Controller of Estate Duty vs Abdul Sattar Sait

Ramanujam, J.—The following common question of law has been referred to this court for opinion at the instance of the Revenue under s.

64(1) of the E.D. Act :

Whether, on the facts and in the circumstances of the case, only half of the property in question passed on the death of the deceased ?

One H.A.S. Abdul Razack Sait, who was a member of the Cutchi Memon sect of Mohamedans, died on October 10, 1968, leaving behind him

five sons, namely, Abdul Sattar Sait, born on June 11, 1938, Khader Sait, Arif Sait, Bashir Sait and Farook Sait, all born after 1938. In the estate

duty proceedings, the accountable person claimed that the deceased''s estate was governed by the Mitakshara law of succession and, therefore,

only the cesser of interest of the deceased should be brought to charge, that the cesser of interest would be 1/6th; of the value of the entire estate,

the deceased having five sons at the time of his death. The Asst. Controller, however, rejected the claim of the accountable person and brought to

estate duty the value of the entire estate as free estate as he was of the view that as per the provisions of the Cutchi Memons Act, 1938, the

privilege of the members of the Cutchi Memon community to follow the Hindu law of succession had been withdrawn.

On appeal before the Appellate Controller it was contended by the accountable person that Abdul Sattar Sait had 50% interest in the joint

family estate as soon as he was born and that, therefore, only the value of the remaining half of the properties should have been subjected to estate

duty. The Appellate Controller, however, rejected the said contention observing that as per the Hindu law the rights of a coparcener would

crystallise only at the time of the partition and proceeded to hold that the properties brought to estate duty by the Asst. Controller must suffer a

reduction to the extent of 1/6th since Abdul Sattar Sait should be deemed to have been divided on the date of death of the coparcener on a

notional partition in the family and that 1/6th share cannot be brought to charge as interest passing on the death of the deceased.

Against the order of the Appellate Controller, both the Revenue and the accountable person filed appeals before the Income Tax Appellate

Tribunal. On behalf of the Revenue it was contended that the accountable person was governed by the Mahomedan law under the provisions of

the Cutchi Memons Act, 1938, that though the first son, Abdul Sattar Sait, had a right by birth in respect of half share of the estate, yet so long as

a partition had not taken place before the commencement of the Act, his right by birth vanished after the introduction of the Shariat Act of 1937,

that thereafter the accountable persons were governed only by the Mahomedan law and not by the Hindu law of succession and inheritance, that

Abdul Sattar Sait could not have claimed even 1/6th share in the deceased''s property at the time of the latter''s death, that there could not be a

notional partition when four of the sons of the deceased were born after the introduction of the Cutchi Memons Act as they had no right by birth

and that the deceased could not have willed away his properties to the exclusion of his four sons as it was opposed to the Mahomedan law, that

the right by birth of Abdul Sattar Sait became useless consequent upon the absence of partition before the Act came into force and by reason of

the subsequent birth of male issues in the family, that though Abdul Sattar Sait was governed by the Hindu law at the time of his birth, the Muslim

personal law became applicable to him after the coming into force of the Cutchi Memons Act, 1938, that under the provisions of the Act the

Muslim personal law was applicable at the time when the deceased died and that, therefore, the entire estate passed on the death of the deceased

in this case. It was further contended by the Revenue that under the Shariat Act of 1937, Abdul Sattar Sait succeeded to the property of the

deceased only in accordance with the Mahomedan law and that the right that was preserved under s. 3 of the Cutchi Memons Act, 1938, was

only the right to partition.

The accountable person, on the other hand, contended that the Cutchi Memons Act, 1938, preserved the right of Abdul Sattar Sait acquired by

him before the commencement of the said Act, but on the coming into force of the said Act, there was, as it were, a division in status between the

deceased and Abdul Sattar Sait and that, therefore, only half the estate passed on the death of the deceased. It was also pointed out by the

accountable person that the provisions of the Shariat Act of 1937 did not touch any coparcenary right.

The Appellate Tribunal considered the rival contentions and took the view that only the provisions of the Cutchi Memons Act, 1938, had to be

considered for the purpose of this case, that the provisions of the Shariat Act will not apply, that as Abdul Sattar Sait was born on June 11, 1938,

before November 1, 1938, when the Cutchi Memons Act of 1938 came into force, he had a right by birth to a half share in the properties of the

joint family consisting of the deceased and Abdul Sattar Sait, and that right stood preserved under s. 3 of that Act, that the mere fact that four sons

were born to the deceased after the coming into force of the Act will not result in the divestiture of the half share of Abdul Sattar Sait which he had

acquired by birth and, therefore, Abdul Sattar Sait was entitled to a half share in the joint family properties and that the said half share cannot be

taken to be property passing on death of the deceased. According to the Tribunal, on the passing of the Cutchi Memons Act, 1938, there is a

severance of joint status as between the deceased and his eldest son, Abdul Sattar Sait and, therefore, Abdul Sattar Sait was entitled to receive his

share in the joint family properties as it stood on the date of the coming into force of the Act.

Aggrieved by the decision of the Tribunal the Revenue has obtained a reference on the above common question of law. The question referred to

above involves the application of the provisions of the Cutchi Memons Act, 1938, to the facts of this case. Prior to 1920 a Cutchi Memon was

governed by Hindu law in matters of succession and inheritance. Then came the Cutchi Memons Act, 1920, and this Act gave option to a Cutchi

Memon to declare himself to be governed by the Mahomedan law and in exercising the option, not only he, but his minor children and their

descendants would be governed by Mahomedan law in this respect. Thereafter under the Shariat Act of 1937, a Cutchi Memon was governed by

the Mahomedan law in the matter of intestate succession and to testate succession he would be subject to that law if he made the necessary

declaration under s. 3 of the said Act. Under the Cutchi Memons Act, 1938, a Cutchi Memon was governed by Mahomedan law in all matters of

succession and inheritance. At the time of passing of the Cutch Memons Act of 1938 which came into force on November 1, 1938, the deceased,

Abdul Razack, had a son, Abdul Sattar. It is not in dispute in this case that both of them constituted a joint family at the time when the said 1938

Act came into force.

According to the accountable person, on the date of the death of the deceased, the property was owned by the deceased and his five sons and,

therefore, the deceased''s 1/6th share alone will pass on death. In any event, prior to the date of the commencement of the Act, Hindu las of

inheritance and succession applied to the deceased as well as his son, Abdul Sattar Sait, who had then been born and as such they were each

entitled to a half share in the joint family properties and that is saved by the provisions of s. 3 of the 1938 Act. Therefore, on the death of the

deceased it is only his half share that should be taken to have passed on death.

According to the Revenue the deceased''s eldest son, Abdul Sattar Sait, though as a coparcener had a right to seek partition before the

commencement of the 1938 Act, his share did not get crystallized and, therefore, such an undefined and indefinite right is not saved by s. 3 of the

Act and the right of Abdul Sattar Sait by birth will get protection under s. 3 only when it gets crystallized by a partition and, therefore, the entire

property which is inherited by all the five sons after the death of the deceased should be taken to have passed on death.

Section 2 of the 1938 Act provided that all Cutchi Memons, subject, however, to the provisions of s. 3, shall, in matters of succession and

inheritance, be governed by the Mahomedan law. Section 3, subject to which s. 2 applied, is a saving provision and it provides that nothing in the

Act shall affect any right or liability acquired or incurred before its commencement or any legal proceeding or remedy in respect of any such right

or liability; and any such legal proceeding or remedy may be continued or enforced as if this Act had not been passed. According to s. 2, after

November 1, 1938, all Cutchi Memons would be governed in matters of succession and inheritance only by Mahomedan law. But this is subject to

s. 3. Section 3, however, saves any right or liability acquired or incurred before the Act. The question is what is the right that had been acquired by

Abdul Razack and Abdul Sattar Sait, who were the only two coparceners on November 1, 1938, the date of the commencement of the Act,

under the Hindu law. On the date when the Act came into force the son had a right by birth and he has become a coparcener with his father. Each

of the coparceners had a right to claim a half share in the joint family properties before November 1, 1938. Though the Act does not expressly say

that there will be a deeming partition between the two coparceners on the date of the Act, a conjoint reading of ss. 2 and 3 would indicate that for

purposes of applying s. 2 and for determinig the properties to which the Mahomedan law of inheritance and succession would have to be applied,

a notional partition has to be assumed on the date of the Act. Further, unless there is a partition and the shares of the coparceners get crystallized,

s. 2 cannot be applied. Thus, on the commencement of the Act, both the father and the son became entitled to a half share each in the properties

and that right to half share is saved by s. 3 of the Act. This view gets support from the decision of the Supreme Court in The Controller of Estate

Duty Mysore, Bangalore Vs. Haji Abdul Sattar Sait and Others, . In that case a Muslim who belonged to the Cutchi Memon sect, died in 1955

possessed of properties, most of which were acquired by his ancestors. He had two sons born long before 1948. The authorities under the E.D.

Act sought to levy estate duty on the entire estate whereas the sons of the deceased claimed that the properties had come to them under the Hindu

law rule of devolution by survivorship and, therefore, only 1/3rd of the properties, that is the undivided share of the deceased, could properly be

said to have passed to them on his death and be assessable under the E.D. Act of 1953. The Supreme Court held that as the parties being Cutchi

Memons were governed in matters of property, succession and inheritance by the rules of Hindu law including the rules as to joint family property,

its distribution according to the rule of survivorship and the right of the son in it by birth, that the accountable persons having been born before

1948 when the Cutchi Memons Act of 1938 was extended to Bangalore where the parties lived, had already acquired a right by birth in the

property held by their father, that such right had expressly been saved by s. 3 of that Act, and that their interest in the property could not,

therefore, pass to them on the death of their father as envisaged by the E.D. Act and, therefore, only 1/3rd of the properties which was the share

of the deceased could be properly said to have passed to the accountable persons on the death of their father. The principle laid down in the said

case squarely applies to the facts of this case. As Abdul Sattar Sait, the eldest son of the deceased was born before 1938, his right by birth to a

half share in the joint family properties which existed on the date of the commencement of the Act is saved by s. 3 of the Act and, therefore, that

share cannot be taken to have passed on the death of the deceased.

The learned counsel for the Revenue, however, submits that the right of a coparcener to a share in the coparcenary property will get

crystallized only if a partition takes place and that an indefinite and oscillating right could not be taken to have been saved by s. 3 and, therefore,

the entire property should be deemed to have passed on the death of the deceased. It is also pointed out by the Revenue that the Cutchi Memons

Act of 1938 does not bring about a notional partition between the coparceners on the date of the coming into force of the Act so that it could be

said that the shares of the coparceners have crystallized on the date of the Act and this aspect of the matter has not been considered by the

Supreme Court in the above decision. It is no doubt true that this aspect of the matter does not appear to have been considered by the Supreme

Court. However, the said decision of the Supreme Court on almost similar facts binds this court. In the case before the Supreme Court the two

sons of the deceased were born before the date of the extension of the Cutchi Memons Act, 1938, to Bangalore Cantonment area in which they

lived. There also there was no partition between the coparceners. However, each of the sons was held entitled to an undivided 1/3rd share on the

date of the application of the Cutchi Memons Act and that right was held to have been saved by s. 3 of that Act and it is in this view that the

Supreme Court held the sons'' interest in the property on the date of the commencement of the Act cannot be taken to have passed on the death of

the deceased.

Therefore, following the said decision of the Supreme Court, we have to hold in this case that on the date of the commencement of the Cutchi

Memons Act, 1938, Abdul Sattar Sait has acquired a half share in the joint family properties by birth as per the Hindu law of inheritance and

succession and that right stood expressly saved by s. 3 of that Act. The result is that only the other half share which belonged to the deceased at

the time when the Act came into force that should be taken to have passed on death. We have to, therefore, uphold the view taken by the Tribunal

in this case.

The question referred to us is answered in the affirmative and against the Revenue. The accountable person will have his costs from the

Revenue. Counsel''s fee Rs. 500.