker 266; Klae v. Dy Director of Consolidation AIR 1976 SC 807.
Another aspect that attracts our attention is whether family arrangement, if recorded in a document, requires registration as per the provisions of section 17(1)(b) of the Indian Registration Act, 1908. Section 17(1)(b) lays down that a document for which registration is compulsory should, by its own force, operate or purport to create declare, assign, limit or extinguish either in present or in future any right, title or interest in immovable property. Thus if an instrument of family arrangement is recorded in writing and operates or purports to create or extinguish rights, it has to be compulsorily registered. But where a document, merely records the terms and recital of the family arrangement after the family arrangement had already been made which per se does not create or extinguish any right in immovable properties, such document does not fall within the ambit of section 17(1)(b) of the Act and so it does not require registration.
According to the Supreme Court in Roshan Singh v. Zile Singh AIR 1988 SC 881, the true principle that emerges can be stated thus ‘If the arrangement, of compromise is one under which a person having an absolute title to the property transfers his title in some of the items thereof to others, the formalities prescribed by law have to be complied with, since the transferees derive their respective title through the transferor. If, on the other hand, the parties set up competing titles and the differences are resolved by the compromise, then, there is no question of one deriving title from the other and therefore, the arrangement does not fall within the mischief of section 17 (1) (b) it read with section 49 of the Registration Act as no interest in property is created or declared by the document for the first time.
Family Arrangement does not amount to transfer: The transaction of a family settlement entered into by the parties bonafide for the purpose of putting an end to the dispute among family members, does not amount to a transfer Hiran Bibi v. Sohan Bibi, AIR 1914 PC 44, approving, Khunni Lal v. Govind Krishna Narain, (1911) ILR 33 All 356 (PC). It is not also the creation of an interest. For, as pointed out by the Privy Council in Hiran Bibi’s case AIR 1914 PC 44, in a family settlement each party takes a share in the property by virtue of the independent title which is admitted to that extent by the other party. It is not necessary, as would appear from the decision in Rangaswami Gounden v. Nachiappa Gounden AIR 1918 PC 196, that every party taking benefit under a family settlement must necessarily be shown to have, under the law, a claim to a share in the property. All that is necessary is that the parties must be related to one another in some way and have a possible claim to the property or a claim or even a resemblance of a claim on some other ground as say, affection. Ram Charan Das v. Girija Nandini Devi, AIR 1966 SC 323.
It is well settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case memorandum itself does not create or extinguish any rights in immovable properties and therefore does not fall within the mischief of section 17 of the Registration Act and is, therefore not compulsorily registrable –Kale v. Dy. Director AIR 1976 SC 807.
The family arrangement will need registration only if it creates any interest in immoveable property in present in favour of the party mentioned therein. In case however no such interest is created, the document will be valid despite its non-registration and will not be hit by section 17 of the Indian Registration Act, 1908. Maturi Pullaih v. Maturi Narasimhan AIR 1966 SC 1836.
Even a family arrangement, which was registrable but not registered, can be used for a collateral purpose, namely, for the purpose of showing the nature and character of possession of the parties .In pursuance of the family settlement. Kale v. Director of Consolidation AIR 1976 SC 807, (1976) 3 SCC 119.
To record a family arrangement arrived at orally, a memorandum of family arrangement-cum-compromise is required to be drawn up wherein the properties and assets belonging to the parties to the family arrangement are required to be specified. Thereafter the fact of arriving at family arrangement some time in the past with the help of well-wishers and family friends is required to be mentioned. In the operative portion of the Memorandum of Family Arrangement-cum-Compromise the properties and business which have been allotted to different parties are required to be specified.
In addition to the Memorandum of Family Arrangement –cum-Compromise, other documents like affidavits of each of the parties to the Family Arrangement are required to be obtained wherein each of the parties confirms on oath that he has received a particular asset and the family arrangement is arrived to his total satisfaction and it is binding on him. In such an affidavit the party giving up his right in other properties which are allotted to other parties to the Family Arrangement states that the said other properties may be transferred in the records of the registering authorities without notice to him. On the basis of the affidavit which is required to be executed before a Notary Public; mutation entries can be made by the concerned authorities.
In order to enable the member of the family to whom a particular property is allotted on arriving at a family arrangement, a power of attorney is required to be given by a member in whose name the said property was standing prior to the family arrangement to enable the party receiving the property to deal with the property as his own. Depending on the facts of each case, various other documents may be required to be drawn up to effect a proper and binding family arrangement.
9. Family arrangement is arrived at for a consideration namely, to resolve the dispute amongst the parties, to preserve the family peace and harmony and to avoid litigation and therefore, the provisions of Gift Tax Act are not attracted.
G.T.O. v. Bhupati Veerbhsadra Rao ( 9 ITD 618 )
C.G. T. v. Pappathi Anni ( 123 ITR 655, Mad )
Ziauddin Ahmed v. CGT ( 102 ITR 253 Gau. )
10. In the case of N. Durgaiah v. C.G.T. 99 ITR 477 (AP), the assessee executed a registered deed of settlement on March 26, 1962, conveying certain immovable properties to his five sons and two daughters out of whom one of the sons was a minor in whose favour a house worth Rs. 64,800/- was settled. The assessee contended before the G.T.O. that the transaction was in the nature of a family arrangement which does not amount to a taxable gift under the G.T.Act. The G.T.O. A.A.C. and the Tribunal rejected the contention of the Assessee.
When the matter reached the High Court, the Andhra Pradesh High Court held that in order to constitute a family arrangement, there must be an agreement or arrangement amongst the members of the joint family who wish to avoid any plausible or possible disputes and secure peace and harmony amongst the members. Where one of the parties executes a document styled as settlement deed where under some of the properties exclusively belonging to him as his self acquired properties are settled in favour of the other members of the family, the terms of such document do not amount to a family arrangement. There is no family arrangement as the same is only a unilateral act.
Hence a purely voluntary act of giving up one’s right in property without compelling circumstances indicating an existing or a possible dispute resulting in a compromise may well constitute a conveyance by way of gift and not valid family arrangement. It is, therefore, necessary that the preamble to the family arrangement should advert to the existence of difference which are likely to escalate to possible litigation and cause lack of peace and harmony in the family and likely to bring dishonor to the family name and prestige.
In the case of Ram Charan Das v. Girja Nandini Devi (Supra), the Supreme Court held that a compromise by way of family settlement is in no sense alienation by a limited owner of the family property and since it is not an alienation it cannot amount to a creation of interest.
The definition of the term “transfer” contained in section 2(47) of the Income Tax Act, 1961 prior to its amendment by the Finance Act, 1987 with effect from 1.4.1988 has been considered by the Supreme Court in the case of Dewas Cine Corporation ( 68 ITR 240), Bankey Lal Vaidya ( 79 ITR 594 ) & Malbar Fisheries Co. ( 120 ITR 49) wherein the High Court, was called upon to consider whether on dissolution of a firm there is a transfer of assets amongst the partners. The Supreme Court in all the decisions unequivocally held that on dissolution of a firm there is a mutual adjustment of rights amongst the partners and therefore, there is no transfer of assets by sale, exchange, relinquishment of the asset or extinguishments of any rights therein.
Their Lordships of the Supreme Court in the case of Sunil Siddharthabhi v. CIT (156 ITR 509) after considering the decisions of their Court in the case of Dewas Cine Corporations, Bankey Lal Vaidya & Malbar Fisheries Co. and the Gujarat High Court decision in the case of Mohanbhai Pamabhai ( 91 ITR 393 ) held, that when a partner retires or the partnership is dissolved, what the partner receives is his share in the partnership. What is contemplated here is a share of the partner qua the net assets of the partnership firm. On evaluation, that share in a particular case may be realized by the receipt of only one of all the assets. What happens here is that a shared interest in all the assets of the firm is replaced by an exclusive interest in an asset of equal value. That is why it has been held that there is no transfer. It is the realization of a pre-existing right.
With effect from 1.4.1988 sub-clause (v) is added to the definition of the term “transfer” in section 2(47) of the Income Tax Act which provides that any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract amounts to a transfer. Sub-clause (vi) which is added to the definition of the term transfer provides that transaction which has the effect of transferring or enabling the enjoyment of any immovable property amounts to a transfer for the purpose of Income Tax Act.
Whether distribution of assets amongst the members of the family amounts to transfer pursuant to the amended definition of the term transfer?
In the case of Ramgowda Annagowda Patil v. Bhausaheb ( AIR 1927 PC 227), the family settlement was between parties which included the brother and son-in-law of a widow of the deceased. Though the widow was a necessary party, her brother and son-in-law were not, but they had been allotted shares in the properties which formed the subject-matter of the family arrangement. It was held that in view of the closeness of the relationship between the persons who were disputing the right over the property with one another, the arrangement between them was legal and enforceable ( Mehdi Hasan v. Ram Ker AIR 1982 All. 92).
source: Taxguru
A. INTRODUCTION :
1. The Hindu Undivided Family (HUF) is a special feature of Hindu society. Hindu Undivided Family is defined as consisting of a common ancestor and all his lineal male descendants together with their wives and unmarried daughters. Therefore a Hindu Undivided Family consists of males and females. Daughters born in the family are its members till their marriage and women married into the family are equally members of the undivided family. On the other hand at any given point of time a coparcenary is limited to only members in the four degrees of the common male ancestor.
2. Hindu : In this term are included all the persons who are Hindus by religion. Section 2 of the Hindu Succession Act, 1956, elaborately declares that it applies to any person, who is a Hindu by religion in any of its forms or developments, including a Virashaiva, a Lingayat or a follower of Brahmo, Prathana or Arya Samaj, a Buddist, Jain or Sikh. In CWT. Smt. Champa Kumari Singh (1972) 83 ITR 720, the Supreme Court held that the HUF includes Jain Undivided Family.
3. Hindu Undivided Family (HUF) is a legal expression which has been employed in taxation laws as a separate taxable entity. It is the same thing as “Joint Hindu Family”. It has not been defined under the Income Tax Act, as it has a well defined connotation under Hindu Law.
4. A Hindu Undivided Family (HUF) is a separate entity for taxation under the provisions of sec. 2(31) of the Income Tax Act, 1961. This is in addition to an individual as a separate taxable entity, it means that the same person can be assessed in two different capacities viz. as an individual and as Karta of his HUF.
B. How HUF comes into existence:
A Hindu male with his wife and children automatically constitutes the HUF. The HUF is a creature of Hindu Law. It cannot be created by acts of any party save in so far as by adoption or marriage, a stranger may be affiliated as a member thereof. An Undivided Family which is a normal condition of the Hindu society is ordinarily joint not only in estate but in food and worship. The joint family being the result of birth, possession of joint property is only an adjunct of the Joint Family and is not necessary for its constitution.
C. Basic requirements for the existence of an HUF are as follows :
(i) Only one co-parcener or member cannot form an HUF Family is a group of people related by blood or marriage. A single person, male or female, does not constitute a family. However the property held by a single co-parcener does not lose its character of Joint Family property solely for the reason that there is no other male or female member at a particular point of time. Once the co-parcener marries, an HUF comes into existence as he alongwith his wife constitutes a Joint Hindu Family as held in the case of Prem Kumar v. CIT , 121 ITR 347 (All.)
(ii) Joint Family continues even in the hands of females after the death of sole male member :
Even after the death of the sole male member so long as the original property of the Joint Family remains in the hands of the widows of the members of the family and the same is not divided amongst them; the Joint Hindu Family continues to exist. CIT v. Veerapa Chettiar, 76 ITR 467(SC)
(iii) An HUF need not consist of two male members- even one male member is enough :
The plea that there must be at least two male members to form an HUF as a taxable entity, has no force. – Gauli Buddanna v. CIT, 60 ITR 347 (SC); C. Krishna Prasad v. CIT 97 ITR 493 (SC) and Surjit Lal Chhabda v. CIT, 101 ITR 776 (SC)
A father and his unmarried daughters can also form an HUF, CIT v. Harshavadan Mangladas, 194 ITR 136 (Guj.)
Further on partition of an HUF a family consisting of a co-parcener and female members is to be assessed in the status of an HUF.
D. Nucleus of HUF:
It is many times argued that existence of nucleus or joint family property is necessary to recognize the claim of HUF status in respect of any property or income of an HUF. It has been established now that since the HUF is a creature of Hindu Law, it can exist even without any nucleus or ancestral joint family property.
E. Manager of HUF or Karta :
The person who manages the affairs of the family is known as Karta. Normally the senior most male member of the family acts as Karta. However a junior male member can also act as Karta with the consent of the other member. Narendrakumar J. Modi v. Seth Govindram Sugar Mills 57 ITR 510 (SC). However in view of the present social mores and needs of the modern progressive society this decision of the Supreme Court needs to be revised / reviewed.
Besides the same person can be taxed as both individual and Karta of an HUF . The individual and the HUF are two different units of taxation i.e. two different assesses CIT v. Rameshwarlal Sanwarmal 82 ITR 628 (SC).
F. Joint Family Property :
The following types of properties are generally accepted as joint family property :
(i) Ancestral property;
(ii) Property allotted on partition;
(iii) Property acquired with the aid of joint family property;
(iv) Separate property of a co-parcener blended with or thrown into a common family hotchpot. The provisions of sec. 64 (2) of the Income Tax Act, 1961 have superseded the principles of Hindu Law, in a case where a co-parcener impresses his property with the character of joint family property.
A female member cannot blend her separate property with joint family property but she can make a gift of it to the HUF. Pushpadevi v. CIT 109 ITR 730 (SC). A female member can also bequeath her property to the HUF, CIT v. G.D. Mukim, 118 ITR 930 ( P & H ).
G. Branches of HUF:
An HUF can have several branches or sub-branches. For example, if a person has his wife and sons, they constitute an HUF. If the sons have wives and children, they also constitute smaller HUFs. If the grandsons also have wives and children, then even they will also constitute still smaller or sub-branch HUFs. As stated above, the HUF is a creature of Hindu Law and these entities are HUFs alongwith the bigger HUF of the father or the grandfather. It is immaterial whether these smaller HUFs possess any property or not. Property can be acquired by any mode; by partition of bigger HUF or by gifts from any member of the family or even by a stranger or by will with unequivocal intention of the donor or the testator that the said gift or bequest will form the joint family property of the donee or the testatee.
An HUF can be composed of a large number of branch families, each of the branch itself being an HUF and so also the sub-branches of more branches. CIT v. M.M.Khanna 49 ITR 232 (Bom).
H. Partition of HUF :
Section 171 of the Income Tax Act, 1961 deals with assessment of an HUF, after partition. Clauses (a) of the explanation to sec.171 defines “Partition” of an HUF. Where the property admits of a physical division, then a physical division of the property thereof, but, where the property does not admit of a physical division then such division as the property admits of, will be deemed to be a “partition”.
`Partition need not be by Metes & bountes, if separate enjoyment can, otherwise the secured and such division is effective so as to bind the members. Cherandas Waridas, 39 ITR 202 (SC).
However the members of an HUF can live separately and such an act would not automatically amount to partition of the HUF. Shiv Narain Choudhary v. CWT 108 ITR 104 (All.)
A finding of partition by the assessing officer u/s. 171 of the Income Tax Act, 1961 is necessary.
Partial partition of an HUF has been derecognised by the provisions of sec. 171(9) & moreover, according to sec. 171(9), any partial partition effected after 31.12.78, is not recognized.
Motive or need for partition cannot be questioned by the Income Tax Department. T. G. Sulakhe v. CIT, 39 ITR 394 (AP).
I. Following methods or devices may prove useful in reducing the tax incidence in the case of HUF :
(i) By increasing the number of assessable units through the device of partition of the HUF;
(ii) By creation of separate taxable units of HUF through will in favour of HUF or gift to HUF;
(iii) Through family settlement / arrangement;
(iv) By payment of remuneration to the Karta and other members of the HUF;
(v) By use of loan from HUF to the members of the HUF;
(vi) Through gift by HUF to its members specially to the female members;
(vii) Through other methods / devices;
The aforesaid methods / devices are discussed in detail below as follows:
(I) Partition of HUF
In the case of certain HUFs, the tax liability can be reduced by partition of the HUF. This can be easily done in a case where the partition results in separate independent taxable units. Suppose an HUF consists of father and two sons and there are two business establishments, a house property and other sources of income with the HUF. If the members of the HUF have no other sources of income then partition of the HUF can be done by giving one business establishment to each of the sons, house property to the father and dividing the other sources in such a manner so as to make the partition equitable. Such a partition of HUF will reduce the tax liability considerably.
The position may, however, be different in a case where the members of the HUF have got high individual incomes. In such a case it is not advisable to break or partition the HUF. The HUF should be allowed to continue as a separate taxable unit.
Then there may be a case where the HUF has got only one business establishment which does not admit of a physical division. For the sake of partition the business may be converted into a partnership firm or a company. At present, rate of firm’s tax and the rate of tax in case of a company, is 30% flat, therefore conversion of HUF business into a partnership or a company is not advantageous. The incidence of , in such a case, can be better reduced by payment of remuneration to the members of the HUF.
Partial partition of HUF is also a very effective device for reducing its tax liability. Partial partition is recognized under the Hindu Law. However partial partition of an HUF has been de-recognised by the provisions of sec. 171(9) of the Income Tax Act, 1961 according to which any partial partition effected after 31.12.78, will not be recognized.
The provisions of sec. 171(9) have been declared ultra-vires by the Madras H.C. in the case of M.V.Valliappan v. ITO, 170 ITR 238. The Supreme Court has granted S.L.P. and stayed the operation of the above decision of Madras H.C. as reported in 171 ITR (St.) 52. The Gujrat H.C. has, however, held the ITAT justified in following the aforesaid decision of Madras H.C., CIT v. M. M. Panchal HUF, 210 ITR 580 (Guj.)
Notwithstanding the provisions of sec. 171(9) partial partition, can still be used as a device for tax planning in certain cases. An HUF not hitherto assessed as undivided family can still be subjected to partial partition because it is recognized under the Hindu Law and such partial partition does not require recognition u/s. 171 of the Income Tax Act,1961. Thus a bigger HUF already assessed as such, can be partitioned into smaller HUFs and such smaller HUFs may further be partitioned partially before being assessed as HUFs. Besides any HUF not yet assessed to tax can be partitioned partially and thereafter assessed to tax.
The following legal aspects in respect of partition of HUF, should also be kept in mind while the partition of HUF which are as under :-
(i) Distribution of the assets of an HUF in the course of partition, would not attract any capital gains tax liability as it does not involve a transfer.
(ii) On the basis of the same reasoning distribution of assets in the course of partition would not attract any gift tax liability, and
(iii) There would be no clubbing of incomes u/s. 64 as it would not involve any direct or indirect transfer.
(II) Creation of HUFs as separate taxable units by will in favour of or gift to HUF :
It is now well settled law that there can be a gift or will for the benefit of a Joint Hindu Family . It is immaterial whether the giver is male or female, whether he or she is a member of the family or an outsider. What matters is the intention of the donor or testator that the property given is for the benefit of the family as a whole.
Suppose there is an HUF consisting of Karta, his wife, his two sons, daughter-in-law and grand children. A gift or will can be made for the benefit of the two smaller HUFs of the sons. The bigger HUF will continue as a separate taxable unit evenafter the death of the Karta.
There may also be a case where the father or mother has got self acquired properties. They have a son and his family but there is no ancestral property as a corpus of their family. Then, father & mother or both can leave their property for the benefit of their son’s family, through their will (s).
Similar result can be obtained by means of a gift for the benefit of a joint family. It may be pointed out here that an HUF cannot be created by act of parties but a corpus can be created for an already existing HUF through the medium of a gift or will etc.
(III) Through Family Settlement / Arrangement :
Family settlements / arrangements are also effective devices for the distribution of ancestral property. The object of the family settlement should be broadly to settle existing or future disputes regarding property, amongst the members of the family. The consideration for a family settlement is the expectation that such settlement will result in establishing or ensuring amity and goodwill amongst the members of the family. Ram Charan Das v. G.N.Devi, AIR 1966 SC 323 and Krishna Beharilal v. Gulabchand, AIR 197 SC 1041. Such an agreement is intended to avoid future disputes and to bring about harmony amongst the members of the family . Sahu Madho Das v. Mukand Ram, AIR 1955 SC 481. Briefly stated though conflict of legal claims, present or future is generally a condition for the validity of family arrangement, it is not necessarily so. Even bonafide disputes, present or possible in future, which may not involve legal claims, will also suffice to effect a family arrangement.
As family arrangement does not involve a transfer, there would be no gift and capital gains tax liability or clubbing u/s. 64.
By a family arrangement tax incidence is considerably reduced or it may even be nil. Suppose a family consists of Karta, his wife, two sons and their wives and children and its income is Rs. 6,00,000/-. The tax burden on the family will be quite heavy. If by family arrangement, income yielding property is settled on the Karta, his wife, his two sons and two daughter-in-law, then the income of each one of them would be Rs.100,000/- which would attract no tax & if the assessment year is 2007-08, then the tax liability would be reduced form Rs. 100,000/- to nil.
(IV) By payment of remuneration to the Karta and / or other members of the family :
The other important measure of tax planning for an HUF is to pay remuneration to the Karta and / or other members of the HUF for services rendered by them to the family business. The remuneration so paid would be allowed as a deduction from the income of the HUF and thereby tax liability of the HUF would be reduced, provided the remuneration is reasonable and its payment is bonafide. There is no legal bar against payment of remuneration to the Karta or other members of HUF for services rendered to the family in carrying on the business of the family or looking after the interests of the family in a partnership business. Jugal Kishore Baldeo Sahai v. CIT 63 ITR 238 (SC). The payment must be for service to the family for commercial or business expediency. Jitmal Bhuramal v. CIT 44 ITR 887(SC). Remuneration paid to the Karta or other members of the HUF should be under a valid agreement. The agreement must be valid, bonafide, on behalf of all the members of the HUF and in the interest of and expedient for the family business. Further the payment must be genuine and not excessive. J. K. B. Sahai v. CIT, 63 ITR 238 (SC).
Agreement with whom to be entered:
The agreement should be between the Karta and other members of the family. The agreement need not always be in writing. An agreement to pay salary / remuneration can also be inferred from the conduct of the parties. CIT v. Raghunandan Saran, 108 ITR 818 (All.). However, it would be better if the agreement to pay remuneration is reduced in writing.
For A.Y. 2007-08, if the total income of an HUF is Rs. 5,00,000/- then income tax on HUF would be Rs.1,00,000/-. If salary is paid to four members @ Rs.1,00,000/- net income of HUF would be Rs. 5,00,000 - Rs.4,00,000 ( 4 x 1,00,000 ) = Rs.1,00,000/-, tax on it would be Rs. NIL. The income of each member would be Rs.1,00,000/-. Therefore tax on members would be NIL. Thus the tax saving would be of Rs.1,00,000/-.
The distinction between ordinary and specified HUF’s has been done away w.e.f. 1.4.1997 i.e. A.Y. 1997-98. For Assessment Year 2007-08 the rate of tax on all HUF’s would be the same as in the case of an individual. This change in the rates of tax has brought a lot of relief to specified HUF’s i.e. the HUF’s with one or more members having taxable income. After the aforesaid amendment whereby the concept of specified HUF’s has been done away with, w.e.f. A.Y. 1997-98 this method of tax planning will be much easier and it will bring more tax relief to the HUF’s.
(V) By loan to the members from the HUF :
If the business, capital or investment of the HUF is expanding then such expansion can be done in the individual names of the members of HUF by giving loans to the members from the HUF. The HUF may or may not charge interest on the loans given.
Where property was purchased by members of HUF with loan from the HUF, which was later on repaid the income from such property would be assessable as individual income of the members
L. Bansidhar and Sons v. CIT 123 ITR 58 (Delhi ).
Where after partition of an HUF, two members became partners in three firms on behalf of their respective HUFs and they also became partners in a fourth firm, the funds were obtained by means of loans from other three firms, the share incomes of the members from the fourth firm was assessable as their individual income only.
CIT v. Champaklal Dalsukhbhai, 81 ITR 293 (Bom.).
(VI) By gift of movable assets of the HUF to its female members:
The Karta of an HUF cannot gift or alienate HUF property but for legal necessity, for pious purposes or in favour of female members
of the family. Gift of immovable property within reasonable limits, can be made by a Karta to his wife, daughter, daughter-in-law or even to a son out of natural love and affection. Gift of immovable property within reasonable limits can be made only for pious purpose e.g. marriage of a daughter.
Therefore, if the HUF has excess funds or property, then, the Karta can make gift of movable assets to his wife, daughter or daughter-in-law at one go or over a period of time. However, it may be noted that with effect from 1.10.98, the applicability of Gift Tax is no more in force. Therefore, no Gift Tax will be payable by a person making the gift from on or after 1.10.98. However, w.e.f. 1.10.2004 Gift received from other than relatives exceeds
Rs.25,000/- then that amount is liable to Income Tax u/s. 57 of Income Tax Act, 1961. It may be remembered that gift for marriage or maintenance of daughter(s) is not liable to Gift Tax. Further clubbing provisions of sec. 64 would not be applicable if the gift in validly made in accordance with the rules of Hindu Law. Besides, if a gift made to the minor daughter of the Karta is valid then the provisions of sec. 60 of the Income Tax Act would not be attracted. CIT v. G. N. Rao, 173 ITR 593 (AP). Whereby, section 60 relates to transfer of income where there is no transfer of assets.
(VII) Through other Methods / Devices :
There are other methods / devices which may be used to reduce the incidence of taxation in the case of an HUF, e.g. :
(i) Vesting of individual or self-acquired property in a family hotchpots.
(ii) Family reunion after partition.
(iii) Through inheritance by succession – Bequests by Will, now recognized by sec. 30 of Hindu Succession Act, can also be utilized for tax-planning.
J. Properties received under a Will:
The status of the property would be the same as is analysed in the case of properties received by way of gifts as discussed above, that is to say, that the properties will be regarded as the properties of the Hindu Undivided Family only, if the recipient has a son.
K. Properties inherited from an ancestor on the ancestor dying
intestate:
As held by the Supreme Court in the case of CWT v. Chander Sen (161 ITR 370 ) the person inheriting the property from his ancestor, even if he has a wife and son would receive the property absolutely in his own right and his son would not have any interest in that property.
L. Unequal Distribution on partition :
The Supreme Court in the case of Commissioner of Gift-Tax v. N. S. Getti Chettiar, 82 ITR 599 held that there is no liability to Gift Tax if there is an unequal distribution of assets amongst members of the family on partition.
M. Reunion : The conditions for a valid reunion are brought
out in the case of CIT v. A. M. Vaiyapuri Chettiar and another 215 ITR 836
The condition precedent for a valid reunion under the Hindu Law are : (1) There must have been a previous state of union. Reunion is possible only among the persons who were on an earlier date members of a Hindu Undivided family ; (2) There must have been a partition in fact ; (3) The Reunion must be effected by the parties or some of them who had made the partition; and (4) There must be a junction of estate and reunion of property because, reunion is not merely an agreement to live together as tenants in common. Reunion is intended to bring about a fusion in the interest and in the estate among the divided member of an erstwhile Hindu Undivided Family, so as to restore to them the status of an HUF once again and therefore, reunion creates a right in all the reuniting coparcener, in the joint family properties which was the subject matter of partition among them, to the extent they were not dissipated before the reunion.
The reunion effected by the assessee under the deed of reunion was valid. The entire properties of the erstwhile joint family prior to the partition would be the properties of the reunited joint family. The Income Tax Officer might have the option to assess the income arising from the entire properties belonging to the erstwhile joint family prior to the partition in the hands of the reunited, Hindu Undivided Family.
Representative of HUF in a Partnership Firm :
An HUF cannot become a partner in a firm. The Karta or a member of the HUF can represent the HUF in a firm. A female member can also represent HUF in a partnership firm, CIT v. Banaik Industries 119 ITR 282 (Pat.)
Remuneration to Karta or Member from Firm :
Where remuneration was received by a member of HUF from a firm, where he was partner on behalf of HUF for managing firms business such remuneration was his individual income, CIT v. G. V. Dhakappa 72 ITR 192 (SC); Premnath v. CIT 78 ITR 319 (SC).
However, income received by a member of HUF from a firm or company is taxable as the income of the HUF, if it is earned detriment to or with the aid of family funds, otherwise it is taxable as the separate income of the member, P.N. Krishna v. CIT 73 ITR 539 (SC).
HUF and Firm :
Members of HUF can constitute Partnership without effecting a partition or without disturbing the status of joint family. Ratanchand Darbarilal v. CIT 15 ITR 720 (SC). However , on viewing at the present rate of firms tax, conversion of HUF business into partnership is not advantageous.
The Landmark decisions on the subject of HUF are as follows:
(i) Krishna Prasad v. CIT, 97 ITR 493 (SC)
On partition between father and sons, the shares which sons obtained on partition of the HUF with their father, is the ancestral property. As regards his male issues who take interest in the said property on birth. Therefore one of the sons who was not married at the time of partition will receive the property as his HUF property, however income therefrom will be taxed as the HUF income from the date of his marriage.
(ii) A.G. v. A.R. Arunachalam Chettiar, 34 ITR 421 (PC)
A Mitakshara joint family consisted of father and son. On death of a son the father and the widow of the son constitute the HUF.
(iii) Gowli Buddanna v. CIT, 60 ITR 293 (SC)
A Joint family may consist of a single male member with his wife and daughter/ s and it is not necessary that there should be two male members to constitute a joint family.
(iv) N.V. Narendranath v. CWT, 74 ITR 190 (SC)
The property received by a coparcener on partition of the HUF is the HUF property in his hands vis-Ã -vis the members of his branch i.e. with his wife and a daughter.
(v) L. Hirday Narain v. ITO, 78 ITR 26 (SC)
After the partition between the father and his sons, the father and his wife constitute a Hindu Undivided Family which gets enlarged on the birth of a son.
(vi) CIT v. Veerappa Chettiar, 76 ITR 467 (SC)
Even when a joint family is reduced to female members only it continues to be a HUF.
(vii) CIT v. Sandhya Rani Dutta, 248 ITR 201 (SC)
Female members cannot create or form an HUF by their acts even under the Dayabhaga School of Hindu Law.
(viii) Pushpa Devi v. CIT, 109 ITR 730 (SC)
The right to blend the self-acquired property with HUF property is restricted to a coparcener ( male member of HUF ) and not available to a female member. However, there is no restriction on a female member gifting her property to the HUF of her son.
(ix) Surjit Lal Chhabda v. CIT, 101 ITR 776 (SC)
The property which was thrown into the common hotchpot was not an asset of a pre-existing joint family of which the assessee was a member. It became an item of joint family property for the first time when the assessee threw what was his separate property into the common family hotchpot. Therefore, the property may change its legal incidence on the birth of the son, but until that event happens, the property, in the eye of Hindu Law, is really the property of the assessee.
II FAMILY ARRANGEMENT
A. It is arrangement between member of a family descending from a common ancestor or near relation trying to sink their differences and disputes, settle and solve their conflicting claims once and for all to buy peace of mind and bring about harmony and goodwill in the family by an equitable distribution or allotment of assets and properties amongst member of the family.
B. FAMILY IN A FAMILY ARRANGEMENT HAS A WIDER MEANING
The Supreme Court in Ram Charan Das v. Girja Nandini Devi (AIR 1996 SC 323, 329 ) held that : “ Court give effect to a family settlement upon the broad and general ground that it’s object is to settle existing or future disputes regarding property amongst members of a family. The word ‘family’ in this context is not to be understood in the narrow sense of being a group of person who are recongnised in law as having a right of succession or having a claim to a share in the property in dispute.” While it is necessary that there should be some common tie between the parties to such family arrangement, it need not be between persons who are commonly understood as constituting a Hindu Family or for that matter, a family in any restricted sense. It is not necessary that there should be a strictly legal claim as member of the same family. It is enough if there is a possible claim or if they are related, a semblance of a claim (Krishna Beharilal v. Gulabchand AIR 1971 SC 1041, 1045 ).
A family arrangement wherein an adopted son was a party was held to be valid though he turned out to be a stranger as the adoption was subsequently held to be invalid in the case of Shivamurteppa Gurappa Ganiger v. Fakirapaa Basangauda Channappagaudar (AIR 1954 Bom. 430) C.G.T. v. Smt. Gollapude Saritammn (116 ITR 930, 936 AP.)
It is possible that married daughters or sisters who are not treated as members of the family of a parent/ brother on their marriage may still be considered as members of the family for purposes of a family arrangement.
C. ESSENTIALS OF A FAMILY ARRANGEMENT
(i) The family arrangement should be for the benefit of the family in general.
(ii) The family arrangement must be bonafide, honest, voluntary and it should not be induced by fraud, coercion or undue influence.
(iii) The purpose of the family arrangement should be to resolve present or possible family dispute and rival claims not necessarily legal claims by a fair and equitable division of the property amongst various members.
(iv) The parties to the family arrangement must have antecedent title, claim or interest. Even if a possible claim in the property which is acknowledged by the parties to the settlement will be sufficient.
(v) The consideration for entering into family arrangement should be preservation of family property, preservation of peace and honour of the family and avoidance of litigation. Kale v. Deputy Director of Consolidation (AIR 1976 SC 807)
(vi) Family peace is sufficient consideration
A question arises as to what is the consideration for allotment of property under a family settlement. It is said that a family settlement is arrived at between the members of the family with a view to compromise doubtful and disputed right. It, therefore, follows that the allotment of shares under a family settlement is not what a person is legally entitled to since some of the members can be allotted a much lesser share of asset than what they are entitled to under the law, while others a much larger share than what they are entitled to , yet some others may get a share to which are not legally entitled to since the main consideration is surely and certainly purchase of peace and amity amongst the family members and such a consideration cannot be deemed as being without consideration.
Antecedent title, claim or interest or even a possible claim :
The members who may be parties to the family arrangement must have some antecedent title, claim or interest or even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld and the Court will find no difficulty in giving assent to the same. Kale v. Deputy Director of Consolidation (AIR 1976 SC 807).
But where the person, in whose favour certain properties have been transferred under the guise of a family arrangement, has no and cannot have any claim or possible claim against the transferor, & therefore, the same cannot be regarded as a family arrangement.
CED v. Chandra Kala Garg 148 ITR 737 ( All.)
CIT v. R.Ponnammal 164 ITR 706 (Mad.)
In the case of Roshan Singh v. Zile Singh (AIR 1988 SC 881) the Supreme Court held that the parties to family arrangement set up competing to the properties and there was an adjustment of the rights of the parties. By family arrangement it was intended to set at rest competing claims amongst various members of the family to secure peace and amity. The compromise was on the footing that there was an antecedent title of the parties to the properties and the settlement acknowledged and defined title of each of the parties.
A family settlement is considered as a pious arrangement by all those who are concerned and also by those who administer law. A family settlement is not within the exclusive domain of the Hindu Law but equality applies to all families governed by other religions as well. Thus, it shall apply to Muslims, Christians, Jews, Parsees and other faiths equally.
The concept of family arrangement is an age old one. It is not only applicable to Hindus but also to other communities in which there is a common unit, common mess and joint living. In the case of Bibijan Begum v. Income Tax Officer (34 TTJ 557), the Gauhati Bench of the Appellate Tribunal in a very elaborate judgement held that there is no bar for Mohammedans to effect a family arrangement. In that case the assessee had an absolute right over her Mehr property and in exchange of that land the assessee received another land over which a multi-storeyed building was to be constructed. The assessee’s two daughters and two sons had antecedent right to the properties in the capacity as her heirs though their shares were not specified. The Tribunal held that by a family arrangement the rights of those children had been specified. The family arrangement by which the assessee and her four children received 1/5th share each in the multi-storeyed building was, therefore, valid. The Tribunal therefore, held that the assessee lady could not be assessed in respect of that share of house property which was given to her children pursuant to the family arrangement.
Three parties to the settlement of a dispute concerning the property of a deceased person comprised his widow, her brother and her son-in-law. The latter two could not under the Hindu Law be regarded as the heirs of the deceased, yet, bearing in mind their near relationship to the widow, the settlement of the dispute was very properly regarded as a settlement of a family dispute – Ram Charan Das v. Girija Nandini Devi AIR 1996 SC 323 at page 329.
A family arrangement differs from partition in as much as in a family settlement there can be a division of income without the distribution of assets and there is no bar to a partial partition. The provision of section 271 of the Act, which places restriction on a partial positions do not apply to a family settlement.
The Gauhati High Court in the case of Ziauddin Ahmed v. CGT, 102 ITR 253 held that the family arrangement amongst the members of Mohammedan family is valid and therefore, the shares given by a father to his sons at less than market value in order to preserve the family peace is not liable to gift tax.
D. WHETHER DOCUMENT OR REGISTRATION IS REQUIRED FOR EFFECTING FAMILY ARRANGEMENT
Family arrangement as such can be arrived orally or may be recorded in writing as memorandum of what had been agreed upon between the parties. The memorandum need not be prepared for the purpose of being used as a document on which future title of the parties be founded. It is usually prepared as a record of what had been agreed upon so that there are no hazy notions about it in future. It is only when the parties reduce the family arrangement in writing with the purpose of using that writing as proof of what they had arranged and, where the arrangement is brought about by the document as such, that the document would require registration as it would amount to a document of title declaring for future what rights in what properties the parties possess. Tek Bhadur Bhuji v. Debi Singh AIR 1966 SC 292 . Also see Awadh Narain Singh v. Narian Mishra, AIR 1962 pat. 400; Mythili Nalini v. Kowmari, AIR 1991 Ker 266; Klae v. Dy Director of Consolidation AIR 1976 SC 807.
Another aspect that attracts our attention is whether family arrangement, if recorded in a document, requires registration as per the provisions of section 17(1)(b) of the Indian Registration Act, 1908. Section 17(1)(b) lays down that a document for which registration is compulsory should, by its own force, operate or purport to create declare, assign, limit or extinguish either in present or in future any right, title or interest in immovable property. Thus if an instrument of family arrangement is recorded in writing and operates or purports to create or extinguish rights, it has to be compulsorily registered. But where a document, merely records the terms and recital of the family arrangement after the family arrangement had already been made which per se does not create or extinguish any right in immovable properties, such document does not fall within the ambit of section 17(1)(b) of the Act and so it does not require registration.
According to the Supreme Court in Roshan Singh v. Zile Singh AIR 1988 SC 881, the true principle that emerges can be stated thus ‘If the arrangement, of compromise is one under which a person having an absolute title to the property transfers his title in some of the items thereof to others, the formalities prescribed by law have to be complied with, since the transferees derive their respective title through the transferor. If, on the other hand, the parties set up competing titles and the differences are resolved by the compromise, then, there is no question of one deriving title from the other and therefore, the arrangement does not fall within the mischief of section 17 (1) (b) it read with section 49 of the Registration Act as no interest in property is created or declared by the document for the first time.
Family Arrangement does not amount to transfer: The transaction of a family settlement entered into by the parties bonafide for the purpose of putting an end to the dispute among family members, does not amount to a transfer Hiran Bibi v. Sohan Bibi, AIR 1914 PC 44, approving, Khunni Lal v. Govind Krishna Narain, (1911) ILR 33 All 356 (PC). It is not also the creation of an interest. For, as pointed out by the Privy Council in Hiran Bibi’s case AIR 1914 PC 44, in a family settlement each party takes a share in the property by virtue of the independent title which is admitted to that extent by the other party. It is not necessary, as would appear from the decision in Rangaswami Gounden v. Nachiappa Gounden AIR 1918 PC 196, that every party taking benefit under a family settlement must necessarily be shown to have, under the law, a claim to a share in the property. All that is necessary is that the parties must be related to one another in some way and have a possible claim to the property or a claim or even a resemblance of a claim on some other ground as say, affection. Ram Charan Das v. Girija Nandini Devi, AIR 1966 SC 323.
It is well settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case memorandum itself does not create or extinguish any rights in immovable properties and therefore does not fall within the mischief of section 17 of the Registration Act and is, therefore not compulsorily registrable –Kale v. Dy. Director AIR 1976 SC 807.
The family arrangement will need registration only if it creates any interest in immoveable property in present in favour of the party mentioned therein. In case however no such interest is created, the document will be valid despite its non-registration and will not be hit by section 17 of the Indian Registration Act, 1908. Maturi Pullaih v. Maturi Narasimhan AIR 1966 SC 1836.
Even a family arrangement, which was registrable but not registered, can be used for a collateral purpose, namely, for the purpose of showing the nature and character of possession of the parties .In pursuance of the family settlement. Kale v. Director of Consolidation AIR 1976 SC 807, (1976) 3 SCC 119.
To record a family arrangement arrived at orally, a memorandum of family arrangement-cum-compromise is required to be drawn up wherein the properties and assets belonging to the parties to the family arrangement are required to be specified. Thereafter the fact of arriving at family arrangement some time in the past with the help of well-wishers and family friends is required to be mentioned. In the operative portion of the Memorandum of Family Arrangement-cum-Compromise the properties and business which have been allotted to different parties are required to be specified.
In addition to the Memorandum of Family Arrangement –cum-Compromise, other documents like affidavits of each of the parties to the Family Arrangement are required to be obtained wherein each of the parties confirms on oath that he has received a particular asset and the family arrangement is arrived to his total satisfaction and it is binding on him. In such an affidavit the party giving up his right in other properties which are allotted to other parties to the Family Arrangement states that the said other properties may be transferred in the records of the registering authorities without notice to him. On the basis of the affidavit which is required to be executed before a Notary Public; mutation entries can be made by the concerned authorities.
In order to enable the member of the family to whom a particular property is allotted on arriving at a family arrangement, a power of attorney is required to be given by a member in whose name the said property was standing prior to the family arrangement to enable the party receiving the property to deal with the property as his own. Depending on the facts of each case, various other documents may be required to be drawn up to effect a proper and binding family arrangement.
9. Family arrangement is arrived at for a consideration namely, to resolve the dispute amongst the parties, to preserve the family peace and harmony and to avoid litigation and therefore, the provisions of Gift Tax Act are not attracted.
G.T.O. v. Bhupati Veerbhsadra Rao ( 9 ITD 618 )
C.G. T. v. Pappathi Anni ( 123 ITR 655, Mad )
Ziauddin Ahmed v. CGT ( 102 ITR 253 Gau. )
10. In the case of N. Durgaiah v. C.G.T. 99 ITR 477 (AP), the assessee executed a registered deed of settlement on March 26, 1962, conveying certain immovable properties to his five sons and two daughters out of whom one of the sons was a minor in whose favour a house worth Rs. 64,800/- was settled. The assessee contended before the G.T.O. that the transaction was in the nature of a family arrangement which does not amount to a taxable gift under the G.T.Act. The G.T.O. A.A.C. and the Tribunal rejected the contention of the Assessee.
When the matter reached the High Court, the Andhra Pradesh High Court held that in order to constitute a family arrangement, there must be an agreement or arrangement amongst the members of the joint family who wish to avoid any plausible or possible disputes and secure peace and harmony amongst the members. Where one of the parties executes a document styled as settlement deed where under some of the properties exclusively belonging to him as his self acquired properties are settled in favour of the other members of the family, the terms of such document do not amount to a family arrangement. There is no family arrangement as the same is only a unilateral act.
Hence a purely voluntary act of giving up one’s right in property without compelling circumstances indicating an existing or a possible dispute resulting in a compromise may well constitute a conveyance by way of gift and not valid family arrangement. It is, therefore, necessary that the preamble to the family arrangement should advert to the existence of difference which are likely to escalate to possible litigation and cause lack of peace and harmony in the family and likely to bring dishonor to the family name and prestige.
In the case of Ram Charan Das v. Girja Nandini Devi (Supra), the Supreme Court held that a compromise by way of family settlement is in no sense alienation by a limited owner of the family property and since it is not an alienation it cannot amount to a creation of interest.
The definition of the term “transfer” contained in section 2(47) of the Income Tax Act, 1961 prior to its amendment by the Finance Act, 1987 with effect from 1.4.1988 has been considered by the Supreme Court in the case of Dewas Cine Corporation ( 68 ITR 240), Bankey Lal Vaidya ( 79 ITR 594 ) & Malbar Fisheries Co. ( 120 ITR 49) wherein the High Court, was called upon to consider whether on dissolution of a firm there is a transfer of assets amongst the partners. The Supreme Court in all the decisions unequivocally held that on dissolution of a firm there is a mutual adjustment of rights amongst the partners and therefore, there is no transfer of assets by sale, exchange, relinquishment of the asset or extinguishments of any rights therein.
Their Lordships of the Supreme Court in the case of Sunil Siddharthabhi v. CIT (156 ITR 509) after considering the decisions of their Court in the case of Dewas Cine Corporations, Bankey Lal Vaidya & Malbar Fisheries Co. and the Gujarat High Court decision in the case of Mohanbhai Pamabhai ( 91 ITR 393 ) held, that when a partner retires or the partnership is dissolved, what the partner receives is his share in the partnership. What is contemplated here is a share of the partner qua the net assets of the partnership firm. On evaluation, that share in a particular case may be realized by the receipt of only one of all the assets. What happens here is that a shared interest in all the assets of the firm is replaced by an exclusive interest in an asset of equal value. That is why it has been held that there is no transfer. It is the realization of a pre-existing right.
With effect from 1.4.1988 sub-clause (v) is added to the definition of the term “transfer” in section 2(47) of the Income Tax Act which provides that any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract amounts to a transfer. Sub-clause (vi) which is added to the definition of the term transfer provides that transaction which has the effect of transferring or enabling the enjoyment of any immovable property amounts to a transfer for the purpose of Income Tax Act.
Whether distribution of assets amongst the members of the family amounts to transfer pursuant to the amended definition of the term transfer?
In the case of Ramgowda Annagowda Patil v. Bhausaheb ( AIR 1927 PC 227), the family settlement was between parties which included the brother and son-in-law of a widow of the deceased. Though the widow was a necessary party, her brother and son-in-law were not, but they had been allotted shares in the properties which formed the subject-matter of the family arrangement. It was held that in view of the closeness of the relationship between the persons who were disputing the right over the property with one another, the arrangement between them was legal and enforceable ( Mehdi Hasan v. Ram Ker AIR 1982 All. 92).
source: Taxguru
INDIAN RAILWAYS: Concession in Shatabdi and Rajdhani Trains
13:26 IST
RAJYA SABHA
Presently Railways grant concession to the following categories of persons in Rajdhani and Shatabdi trains:
(i) Senior citizens – 50 per cent to women and 30 per cent to men in all classes,
(ii) Doctors (allopathic) – 10 per cent in all classes,
(iii) Amateur artists (theatrical, concert, musical and dancing troupes) for giving performance – 50 per cent in AC-2 tier, AC-3 tier and AC chair car,
(iv) Press Correspondents accredited to Government of India/State Government/District Headquarters travelling for bona fide press work and spouse (once in a Financial Year) – 50 per cent in all classes, and
(v) Recipients of President’s Police Medal for Distinguished Service and Indian Police Medal for Meritorious service who have attained the age of 60 years – 60 per cent to women and 50 per cent to men in all classes.
This information was given by the Minister of State for Railways, Shri E. Ahamed in a written reply in Rajya Sabha today.
13:26 IST
RAJYA SABHA
Presently Railways grant concession to the following categories of persons in Rajdhani and Shatabdi trains:
(i) Senior citizens – 50 per cent to women and 30 per cent to men in all classes,
(ii) Doctors (allopathic) – 10 per cent in all classes,
(iii) Amateur artists (theatrical, concert, musical and dancing troupes) for giving performance – 50 per cent in AC-2 tier, AC-3 tier and AC chair car,
(iv) Press Correspondents accredited to Government of India/State Government/District Headquarters travelling for bona fide press work and spouse (once in a Financial Year) – 50 per cent in all classes, and
(v) Recipients of President’s Police Medal for Distinguished Service and Indian Police Medal for Meritorious service who have attained the age of 60 years – 60 per cent to women and 50 per cent to men in all classes.
This information was given by the Minister of State for Railways, Shri E. Ahamed in a written reply in Rajya Sabha today.
TAX PAYERS ARE IMPORTANT STAKEHOLDERS- ADMINISTER TAX WITH HUMANE FACE-FM
DIRECT TAX COLLECTION INCREASES TO MORE THAN HALF OF TOTAL TAX COLLECTION
13:17 IST
Finance Minister Shri Pranab Mukherjee has asked Indian Revenue Service officials to consider tax payers as important stakeholders in nation building and to administer taxes with a human approach. He was addressing the 63rd batch of IRS trainees last evening.
Shri Mukherjee pointed out that the shift in policy whereby tax payers are not seen as adversaries has resulted in a significant growth in tax collection during the past decade. He asked the trainee officers to imbibe this approach in their daily working.
The Finance Minister said that direct taxes collection has increased by ten times during the past decade. He also pointed out that the share of direct taxes is now more than 55 %.
The Finance Minster reminded the officials that it was due to increased tax buoyancy and collection efforts of Revenue departments that the government was able to waive off the loans to farmers amounting to Rs 71,000 crores.
BS/KP/GN-106/10
13:17 IST
Finance Minister Shri Pranab Mukherjee has asked Indian Revenue Service officials to consider tax payers as important stakeholders in nation building and to administer taxes with a human approach. He was addressing the 63rd batch of IRS trainees last evening.
Shri Mukherjee pointed out that the shift in policy whereby tax payers are not seen as adversaries has resulted in a significant growth in tax collection during the past decade. He asked the trainee officers to imbibe this approach in their daily working.
The Finance Minister said that direct taxes collection has increased by ten times during the past decade. He also pointed out that the share of direct taxes is now more than 55 %.
The Finance Minster reminded the officials that it was due to increased tax buoyancy and collection efforts of Revenue departments that the government was able to waive off the loans to farmers amounting to Rs 71,000 crores.
BS/KP/GN-106/10
Judicial reforms get a fillip
by N. R. Madhava Menon
The 13th Finance Commission's recommendation to allocate Rs. 5,000 crore to improve the justice delivery system constitutes a landmark opportunity.
Never before in India's judicial history has the government come forward to invest a large sum, Rs.5,000 crore, to improve the justice delivery system. The 13th Finance Commission recommended this for the five-year period 2010-15. It is to the credit of Union Law Minister Veerappa Moily that the judiciary has at last received the attention it deserves, to be able to implement his Vision Plan of reducing the life-span of a case in the system to three years, a target to be achieved within a three-year period. Whether the judiciary, which historically has been reluctant to absorb changes, will rise to the occasion and implement the Plan now depends entirely on the judges and lawyers who operate the system.
How could the money be utilised in time and with good effect? Would the High Courts be a little proactive and get an action plan prepared in advance without waiting for instructions from the bureaucrats in Delhi? Since the Union government seems to have approved in principle the need to make investments in the judiciary to expedite justice delivery, one can expect more money being made available beyond 2015, if the judiciary is prepared to deliver, modifying in the process the systemic and processual ills that have been plaguing it for long.
Bottom-up reforms
There are six components to which the money is earmarked, all of which may not be equally relevant to all the States. Obviously the focus of the expenditure is on the trial courts where over 90 per cent of all arrears reside. However, the administrative and supervisory control exercised over them by the respective High Courts is so absolute that nothing much can happen without the Chief Justice and the portfolio judges in charge of the districts concerned allowing them the freedom to innovate and change. It is hoped that High Courts for once would welcome the initiatives from below and provide the leadership for the effective implementation of the plan even if they do not personally support the changes proposed. This may require amendment to the rules of the court: on an experimental basis this could be allowed in those districts where the plan is to be implemented. The causes of delay are not the same everywhere and a district-wise approach alone can be effective in the beginning. It is more so because the support of the Bar and court staff are critical for the success of the plan. This is easier to mobilise at the local level.
Shift courts
Half the money (about Rs.2,500 crore) is set apart to increase the number of courts operating during morning and evening hours, staffed either by regular judges on payment of additional compensation, or by re-employed retired judges. Andhra Pradesh, Gujarat and a few other States have already experimented successfully with courts working in shifts, and they will naturally have a headstart in being able to expand the scheme throughout the State with the Central funds now available. It is for the High Court to decide what type of cases should be referred to the shift courts. If they are assigned small cause matters or petty offences, both pending and current, the regular courts will be left with more serious matters requiring greater attention and more judicial time. Each State will thus be entitled to double the existing number of courts through the shift system, with no additional investment on physical infrastructure.
The High Courts will be well advised to act quickly to recruit the required number of judges and staff, invest in their training for the tasks assigned, work on the rules required to regulate their functioning, and put in place a monitoring cell in the High Court to coordinate and oversee implementation.
ADR centres in districts
Considering the potential of Section 89 of the Civil Procedure Code (CPC) for the settlement of cases without trial, a sum of Rs.850 crore is assigned. Of this, Rs.100 crore is to hold 10 mega-Lok Adalats per High Court each year, and five Lok Adalats a year in each judicial district of the States. As Lok Adalats are already part of the process of dispensing justice, its systematic expansion will not pose any serious problems.
The ADR centre, one in each district, is an innovative measure to address the problem of mounting arrears through the mechanisms of mediation, conciliation, arbitration and negotiated settlement as provided for in Section 89 CPC. There are mediation centres in some High Courts, but very few in the districts. An investment of Rs. 1 crore per district ADR centre is to be used to develop the physical infrastructure and training of mediators, conciliators and arbitrators. A sum of Rs.600 crore for physical infrastructure and Rs.150 crore for training that have been earmarked are attractive enough for the system to act swiftly for the effective implementation of these new judicial institutions at the taluk and district levels.
To augment the resources of the Legal Services Authority, an additional sum of Rs.200 crore over five years is earmarked. Again this sum is to be allocated to the States in proportion to the number of courts within their jurisdiction.
Capacity building
A sum of Rs.250 crore to provide additional support to train judicial officers, Rs.300 crore to equip State Judicial Academies with necessary infrastructure and another Rs.150 crore to train public prosecutors are recommended for the five-year period. A sum of Rs.15 crores per High Court to build infrastructure for judicial academies is provided.
The faculty and infrastructure now available in the Academies are inadequate. A cadre of judicial trainers has to be developed and the practice of deputing district judges temporarily to manage training programmes should end. There is need for trainers in the areas of information-communication technology, interpersonal relationships, court and case management, judicial administration, judicial statistics, judicial performance assessment, judicial planning and so on. At least a third of the faculty members of the judicial academies will need to come from outside ‘law', from management, social sciences, technology and public administration.
There is the need for a Dean of Academic Affairs in every judicial academy, who will not only develop and manage programmes but coordinate with other institutions in India and abroad to enhance the quality of training. There is the need for a research and publication cell in each academy.
Court managers
The district judges are over-worked and have very poor professional support systems. They devote a considerable length of time on non-judicial work, to manage which they have neither the expertise nor the training. It is therefore a good initiative recommended by the Finance Commission to provide qualified court managers with degrees in management (such as MBA) or law to be employed to assist judges. In planning the docket, in mobilising the parties concerned and their witnesses, in coordinating the distribution of work, in monitoring progress and removing bottlenecks, in helping assess performance and providing liaison with the public under instructions from the judge, the court manager can give assistance to make a significant difference in judicial administration.
Heritage court buildings
There are courts at the trial and appellate levels that are over 100 years old: some of them date back to the East India Company. For the restoration and conservation of 150 such buildings, Rs.450 crore has been allotted. This will help tell the story of the noble traditions of Indian justice for future generations if it is coupled with setting up a museum containing oral history accounts from lawyers and judges associated with each court, and rare court documents from different periods.
Conclusions
The government has declared that the next 10 years would mark the “Decade of Innovation” in every sphere of life, and the next five years, a period for judicial reforms. In pursuance of this, the Law Minister announced a National Litigation Policy under which government litigation is to be regulated to avoid unnecessary cases being filed by public authorities. The Finance Commission advised the government to release the money for States under this package, seeking that States also announce a litigation policy on the lines of what the Union government has done.
The grants announced to the States and the High Courts are without the sort of conditionalities usually attached to Centrally-sponsored schemes. The release of yearly instalments is, of course, based on the utilisation of funds allotted to the six different components of the scheme. It is now up to the High Courts in consultation with the State governments to quickly prepare plans in their respective jurisdictions and start implementation within the next few months. The State Judicial Academies should be asked to do the preparatory work under the supervision of a committee of senior judges, if necessary seeking advice from consultants. The litigant public now has a right to demand from the judiciary quicker delivery of justice, planned elimination of arrears, and enhanced access to justice. The judiciary is indeed on trial on its commitment to timely justice. No more alibis would be acceptable to the public.
(Professor N.R. Madhava Menon is the Founder-Director of the National Judicial Academy, and a former member of the Law Commission of India.)
source; The Hindu
by N. R. Madhava Menon
The 13th Finance Commission's recommendation to allocate Rs. 5,000 crore to improve the justice delivery system constitutes a landmark opportunity.
Never before in India's judicial history has the government come forward to invest a large sum, Rs.5,000 crore, to improve the justice delivery system. The 13th Finance Commission recommended this for the five-year period 2010-15. It is to the credit of Union Law Minister Veerappa Moily that the judiciary has at last received the attention it deserves, to be able to implement his Vision Plan of reducing the life-span of a case in the system to three years, a target to be achieved within a three-year period. Whether the judiciary, which historically has been reluctant to absorb changes, will rise to the occasion and implement the Plan now depends entirely on the judges and lawyers who operate the system.
How could the money be utilised in time and with good effect? Would the High Courts be a little proactive and get an action plan prepared in advance without waiting for instructions from the bureaucrats in Delhi? Since the Union government seems to have approved in principle the need to make investments in the judiciary to expedite justice delivery, one can expect more money being made available beyond 2015, if the judiciary is prepared to deliver, modifying in the process the systemic and processual ills that have been plaguing it for long.
Bottom-up reforms
There are six components to which the money is earmarked, all of which may not be equally relevant to all the States. Obviously the focus of the expenditure is on the trial courts where over 90 per cent of all arrears reside. However, the administrative and supervisory control exercised over them by the respective High Courts is so absolute that nothing much can happen without the Chief Justice and the portfolio judges in charge of the districts concerned allowing them the freedom to innovate and change. It is hoped that High Courts for once would welcome the initiatives from below and provide the leadership for the effective implementation of the plan even if they do not personally support the changes proposed. This may require amendment to the rules of the court: on an experimental basis this could be allowed in those districts where the plan is to be implemented. The causes of delay are not the same everywhere and a district-wise approach alone can be effective in the beginning. It is more so because the support of the Bar and court staff are critical for the success of the plan. This is easier to mobilise at the local level.
Shift courts
Half the money (about Rs.2,500 crore) is set apart to increase the number of courts operating during morning and evening hours, staffed either by regular judges on payment of additional compensation, or by re-employed retired judges. Andhra Pradesh, Gujarat and a few other States have already experimented successfully with courts working in shifts, and they will naturally have a headstart in being able to expand the scheme throughout the State with the Central funds now available. It is for the High Court to decide what type of cases should be referred to the shift courts. If they are assigned small cause matters or petty offences, both pending and current, the regular courts will be left with more serious matters requiring greater attention and more judicial time. Each State will thus be entitled to double the existing number of courts through the shift system, with no additional investment on physical infrastructure.
The High Courts will be well advised to act quickly to recruit the required number of judges and staff, invest in their training for the tasks assigned, work on the rules required to regulate their functioning, and put in place a monitoring cell in the High Court to coordinate and oversee implementation.
ADR centres in districts
Considering the potential of Section 89 of the Civil Procedure Code (CPC) for the settlement of cases without trial, a sum of Rs.850 crore is assigned. Of this, Rs.100 crore is to hold 10 mega-Lok Adalats per High Court each year, and five Lok Adalats a year in each judicial district of the States. As Lok Adalats are already part of the process of dispensing justice, its systematic expansion will not pose any serious problems.
The ADR centre, one in each district, is an innovative measure to address the problem of mounting arrears through the mechanisms of mediation, conciliation, arbitration and negotiated settlement as provided for in Section 89 CPC. There are mediation centres in some High Courts, but very few in the districts. An investment of Rs. 1 crore per district ADR centre is to be used to develop the physical infrastructure and training of mediators, conciliators and arbitrators. A sum of Rs.600 crore for physical infrastructure and Rs.150 crore for training that have been earmarked are attractive enough for the system to act swiftly for the effective implementation of these new judicial institutions at the taluk and district levels.
To augment the resources of the Legal Services Authority, an additional sum of Rs.200 crore over five years is earmarked. Again this sum is to be allocated to the States in proportion to the number of courts within their jurisdiction.
Capacity building
A sum of Rs.250 crore to provide additional support to train judicial officers, Rs.300 crore to equip State Judicial Academies with necessary infrastructure and another Rs.150 crore to train public prosecutors are recommended for the five-year period. A sum of Rs.15 crores per High Court to build infrastructure for judicial academies is provided.
The faculty and infrastructure now available in the Academies are inadequate. A cadre of judicial trainers has to be developed and the practice of deputing district judges temporarily to manage training programmes should end. There is need for trainers in the areas of information-communication technology, interpersonal relationships, court and case management, judicial administration, judicial statistics, judicial performance assessment, judicial planning and so on. At least a third of the faculty members of the judicial academies will need to come from outside ‘law', from management, social sciences, technology and public administration.
There is the need for a Dean of Academic Affairs in every judicial academy, who will not only develop and manage programmes but coordinate with other institutions in India and abroad to enhance the quality of training. There is the need for a research and publication cell in each academy.
Court managers
The district judges are over-worked and have very poor professional support systems. They devote a considerable length of time on non-judicial work, to manage which they have neither the expertise nor the training. It is therefore a good initiative recommended by the Finance Commission to provide qualified court managers with degrees in management (such as MBA) or law to be employed to assist judges. In planning the docket, in mobilising the parties concerned and their witnesses, in coordinating the distribution of work, in monitoring progress and removing bottlenecks, in helping assess performance and providing liaison with the public under instructions from the judge, the court manager can give assistance to make a significant difference in judicial administration.
Heritage court buildings
There are courts at the trial and appellate levels that are over 100 years old: some of them date back to the East India Company. For the restoration and conservation of 150 such buildings, Rs.450 crore has been allotted. This will help tell the story of the noble traditions of Indian justice for future generations if it is coupled with setting up a museum containing oral history accounts from lawyers and judges associated with each court, and rare court documents from different periods.
Conclusions
The government has declared that the next 10 years would mark the “Decade of Innovation” in every sphere of life, and the next five years, a period for judicial reforms. In pursuance of this, the Law Minister announced a National Litigation Policy under which government litigation is to be regulated to avoid unnecessary cases being filed by public authorities. The Finance Commission advised the government to release the money for States under this package, seeking that States also announce a litigation policy on the lines of what the Union government has done.
The grants announced to the States and the High Courts are without the sort of conditionalities usually attached to Centrally-sponsored schemes. The release of yearly instalments is, of course, based on the utilisation of funds allotted to the six different components of the scheme. It is now up to the High Courts in consultation with the State governments to quickly prepare plans in their respective jurisdictions and start implementation within the next few months. The State Judicial Academies should be asked to do the preparatory work under the supervision of a committee of senior judges, if necessary seeking advice from consultants. The litigant public now has a right to demand from the judiciary quicker delivery of justice, planned elimination of arrears, and enhanced access to justice. The judiciary is indeed on trial on its commitment to timely justice. No more alibis would be acceptable to the public.
(Professor N.R. Madhava Menon is the Founder-Director of the National Judicial Academy, and a former member of the Law Commission of India.)
source; The Hindu
Even the groom must market himself
By:SANTOSH DESAI/FUTURE BRANDS BY GOURI SHAH
A t M i the launch of his book other Pious Lady: Making Sense Of Everyday India, Santosh Desai, noted ad- vertising professional and man- aging director and chief execu- tive of Future Brands, spoke about consumer insights de- rived from fragments of every- day life as experienced by the middle class in urban India. He explains why we are obsessed with our stomachs, why a slap is the ultimate insult, and why consumers still expect dhaniya and mirchi (green coriander and chillies) free with their veg- etables. Edited excerpts: You ve drawn from your own ex periences of growing up in a mid dleclass Indian family. Will the book touch a chord with new con sumers?
This is the thing about India, there is a certain amount of things that are changing, but our desire is to believe that nothing is. If you ask people if they are comfortable with their way of life, young or old, most would say yes. The young are not looking to redefine their lives. It s not like 18-year-olds are moving out of their parents homes, they are not saying: What is this ridiculous way of getting married? If we really wanted a discontinuous way of life, the young could have easily walked away from the past. But they haven t. This is a story of India as it exists, because it is continuous, in a sense it goes back to explain where this con- tinuity comes from, to explain the present. Early anecdotal ev- idence shows that young peo- ple are reading it like a novel.
Yes, perhaps it will strike (more of) a chord with people of my generation.
Your observations of everyday India are so detailed.
The insight into anything is retrospectively self-evident.
Once you say it, I have always known it. So in a sense, it s not observing anything that did not happen, it s merely pointing to things that did. All of us have the same memories; the prob- lem simply is that we don t think of them as important and, therefore, don t notice or ac- tively remember it.
I mentioned this habit of people at a paan shop who will from a distance signal at the guy and revel in the fact that he knows their preference without being told. In India, which is such a huge country, faceless- ness is such a problem: How do you become somebody? There are so many such signs It is all these small things, respect, the seat you get in a bus, etc., are the only things setting you apart. It is the inference you draw, and all these things be- come additive, you start seeing a larger pattern and explaining India, brick by brick. So, in- stead of some grand theory, there are a lot of books which say that we are like this because Hindu thought is like that. This goes the other way round.
What sets Indian consumers apart?
I think it s a great ability to almost dismantle anything that you give them as a package. To figure out what s the most valu- able part and reconfigure it in its most valuable form. Indian consumers don t accept your stories but will create their own around your brand. Which is possibly why you find that mov- ing up the price point ladder in India is not easy. That s possi- bly why luxury brands haven t had much luck here. Look at wines consumers are not buy- ing into that cultural baggage of it being French, etc. But they understand Johnnie Walker be- cause it s a simple status lad- der.
What is it giving me? One as- pect is that you will buy value, and another is that you will see value in something. But it s not like we re cheap.
Consumers are happy to spend money like water to get their children married because they see value in it. Otherwise they will haggle everywhere. It s that ability to see and reconsti- tute value on your own terms that makes the Indian consum- er special.
What was the inspiration for the title?
A number of people may not get it at first glance, but if you Google it, a number of matri- monial ads with that phrase will pop up. I was looking for a title that captured the idiosyn- cratic nature of India and, to some extent, of the book, which is lightly written but the depth comes when you navigate it.
Something that was not a cliche, like arranged love mar- riage but something that cap- tured the flavour of India. I re- membered this phrase mother pious lady (it) was some- thing that was so peculiar the Indian matrimonial ad itself is a peculiar phenomenon. The funny thing is that this (mother pious lady) is always said about the groom s mother. There are a number of things that it points to, that in today s world even, the groom must market himself. And say things like mother pious lady to make it clear that his mother is more interested in burning incense sticks than burning her daugh- ter-in-law with kerosene.
What is your favourite chapter in the book?
I m sure I will think of some- thing else after saying this, but in many ways it would be the chapter titled The dignity of ultramarine. It argues in some ways that ultramarine was the sign of the middle class. To be in the middle class in India was to experience poverty with a full stomach. You could have everything you truly need, but nothing of what you desired.
And the neel (ultramarine) is a sign that you have old clothes, but you want them to look white long after they ve stopped being white. At one level it s heartbreaking, and at another it s brave and digni- fied.
source; LiveMint
By:SANTOSH DESAI/FUTURE BRANDS BY GOURI SHAH
A t M i the launch of his book other Pious Lady: Making Sense Of Everyday India, Santosh Desai, noted ad- vertising professional and man- aging director and chief execu- tive of Future Brands, spoke about consumer insights de- rived from fragments of every- day life as experienced by the middle class in urban India. He explains why we are obsessed with our stomachs, why a slap is the ultimate insult, and why consumers still expect dhaniya and mirchi (green coriander and chillies) free with their veg- etables. Edited excerpts: You ve drawn from your own ex periences of growing up in a mid dleclass Indian family. Will the book touch a chord with new con sumers?
This is the thing about India, there is a certain amount of things that are changing, but our desire is to believe that nothing is. If you ask people if they are comfortable with their way of life, young or old, most would say yes. The young are not looking to redefine their lives. It s not like 18-year-olds are moving out of their parents homes, they are not saying: What is this ridiculous way of getting married? If we really wanted a discontinuous way of life, the young could have easily walked away from the past. But they haven t. This is a story of India as it exists, because it is continuous, in a sense it goes back to explain where this con- tinuity comes from, to explain the present. Early anecdotal ev- idence shows that young peo- ple are reading it like a novel.
Yes, perhaps it will strike (more of) a chord with people of my generation.
Your observations of everyday India are so detailed.
The insight into anything is retrospectively self-evident.
Once you say it, I have always known it. So in a sense, it s not observing anything that did not happen, it s merely pointing to things that did. All of us have the same memories; the prob- lem simply is that we don t think of them as important and, therefore, don t notice or ac- tively remember it.
I mentioned this habit of people at a paan shop who will from a distance signal at the guy and revel in the fact that he knows their preference without being told. In India, which is such a huge country, faceless- ness is such a problem: How do you become somebody? There are so many such signs It is all these small things, respect, the seat you get in a bus, etc., are the only things setting you apart. It is the inference you draw, and all these things be- come additive, you start seeing a larger pattern and explaining India, brick by brick. So, in- stead of some grand theory, there are a lot of books which say that we are like this because Hindu thought is like that. This goes the other way round.
What sets Indian consumers apart?
I think it s a great ability to almost dismantle anything that you give them as a package. To figure out what s the most valu- able part and reconfigure it in its most valuable form. Indian consumers don t accept your stories but will create their own around your brand. Which is possibly why you find that mov- ing up the price point ladder in India is not easy. That s possi- bly why luxury brands haven t had much luck here. Look at wines consumers are not buy- ing into that cultural baggage of it being French, etc. But they understand Johnnie Walker be- cause it s a simple status lad- der.
What is it giving me? One as- pect is that you will buy value, and another is that you will see value in something. But it s not like we re cheap.
Consumers are happy to spend money like water to get their children married because they see value in it. Otherwise they will haggle everywhere. It s that ability to see and reconsti- tute value on your own terms that makes the Indian consum- er special.
What was the inspiration for the title?
A number of people may not get it at first glance, but if you Google it, a number of matri- monial ads with that phrase will pop up. I was looking for a title that captured the idiosyn- cratic nature of India and, to some extent, of the book, which is lightly written but the depth comes when you navigate it.
Something that was not a cliche, like arranged love mar- riage but something that cap- tured the flavour of India. I re- membered this phrase mother pious lady (it) was some- thing that was so peculiar the Indian matrimonial ad itself is a peculiar phenomenon. The funny thing is that this (mother pious lady) is always said about the groom s mother. There are a number of things that it points to, that in today s world even, the groom must market himself. And say things like mother pious lady to make it clear that his mother is more interested in burning incense sticks than burning her daugh- ter-in-law with kerosene.
What is your favourite chapter in the book?
I m sure I will think of some- thing else after saying this, but in many ways it would be the chapter titled The dignity of ultramarine. It argues in some ways that ultramarine was the sign of the middle class. To be in the middle class in India was to experience poverty with a full stomach. You could have everything you truly need, but nothing of what you desired.
And the neel (ultramarine) is a sign that you have old clothes, but you want them to look white long after they ve stopped being white. At one level it s heartbreaking, and at another it s brave and digni- fied.
source; LiveMint
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