Vildirect: IncomeTax-caselaws-1981-VIL-612-GUJ-DT

1981-VIL-612-GUJ-DT

Equivalent Citation: [1982] 136 ITR 422, 7 TAXMANN 260

GUJARAT HIGH COURT

Date: 22.04.1981

RAMNIKLAL J., DAFTARY

CONTROLLER OF ESTATE DUTY, GUJARAT

BENCH

Judge(s) : M. P. THAKAR., R. C. MANKAD

JUDGMENT

The judgment of the court was delivered by

MANKAD J.-The two questions which are referred to us for our opinion arise oat of the estate duty proceedings in respect of the estate of J. K. Daftary (hereinafter referred to as the " deceased ") who died on April 3, 1971. The deceased was a coparcener in the Hindu undivided family (hereinafter referred to, as the " HUF "), consisting of himself and his son, Ramniklal J. Daftary, who, is the accountable person. In the course of the assessment proceedings, one of the questions which arose was whether the value of the share of the lineal descendant of the deceased was includible in the dutiable estate for rate purposes under s. 34(1)(c) of the E D. Act, 1953 (hereinafter referred to as " the Act"). The Incometax Appellate Tribunal, agreeing with the view taken by the Asst. Controller and the Appellate Controller, held that on the death of the deceased who was a coparcener in the Mitakshara Hindu family, his interest ceased under s. 7 of the Act and that the value of the interest of the lineal descendant of the deceased in the joint family property was includible in the dutiable estate for rate purposes under s. 34(1)(c) of the Act. The accountable person has challenged the view taken by the Tribunal, and at his instance, the following two questions are referred to us for our opinion under s. 64(1) of the Act:

" (1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that on the death of the deceased who was a coparcener in a Mitakshara Hindu joint family, his interest ceased under section 7 of the Estate Duty Act?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest of the lineal descendants of the deceased in the joint family property should be taken for rate purposes under section 34(1)(c) of the Estate Duty Act ? "

Mr. K. C. Patel, learned counsel for the accountable person, did not dispute that the deceased was a coparcener in an HUF governed by the Mitakshara law. Besides having interest in the property owned by the HUF, the deceased did not own any other property. Mr. Patel contended that under the proviso to s. 6 of the Hindu Succession Apt, 1956, when Hindu male dies leaving him surviving a female relative specified in class of the Schedule or a male relative specified in that class Who claims through such female relative, his interest in the Mitakshara coparcenary property shall devolve by testamentary or intestate succession, as the case may be, under the said Act and not by survivorship. Mr. Patel pointed out that under Expln.1, for the purpose of s. 6, the interest of a Hindu Mitakshara coparcener shall be deemed to be the share in the property that would have been allotted to him if the partition of the property has taken place immediately before his death, irrespective of whether he was entitled to claim partition or not. Now, there is nothing on the record to show whether in the instant case the deceased had left him surviving a female relative specified in class I of the Schedule or a male relative specified in that class who claims through such female relative. It, however, appears the Tribunal has proceeded to resolve the controversy raised before it on the basis that the proviso to s. 6 of the Hindu Succession Act was attracted. In other words, the Tribunal proceeded to examine the question raised before it on the assumption that the deceased had left him surviving female relative specified in class I of the Schedule or a male relative specified in that class who claims through such relative. Mr. Patel argued that since the interest of the deceased in the HUF devolved under the proviso to s. 6 of the Hindu Succession Act, such interest is a property which passes on his death as laid down under s. 5 of the Act. It was not a case of cesser of the interest of the deceased which will attract the provisions of s. 7 of the Act. Mr. Patel's argument was that s. 34(1)(c) would be attracted only in a case where the property is deemed to pass on the death of the deceased under s. 7 of the Act. It was argued that in view of Expln. I to s. 6 of the Hindu Succession Act, it should be presumed that there was an actual partition of the properties of the HUF immediately before the death of the deceased and if such a presumption is raised what passes on the death of the deceased is his defined share and not the coparcenary interest in the property of the HUF. Section 34(1)(c) of the Act, the argument ran, applied only in case where the coparcenary interest of the deceased passes on death and such being not the position after the coming into force of the Hindu Succession Act, the said provision did not apply. Therefore, according to Mr. Patel, the value of the share of the lineal descendant was not includible in the dutiable estate for rate purposes under the said provision.

Section 6 of the Hindu Succession Act, on which strong reliance was placed by Mr. Patel, reads as under:

" 6. When a male Hindu dies after the commencement of this Act, having at the time of his death an interest in a Mitakshara coparcenary property, his interest in the property shall devolve by survivorship upon the surviving members of the coparcenary and not in accordance with this Act:

Provided that, if the deceased had left him surviving a female relative specified in class I of the Schedule or a male relative, specified in that class who claims, through such female relative, the interest of the deceased in the Mitakshara coparcenary property shall devolve by testamentary or intestate succession, as the case may be, under this Act and not by survivorship.

Explanation 1.-For the purposes of this section, the interest of Hindu Mitakshara coparcener shall be deemed to be the share in the property that would have been allotted to him if a partition of the property had taken place immediately before his death, irrespective of whether he was entitled to claim partition or not.

Explanation 2.-Nothing contained in the proviso to this section shall be construed as enabling a person who has separated himself from the coparcenary before the death of the deceased or any of his heirs to claim on intestacy a share in the interest referred to therein. "

Section 6 provides for a devolution of the interest in a coparcenary property. Mr. Patel does not dispute that it is under the provisions of s. 6 that the interest of the deceased in the HUF property devolved. If that be so, we fail to see how, with the aid of Expln. 1, it can be argued that what devolved was not a coparcenary interest. Two questions become pertinent, namely, (i) What passed on the death of the deceased ? Was it coparcenary interest ? and (ii) What was the value of the interest and how is it to be computed ? The answer to the first question is obvious. What passes is the coparcenary interest of the deceased. And once this answer stares us in the eye, no other problem remains to be considered for the applicability of s. 34(1)(c) of the Act. The next question which crops up is: What exactly is the quantum of what has passed? How to quantify it? How to compute it ? How to value it ? And it is this dimension of the second question which is dealt with in Expln. appended to s. 6. A fiction or a workable formula is evolved thereby for the limited purpose of quantification or ascertainment in order to spell out what is to be computed, how. The aid of Expln. I is to be taken only in order to ascertain the share or interest of the deceased coparcener in the coparcenary property. Explanation I to s. 6 resorts to the simple expedient, undoubtedly fictional, that the interest of a Hindu Mitakshara coparcener "shall be deemed to be" the share in the property that would have been allotted to him if a partition of that property had taken place immediately before his death. What is, therefore, required to be assumed and assumed for the limited purpose demarcated hereinabove, is that a partition had in fact taken place between the deceased and his coparceners immediately before his death. It is for the limited purpose of ascertaining the share of the deceased in the coparcenary property that Expln. I to s. 6 of the Hindu Succession Act comes into play. We are, however, unable to see any force in Mr. Patel's argument that as a result of the Expln. I what devolves is not the coparcenary interest of the deceased (though s. 6 in terms says so) but his defined share on the assumption (which is made, to compute the extent of coparcenary interest which has devolved) that there was a, actual partition. We do not agree that actual partition of the property of the HUF must be assumed to have taken place immediately before the death of the deceased (to do so would be to re-write s. 6) and it must further be assumed that it was the share which the deceased received at such partition which devolved on his heirs under the proviso to s. 6. We cannot do so, for, s. 6 in terms says that what p is coparcenary interest and the Explanation to s. 6 merely explains how to ascertain the coparcenary share by recourse to the fiction. There is, therefore, no doubt that what devolved under the proviso to s. 6 was the coparcenary share of the deceased.

For the purpose of s. 34(1)(c) of the Act, we may hasten to add, it is immaterial whether the property passes as laid down under s.5 of the Act or is deemed to pass under s. 7 of the Act. Section 34(1)(c) of the Act, in so far as is relevant, reads as under :

"34. Aggregation.-(1) For the purpose of determining the rate of the estate duty to be paid on any property passing on the death of the deceased,-...

(c) in the case of property so passing which consists of a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law, also the interests in the joint family property of all the lineal descendants of the deceased, member;

shall be aggregated so as to form one estate and estate duty shall be levied thereon at the rate-or rates applicable in respect of the principal value thereof."

In order to attract the application of s. 34(1)(c) what is necessary to establish is that the property passing on death includes a coparcenary interest in the joint family property. If the coparcenary interest of the deceased passes on his death whether under s. 5 or under s. 7 of the Act, the interest of the lineal descendants of the deceased in the joint family property have to be aggregated so as to form one estate for the purpose of determining the rate of estate duty. It is, therefore, not relevant whether the coparcenary interest of the deceased passes under s. 5 or s. 7 of the Act. In the instant case, the coparcenary interest of the deceased did pass on his death whether under s. 5 or under s. 7 of the Act and, consequently, the provisions of s. 34(l )(c) are attracted. Therefore, in determining the rate of estate duty to be paid on the property passing on the death of the deceased, the value of the share of the lineal descendant of the deceased is includible in the dutiable estate. In the view which we are taking, we do not consider it necessary to answer question No. 1 referred to us for our opinion. Even if the coparcenary interest of the deceased passed on the death of the deceased as laid down under s. 5 of the Act, it must be held that the Tribunal was justified in holding that the interest of the lineal descendant of the deceased in the joint family property shall have to be taken into account for rate purposes as provided in s. 34(1)(c) of the Act.

In the result, we answer the questions as follows:

----------------------------------------------------------------------------------------------------------------------------------------------------

QUESTIONS ANSWERS

----------------------------------------------------------------------------------------------------------------------------------------------------

1. Whether, on the facts and in Not necessary to answer.

the circumstances of the case, the

Tribunal was justified in holding that

on the death of the deceased who was

a coparcenary in a Mitakshara Hindu

joint family, his interest ceased under

section 7 of the Estate Duty Act ?

2. Whether, on the facts and in In the affirmative and against

the circumstances of the case, the the accountable person.

Tribunal was justified in holding that

interest of the lineal descendants of

deceased in the joint family property

should be taken for rate purposes

under section 34(1)(c) of the Estate

Duty Act ?

Reference answered accordingly with no order as to costs.

DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that VATinfoline Multimedia is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.