Dulari Devi vs Controller of Estate Duty

G.B. Patnaik, J.—On an application being filed under sub-section (3) of section 64 of the Estate Duty Act, 1953 (''the Act'') by the persons

held to be accountable, after their application under sub-section (1) thereof was rejected by the Tribunal, the High Court directed the Tribunal to

draw up a statement of case and refer the following question of law:

Whether the Tribunal is correct in distinguishing the decision in Gurupad Khandappa Magdum Vs. Hirabai Khandappa Magdum and Others, to

hold that the property of the deceased passed to the assessee was not inherited by them?

The question, thus, posed has not properly been framed, and accordingly, after hearing the learned counsels for the parties, we reframe the

question as follows:

Whether the Tribunal was right in distinguishing the decision in Gurupad Khandappa Magdum Vs. Hirabai Khandappa Magdum and Others, in

arriving at the conclusion that on the death of deceased Ramraja Ram, the entire HUF property passed to his heirs and is, thus, includible in the

dutiable estate?

The brief facts of the case are that late Ramraja Ram was the karta of HUF consisting of himself and his three wives, and he had all along been

assessed to income tax as well as wealth-tax in the capacity of karta of HUF. After his death, the accountable persons took the stand before the

Assistant Controller that the deceased Ramraja Ram had only one-fourth share in the property which passed on his death to the accountable

persons and, therefore, the estate duty is leviable only on the said one- fourth interest. The Assistant Controller, relying upon a decision of this

Court in Commissioner of Income Tax Vs. K. Satyanarayan Murty, came to hold that the property belonging to the HUF consisting of a single

male member and other family members is coparcenary property and, therefore, on the death of Ramraja Ram, the entire property passed to the

heirs. He also came to the conclusion that since the deceased Ramraja Ram was the only coparcener, there could not be any notional partition of

the HUF property. Accordingly, the entire HUF property would be dutiable estate. On appeal by the accountable persons, the appellate authority

dismissed the appeal and confirmed the order of the Assistant Controller. A second appeal had been preferred to the Tribunal, and the Tribunal

also dismissed the second appeal and rejected the contentions raised on behalf of the accountable persons. The Tribunal was of the view that even

though there is no dispute that the property belonged to the HUF of which the deceased was the sole coparcener and other members of the HUF

were his three wives, yet since the deceased was entitled to dispose of the entire HUF property as if it was his own property, the entire property

passed on the death of the deceased u/s 6 of the Act. The Tribunal also came to the conclusion that it was unnecessary to take recourse to any

deeming provision. Though the accountable persons relied upon the decision of the Supreme Court in Gurupad Khandappa Magdum Vs. Hirabai

Khandappa Magdum and Others, the Tribunal came to hold that the said decision has no application to the facts of the case. Ultimately, the

Tribunal having dismissed the second appeal, an application for making a reference under sub-section (1) of section 64was filed and that having

been rejected, the jurisdiction of this Court was invoked under sub-section (3) of section 64 and final by pursuant to the direction of this Court, the

Tribunal has made a statement of case and submitted the same for opinion of the Court on the question of law as already stated.

Mr. Mohapatra, the learned counsel appearing for the petitioners, contends that in view of Explanation 1 to section 6 of the 1956 and section

39(1) of the Estate Duty Act, in case of the death of a member of the HUF, the value of the share of the deceased in such joint family property

which would have been allotted to him had there been a partition immediately before his death, would be taken to be the value of his interest in the

joint family property ceasing on death and, therefore, that portion of the property, which would have fallen to the share of the deceased in the event

of a partition of the family taking place immediately before the death, would be deemed to be the interest of the deceased in the joint family

property. The Tribunal, therefore, committed error in directing that the entire property of the deceased would pass. The learned standing counsel

for the department, on the other hand, contended that even though the property was treated to be the property of the HUF both under the income

tax Act, 1961 as well as the Wealth-tax Act, 1957 and the HUF consisted of deceased Ramraja Ram and his three wives, but on death of

Ramraja Ram the entire property must be deemed to have passed since Ramraja Ram had unfettered power and competence to dispose of the

entire property at the time of his death as is apparent from section 6 and, therefore, the Tribunal rightly rejected the petitioner''s contention. In

order to appreciate the correctness of the rival submissions, it would be appropriate for us to notice certain provisions of the Act itself. Section 5

of the Act provides for levy of estate duty which is the charging section. u/s 5 the duty is levied on a person dying after the commencement of the

Act and levy is based on the principal value of the property, which property either passes or is deemed to pass after the death of such a person.

u/s 6 the property which the deceased was competent at the time of his death to dispose of shall be deemed to pass. In fact sections 6 to 16 of the

Act define and describe what is the property which is deemed to pass. Part V of the Act containing sections 36 to 43 provides as to how the

principal value of any property shall be estimated. Section 39 deals with the mode of valuation of interest in coparcenary property ceasing on

death. Section 39(3) of the Act provides that for the purpose of estimating the principal value of the joint family property of a Hindu family

governed by the Mitakshara law in order to arrive at the share which would have been allotted to the deceased had a partition taken place

immediately before his death, the provisions of the Act, so far as may be, shall apply as they would have applied if the whole of the joint family

property had belonged to the deceased. For better appreciation of the point in issue, section 39 is extracted herein below in extenso:

Valuation of interest in coparcenary property ceasing on death. -(1) The value of the benefit accruing or arising from the cesser of a coparcenary

interest in any joint family property governed by the Mitakshara School of Hindu Law which ceases on the death of a member thereof shall be the

principal value of the share in the joint family property which would have been allotted to the deceased had there been a partition immediately

before his death.

(2) The value of the benefit accruing or arising from the cesser of an interest in the property of a tarwad or tavazhi governed by the

Marumakkattayam rule of inherintance or of a kutumba or kavaru governed by the Aliyasantana rule of inheritance which ceases on the death of a

member thereof shall be the principal value of the share in the property of the tarwad or tavazhi or, as the case may be, the kutumba or kavaru

which would have been allotted to the deceased had a partition taken place immediately before his death.

(3) For the purpose of estimating the principal value of the joint family property of a Hindu family governed by the Mitakshara, Marumak kattayam

or Aliyasantana law in order to arrive at the share which would have been allotted to the deceased had a partition taken place immediately before

his death, the provisions of this Act, so far as may be, shall apply as they would have applied if the whole of the joint family property had belonged

to the deceased.

That Ramraja Ram and his three wives constituted a joint Hindu family and the property in the hands of Ramraja Ram was being taxed as HUF

property both for the purpose of income tax and wealth-tax is not disputed. But the authority under the Act as well as the Tribunal being of the

opinion that the sole surviving coparcener can dispose of the entire HUF property as if it was his own property and applying section 6, held that

there is no necessity to take recourse to any deeming provision and the decision of the Supreme Court in Gurupad Khandappa Magdum''s case

(supra) has no application. The Assistant Controller, however, solely relying upon Bench decision of this Court in K. Satyanarayan Murty''s case

(supra) came to hold that the status of a coparcener in a single coparcenary HUF is that of an individual and, therefore, though Ramraja Ram and

his three wives constituted the HUF yet it is Ramraja Ram as karta who had possessed the right to dispose of the entire property and,

consequently, on his death, the entire property must be deemed to have passed and as such, is dutiable. At the outset, it may be stated that the

Bench decision of this Court in K. Satyanarayan Murty''s case (supra) has at all no application to the case in hand. The question for consideration

before the Court in K. Satyanarayan Murty''s case (supra) was whether in respect of a business when HUF was the owner and one of the partners

claiming to be the karta of the HUF claimed partition and partial partition of the HUF business was allowed, then the property coming into the

hands of the said karta would be his personal property or joint family property. This Court answered the aforesaid question by holding that the said

property became his personal property and had no longer the incidence of joint family character. We really fail to understand how the aforesaid

decision can be the basis for the conclusion of the Assistant Controller that on the death of Ramraja Ram the entire property must be deemed to

have passed and, therefore, is dutiable u/s 5. The expression, ''Hindu undivided family'' for the purpose of the income tax Act, or the Wealth-tax

Act, or the Estate Duty Act, is not coterminus with a Hindu coparcenary. The said expression ''Hindu undivided family'' is used in the sense in

which it is understood in the personal laws of Hindus. That means, a joint family may consist of a single male member, wife and daughters, and

there is no embargo either under the income tax Act, or the Wealth-tax Act or Estate Duty Act, to suggest that unless there is more than one male

member, there cannot be an assessable unit of HUF. In this connection, the decision of the Supreme Court in the case of N.V. Narendranath Vs.

Commissioner of Wealth-tax, Andhra Pradesh, , as well as in the case of C. Krishna Prasad Vs. Commissioner of Income Tax , Bangalore, be

seen. In Gurupad Khandappa Magdum''s case (supra) on which the petitioners placed reliance before the Tribunal, and the Tribunal did not rely

upon it, the question that arose for consideration was as to what would be the share of the heirs in coparcenary property on the death of a

coparcener. The Supreme Court, therefore, considered Explanation 1 to section 6 of the Hindu Succession Act, and came to hold that the share of

the heirs must be ascertained on the basis that they had separated from one another and had received a share in the partition which had taken place

during the lifetime of the deceased. Their Lordships ultimately held that the heir will get his or her share in the interest which the deceased had in the

coparcenary property at the time of his death, in addition to the share which he or she received or must be deemed to have received in the notional

partition. The provisions of subsection (1) of section 39 came up for consideration in the case of Controller of Estate Duty, Madras Vs. Alladi

Kuppuswamy, . After considering the scope and ambit of the provisions, their Lordships held that on the death of Smt. Alladi, her interest in the

HUF property passed to her three sons and the value of this interest being one-fourth, the heirs would be liable to pay estate duty on the value of

one-fourth share of the Hindu joint family property. In Controller of Estate Duty Vs. P.G. Chaware, the Division Bench of the Bombay High Court

considered directly the question which has been raised in the present case and came to the conclusion that in case of a Hindu joint family consisting

of deceased and his wife, on the death of the deceased who was the sole coparcener, then estate duty would be leviable on the value of the

property which the deceased would have got had there been a notional partition prior to his death by application of section 39(1). The learned

standing counsel for the income tax Department vehemently argued that the aforesaid decision does not lay down the correct position and has

ignored to take note of the provisions of section 6, but we are unable to persuade ourselves to agree with this submission of the learned standing

counsel. Since Ramraja Ram and his three wives constituted the HUF and the property were being assessed for the purpose of income tax and

wealth-tax as HUF property. On the death of Ramraja Ram it is his interest in the property which would be leviable to duty, and in the event of a

partition between Ramraja Ram and his three wives prior to the death of Ramraja Ram, Ramraja Ram would have got eight annas interest.

Consequently, it is that interest of Ramraja Ram which must be deemed to have passed and as such, is leviable to duty under the Act. In the

circumstances, our answer to the question reframed by us is that the Tribunal was not right in distinguishing the Gurupad Khandappa Magdum''s

case (supra) and the conclusion of the Tribunal that the entire HUF property of Ramraja Ram was includible in the dutiable estate is wholly

unsustainable. We further hold that it is only the eight annas interest of Ramraja Ram in the property which would be includible in the dutiable

estate.

The reference is answered accordingly.

Issrani, J.

I agree.