Per A. Kalyanasundharam, Senior Vice President: This is appeal by assessee individual against order of Commissioner of Income-tax (Appeals), Mangalore, dated 19-12-2006. appellant's grievance is with regard to treatment given to exchange of shares for consideration in view of family arrangement, determined by arbitrator as attracting provisions of Capital Gains. 2. On above issue, rival contentions have been very carefully considered. assessee is daughter of Mr. T. Ramesh Pai and is married. Mr. T. Ramesh Pai was assessed to tax in status of HUF that had investment in shares of Reliance India Ltd., Karnataka Consumer Products Ltd., and others including ICDS Ltd., concern in which family members are interested as shareholders, directors, etc. issue revolves around 56,149 shares of ICDS Ltd., for which assessee received Rs. 220 per share and total consideration was Rs. 1,23,52,780. Pai group of Mangalore had two families, namely, Mohandas Pai and Ramesh Pai. There were disputes between two families of group and two families wanted settlement to effect that various business and other activities of family should be divided between two families with no interference by members of either of families in business of other. Consequent to arrangement, business of ICDS Ltd., was to be given in settlement to Mohandas Pai and by virtue of arrangement and understanding, assessee who was member of family of Ramesh Pai, to honour commitment of family that family of Ramesh Pai will not have any say in t h e business of Mohandas Pai, had to give away her shares in view of arbitration award. value of shares for purpose of this arrangement was also determined by arbitrator at Rs. 220 per share. claim of assessee was that but for dispute in family that needed to be resolved by intervention of arbitrator; with sole purpose and view of honouring award of arbitrator; for purpose of family peace; and in process of arbitration in order to accept that assessee as member of Ramesh Pai family, will not interfere with business activities of Mohandas Pai family, agreed to receive amount for shares held by her in ICDS Ltd. Assessing Officer was of opinion that assessee being married person could no longer claim to be part of joint family and, therefore, family arrangement had nothing to do with she disposing off her holdings in ICDS Ltd.The Commissioner of Income-tax (Appeals) in his order upholding view of Assessing Officer, observed as under: ' 5.16: appellant has placed reliance on decision of ITAT, Bangalore Bench 'C' in case of Searock Investment Ltd. v. JCIT, ITA No. 750/Bang./1999 dated 5-10-2001. I have carefully gone through decision of Hon'ble ITAT. Firstly, decision is not applicable on facts of present tax. assessee before ITAT was investment company. In present case, assessee is individual who is also not coparcener. Investment companies are vehicles of controlling/holding shares in other companies. purpose may be to control other companies through investment company. funds are made available to investment company by group concerns/family members either as share capital or by way of loans and advances. Thus, funds are common and keep on rotating. In case of appellant position is different. Secondly, with due respect on merits also, I beg to differ with decision of ITAT for reasons that Hon'ble ITAT did not discuss provisions of section 2(47) and section 47 of Income-tax Act with reference to charge of capital gains under section 45 of Income- tax Act. Hon'ble ITAT placed overwhelming emphasis on concept of family arrangement, without considering provisions of section 45, section 47 and section 2(47) of Income-tax Act. According to ITAT, it was case of distribution of assets held by two family groups. However, in present case, basic difference is that appellant has not proved that source of acquisition of shares held by her were common funds of two family groups between which there was dispute regarding controlling interest in various companies run by two families. It was also held by ITAT that transfer of shares by M/s. Searock Investment Ltd., did not result in any earning by way of capital gains as shares held by company were exchanged in family arrangement. In case of appellant, there is no exchange of shares of one company of family with shares of other company of family. appellant had transferred shares for consideration received in cash. 3. undisputed fact that emerges from record is that differences between two families of group required intervention of arbitrator. It is also accepted position that arbitration involved division of various activities including business between two families with entire exclusion of other family. There was clear demarcation that neither of families would thenceforth interfere with business and other activities of other family. broad purpose of arbitration was to effectively transfer control and management of companies, shareholding of one group in companies controlled by other group will be sold to controlling group. Likewise Directors will also resign from companies controlled by other group to enable controlling group to reconstitute Board of Directors according to their wish. This arrangement is also applicable to subsidiaries and sister companies falling in respective group. On basis of this broad preamble of arbitration, business and other activities of two families were earmarked. agreement that was entered on 23-8-1994 stated 'In case Ambani award is chosen for implementation, Sri C. Subramaniam will decide on manner of disposal of ICDS shares subsequently acquired by Sri T. Ramesh Pai group.' agreement also stated 'It has been agreed that G.M. Croup will take over newly acquired shares between 3-11-1993 and 23-8-1994 regarding which purchases have been completed by payment of purchase money, etc., at no loss, no profit basis. This may be worked out by Shri D.N. Chaturvedi in consultation with both parties and exact amount payable may be fixed. In changed context where prices of ICDS have been jacked up due to competitive purchase operations by both parties, and also general boom in share market what should be prices of shares of various companies has to be fixed. Shri Dhirubhai has fixed Rs. 220 for ICDS shares. proportionate price increase will be made in regard to shares of companies belonging to R Group, which have to be transferred to group by M Group. After further discussions parties have agreed that shares subsequently purchased by R Group between 3-11-1993 and 23-8-1994 will also be taken over by M Group at Rs. 220 per share.' above is only sample in regard to majority of shares and there were other shares on which identical situation, identical evaluation was made by arbitrator. 4. above goes to show that consequent to differences between two family groups, situation had developed requiring two family groups to identify their interests with clear understanding that they will not dabble in affairs of other family group. assessee is daughter of Ramesh Pai group is accepted position and all that she had in shape of shares, etc., in companies had to be handed over to Mohandas group. From that point of view, assessee being member of Ramesh Pai group, had to be roped in and she had to abide by award of arbitrator for sole purpose of ensuring peace between two family groups. Supreme Court in Ram Charan Das v. Girja Nandini Devi AIR 1966 SC 323, considering meaning of family settlement, family, etc., held that consideration for family settlement being compromise between parties even to previous suit would be family settlement. Supreme Court observed: ' In this context work 'family' is not to be understood in narrow sense of being group of persons whom law recognizes as having right of succession or having claim to share in disputed property. consideration for family settlement is expectation that such settlement will result in establishing or ensuring amity and goodwill amongst relations. That consideration having passed by each of disputants settlement consisting of recognition of right asserted by each other cannot be impeached thereafter.' In instant case, very purpose was to bring about peace between family groups in which assessee had to necessarily agree for sake of family amity. Supreme Court in Kale v. Dy. Director of Consolidation AIR 1976 SC 807, considered family settlement, principles behind it, purpose of settlement, antecedent title and many more. Supreme Court observed: ' family settlement must be bona fide one so as to resolve family disputes and rival claims by fair and equitable division or allotment of properties between various members of family; said settlement must be voluntary and should not be induced by fraud, coercion or undue influence; members who may be parties to family arrangement must have some antecedent title, claim or interest even possible claim in property which is acknowledged by parties to settlement. Even if one of parties to settlement has no title but under arrangement other party relinquishes all its claims or titles in favour of such person and acknowledges him to be sole owner, then antecedent title must be assumed and family arrangement will be upheld and Courts will find no difficulty in giving assent to same.' In instant case, notwithstanding fact that assessee is married woman, and becomes member of husband's family by virtue of marriage, antecedence with Ramesh Pai's family remains intact and family ties are not severed. She being part of Ramesh Pai's family and carrying that name still as daughter of family, with view to ensure peace and amity for her parents, had to necessarily surrender her interest in ICDS Ltd., by giving away shares at price determined by arbitrator. Therefore, this would clearly partake character of total partition of HUF. 5. For foregoing reasons, we are of view that claim of assessee deserves to be upheld as per sanction of Supreme Court (supra) and we, accordingly, uphold claim that amount received by assessee on transfer of various shares in course of family arrangement would not result in any capital gains within meaning of Income-tax Act as it does not amount to transfer. 6. In result, appeal is allowed. *** MRS. P. SHEELA v. INCOME TAX OFFICER