Punjab-Haryana High Court
Smt. Asha Rani vs Controller Of Estate Duty on 23 July, 1997
Equivalent citations: [1998]229ITR430(P&H)
Author: Ashok Bhan
Bench: Ashok Bhan
JUDGMENT Ashok Bhan, J.
1. The ticklish question of law reproduced below, which has been referred to us at the instance of the assessee by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal") under Section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as "the Act"), has evoked divergent and diametrically different views from different High Courts of the country :
"Whether, in view of the facts and circumstances of the case, the Tribunal was legally justified in holding that the entire value of the properties belonging to the Hindu undivided family was assessable to estate duty on death of Shri Telu Ram, karta and sole surviving coparcener of his Hindu undivided family ?"
2. One Telu Ram, the sole surviving coparcener, who constituted a Hindu undivided family (hereinafter referred to as "Hindu undivided family") with his wife, died on January 27, 1977. The wife, being the accountable person, after issuance of statutory notice, filed the estate duty return contending that the properties, both movable and immovable, were ancestral and the deceased who was governed by the Mitakshara school of Hindu law constituted a Hindu undivided family with his wife. It was claimed that half portion of the properties belonged to her and, therefore, only half of the Hindu undivided family properties should be included in the estate passing on the death of the deceased. The Assistant Controller of Estate Duty found that the deceased was the sole surviving coparcener at the time of his death. He was competent to dispose of the whole of the properties. The wife was entitled to claim maintenance only and could not claim partition of the Hindu undivided family properties. The Assistant Controller of Estate Duty held that the whole of the properties passed on the death of the deceased and, therefore, included the entire estate of the deceased for levy of the estate duty.
3. The accountable person carried an appeal to the Controller of Estate Duty (Appeals) who agreed with the conclusions of the Assistant Controller of Estate Duty. It was held that the deceased, being the sole surviving coparcener, had the right to dispose of the properties within the meaning of Section 6 of the Act. The wife could not claim partition and the provisions of the Hindu Succession Act, 1956 (hereinafter referred to as "the Act of 1956"), could not be helpful in determining the question of power of disposal of the properties by the sole surviving coparcener. The appeal was dismissed.
4. In further appeal before the Tribunal, it was held that Sections 7 and 39 of the Act had no application and the whole of the properties passed on the death of the deceased under the provisions of Section 6 of the Act. It was also held by the Tribunal that the provisions of the Act of 1956 had no relevance for deciding the issue under consideration. The plea raised and the appeal filed by the accountable person were rejected.
5. Mr. A. K. Mittal, learned counsel appearing for the accountable person, relying upon the decisions of the Bombay and Orissa High Courts in CED v. P. G. Chaware [1993] 204 ITR 513 and Dulari Devi v. CED [1995] 211 ITR 524, respectively, vehemently contended that there can be a Hindu joint family consisting of the sole coparcener with his wife. In the event of the death of either one of them, for computing the interest of the deceased in the Hindu undivided family properties, Section 39 of the Act would apply and only that portion of the properties which would fall to the share of the deceased on a notional partition under Section 6 of the Act of 1956 immediately before the death of the deceased, would be the interest which would pass on the death of the deceased. Under Section 39(1) of the Act, there has to be a deemed partition for determining the share of the deceased in the Hindu undivided family property.
6. As against this, Mr. B. S. Gupta, senior advocate, appearing for the Department, with equal emphasis, relying upon the text of the Hindu law and the judgments in CED v. Smt. P. Leelavathamma [1978] 112 ITR 739 (AP), CED v. Smt Ginni Devi Jain [1993] 204 ITR 110 (Patna), CED v. Smt. S. Harish Chandra [1987] 167 ITR 230 (All), CED v. Smt Kalawati Devi [1980] 125 ITR 762 (All), Ramratan v. CED [1983] 142 ITR 863 (MP) [FB] and P. Amirthavalli v. CED [1987] 164 ITR 63 (Mad), contended that though a wife can constitute a Hindu undivided family which is a taxable unit under the Income-tax Act, 1961, without there being two male members in the family, none the less, she cannot claim partition of the Hindu undivided family. Only a coparcener could claim partition of the ancestral property. The wife has a right of maintenance only from the husband. The sole surviving coparcener, has the absolute right over the property which he can dispose of as his self-acquired property. On his death, the whole of the property possessed by the Hindu undivided family passes for the purposes of estate duty. It was argued that the Tribunal has taken the correct view and the question be answered in the affirmative, i.e., in favour of the Revenue. It was also argued by him that the Bombay and Orissa High Courts in P. G. Chaware's case [1993] 204 ITR 513 and Dulari Devi's case [1995] 211 ITR 524, respectively, have not taken the correct view and commended to us the contrary view taken by the other High Courts in Smt. P. Leelavathamma's case [1978] 112 ITR 739 (AP), Smt. Ginni Devi Jain's case [1993] 204 ITR 110 (Patna), Smt, S. Harish Chandra's case [1987] 167 ITR 230 (All), Smt. Kalawati Devi's case [1980] 125 ITR 762 (All), Ramratan's case [1983] 142 ITR 863 (MP) [FB] and P. Amirthavalli's case [1987] 164 ITR 63 (Mad).
7. Sections 6, 7 and 59 of the Estate Duty Act, 1953, which would be relevant to the discussion, are reproduced below :
"Section 6. Property within disposing capacity,--Property which the deceased was at the time of his death competent to dispose of shall be deemed to pass on his death.
Section 7. Interest ceasing on death.--(1) Subject to the provisions of this Section, property in which the deceased or any other person had an interest ceasing on the death of the deceased shall be deemed to pass on the deceased's death to the extent to which a benefit accrues or arises by the cesser of such interest, including, in particular, a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasanthana law.
(2) If a member of a Hindu coparcenary governed by the Mitakshara school of law dies, then the provisions of Sub-section (1) shall apply with respect to the interest of the deceased in the coparcenary property only-
(a) if the deceased had completed his eighteenth year at the time of his death, or
(b) where he had not completed his eighteenth year at the time of his death, if his father or other male ascendant in the male line was not a coparcener of the same family at the time of his death.
Explanation. --Where the deceased was also a member of a sub-coparcenary (within the coparcenary) possessing separate property of its own, the provisions of this Sub-section shall have effect separately in respect of the coparcenary and the sub-coparcenary.
(3) If a member of any tarwad or tavazhi governed by the Marumakkattayam Rule of inheritance or a member of a kutumba or kavaru governed by the Aliyasantana Rule of inheritance dies, then the provisions of Sub-section (1) shall not apply with respect to the interest of the deceased in the property of the tarwad, tavazhi, kutumba or kavaru, as the case may be, unless the deceased had completed his eighteenth year.
(4) The provisions of Sub-section (1) shall not apply to the property in which the deceased or any other person had an interest only as holder of an office or recipient of the benefits of a charity or as a corporation sole.
Explanation.--For the removal of doubts, it is hereby declared that the holder of a sthanam is neither the holder of an office nor a corporation sole within the meaning of this Sub-section.
Section 39. 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 Marumakkatayam Rule of inheritance 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, Mamma-kkattayam or Aliyasanatana 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."
8. Section 6 of the Hindu Succession Act, 1956, is also reproduced below, as reference would be made to it in the later discussion :
"Section 6. Devolution of interest in coparcenary property,--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 surviorship 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 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 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."
9. In P. G. Chaware's case [1993] 204 ITR 513, the Bombay High Court in the case of a Hindu undivided family consisting of the sole surviving coparcener and his wife, on consideration of Section 39 of the Act, held (page 516) :
"In the instant case, factually, there is no dispute that there was a joint Hindu family consisting of the deceased and his wife. The deceased was the sole coparcener and his wife a member of the said Hindu undivided family. Each one of them had an equal interest in the properties of the said joint family. In the event of partition, the deceased would have been entitled only to one-half of the property as his share. If that be so, Section 39(1) would be clearly attracted and, on the death of the deceased, only a half share of the family property would be deemed to pass. The Assistant Controller of Estate Duty does not appear to be correct in taking the view that though there might be a Hindu undivided family consisting of the deceased and his wife, on the death of the deceased, the whole property will pass. He also does not appear to be right in holding that there cannot be a valid partition between a single male coparcener and his wife. There is no dispute in regard to the legal proposition that, in a joint Hindu family, the wife who is a member is entitled to get a share as and when a partition is effected. The only restriction is that she herself is not entitled to claim a partition. But, in the event of a partition taking place, she cannot be denied her share. If that be so, it is not understandable how Section 39{1) will not be attracted. Section 39(1) visualises a deemed partition immediately before the death of the deceased and determination of the share of the deceased consequent to such partition. It is the share of the deceased determined in such manner which will be taken as his interest in the joint family property that ceased on his death. The Appellate Controller of Estate Duty, therefore, seems to be correct in holding that only a half share of the joint family property could be included in the estate of the deceased. The Tribunal was justified in upholding this view."
10. Relying upon N. V. Narendranath v. CWT[1969] 74 ITR 190 (SC) and C. Krishna Prasad v. CIT [1974] 97 ITR 493 (SC), it was held that a single coparcener could form a Hindu undivided family with female members of the family. Further relying upon Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440 (SC) and CED v. Alladi Kuppuswamy [1977] 108 ITR 439 (SC), two judgments of the Supreme Court, it was concluded (page 522 of 204 ITR) : "On a careful consideration of the various decisions of the Supreme Court and the High Court referred to above, we are of the clear opinion that there can be a Hindu joint family consisting of a sole coparcener and his wife. That being so, in the event of the death of any one of them, for computing the interest of the deceased in the family property, Section 39 of the Estate Duty Act would apply and only 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. That being so, in the instant case, the Tribunal was right in holding that only a half share in the property of the deceased passed on his death."
11. It specifically dissented from the view taken by the Madhya Pradesh High Court in CED v. Smt. Rani Bahu [1983] 142 ITR 843 [FB] and Ramratan's case [1983] 142 ITR 863 (MP) [FB] and the Allahabad High Court in Smt. Kalawati Devi's case [1980] 125 ITR 762.
12. The Orissa High Court in Dulari Devi's case [1995] 211 ITR 524 took the same view as the Bombay High Court in P. G. Chaware's case [1993] 204 ITR 513. The judgment in P. G. Chaware's case [1993] 204 ITR 513 (Bom) was ndted but the judgments of the other High Courts taking the contrary view were not considered.
13. The Madhya Pradesh High Court in Ramratan's case [1983] 142 ITR 863 [FB], on somewhat similar facts, took the following view (page 866);
"The ownership in the property obtained by the deceased on partition was not shared by his wife although the deceased and his wife constituted a Hindu undivided family. The deceased had no son. There was thus no coparcener in his family excepting himself. The deceased was the sole coparcener in his family. Speaking generally, female members in a Hindu Undivided family have no ownership in the property belonging to the family. The ownership of such a property is held by a smaller body which is called the coparcenary and in case there is only one coparcener, it is he alone who owns the entire property. It is true that for the purposes of the assessment of income-tax, the status of the deceased was that of a Hindu undivided family as he and his wife constituted a family but different considerations prevail for finding out as to whether the entire property of the family or a share in it passed on the death of the deceased. As the entire ownership in the property vested in the deceased and as no part of it was shared by the wife who was the only other member in the family, the entire property passed on the death of the deceased within the meaning of Section 5 of the Act. The deceased being the sole coparcener had disposing power under the Hindu law in respect of the entire property and even under Section 6 of the Act the entire property would be deemed to have passed on his death for purposes of estate duty. Section 7 which applies when a coparcenary interest in a joint family property ceases on death and Section 39(1) which lays down the mode of valuation of such interest, can apply only when the joint family property is vested in more than one person. It is only then that an interest in the joint family property ceases on the death of a coparcener and the valuation of such an interest has to be ascertained on the basis of the principal value of the share which would have been allotted to the deceased had there been a partition immediately before his death. When the entire property vested in the deceased because the deceased was the sole coparcener, there is no question of any other person getting any interest or share on a notional division immediately before his death and Sections 7 and 39 have no application to such a case. As earlier stated, the whole of the property in such cases passes under Section 5 read with Section 6. The view that we have taken is fully supported by the decision of the Allahabad High Court in CED v. Smt. Kalawati Devi [1980] 125 ITR 762, with which we entirely agree."
14. The Allahabad High Court has consistently taken the same' view in Smt. Kalawati Devi's case [1984] 125 ITR 762, Smt. S. Harish Chandra's case [1987] 167 ITR 230 (All) and Smt. Rajni Bhargava v. CED [1991] 190 ITR 521 (All). It has been held in these judgments that a single male member in the family could constitute a Hindu undivided family with the female members and it is not necessary that there should be two male members to constitute a joint family. The last, male holder would have absolute power to dispose of the property and on his death the entire estate would pass to the accountable person. In Smt S. Harish Chandra's case [1987] 167 ITR 230 (All), it was also held that as there was no coparcenary in existence at the time of the death of the last male holder, a notional partition under Section 6 of the Act of 1956 could not, therefore, be assumed and the whole of his share of the original Hindu undivided family passed on his death to the accountable person.
15. Similarly, the Patna High Court in Smt. Ginni Devi Jain's case [1993] 204 ITR 110, on the same facts, has taken the following view (page 112):
"It is also well established that, in respect of ancestral properties, there can be a partition only between two surviving coparceners subject to the provisions contained in the Hindu Succession Act, 1956, conferring special rights which are not relevant for the present purpose. Therefore, even immediately before the death of the deceased, no partition was permissible between the deceased and his wife, Ginni Devi, It is well-
settled that, in a case like the present one, neither the wife can have any share nor could she sue for any share and, therefore, on the death of the sole surviving coparcener of a Hindu undivided family, the entire interest in the Hindu undivided family property passes to his heir. (See Smt. Rajni Bhargava v. CED [1991] 190 ITR 521 (All) and CED v. Smt. Kalawati Devi [1980] 125 ITR 762 (All))."
16. The Madras High Court in P. Amirthavalli's case [1987] 164 ITR 63 held (headnote) :
". . . that when the partition took place between the deceased and his son, the deceased's wife had no right to be allotted any share in the joint family property. Thereafter, in the said joint family, the only members were the deceased, his wife and one unmarried daughter and during the lifetime of the deceased, neither his wife nor the unmarried daughter had any right to demand any partition and it would be only on the death of the deceased that the entire estate would devolve on his heirs including the widow. Further, there being only a sole coparcener in the coparcenary, no partition was ever possible during the life time of the deceased and, therefore, the entire interest of the deceased passed on his death. The Tribunal was, therefore, right in its view that the Cesser of interest under Section 7(1) was to the extent of the whole of the property received by the deceased in the partition between him and his son."
17. The Andhra Pradesh High Court in Smt. P. Leelavathamma's case [19781 112 ITR 739 has also taken the same view.
18. On consideration of the matter, we with respect differ from the view expressed by the Bombay and Orissa High Courts in P. G. Chaware's case [1993] 204 ITR 513 and Dulari Devi's case [19951 211 ITR 524, respectively, and respectfully follow the view taken by the Madhya Pradesh, Allahabad, Madras, Patna and Andhra Pradesh High Courts in CED v. Rani Bahu [1982] 142 ITR 843 (MP) [FB], Ramratan v. CED [1983] 142 ITR 863 (MP) [FB], CED v. Smt. Kalawati Devi [1980] 125 ITR 762 (All), Rajni Bhargava v. CED [1990] 190 ITR 521 (All), CED v. Smt S. Harish Chandra [1987] 167 ITR 230 (All), Amirthavalli (P.) v. CED [1987] 164 ITR 63 (Mad), CED v. Smt. Ginni Devi Jain [1993] 204 ITR 110 (Patna) and CED v. Smt P. Leelava-thamma [1978] 112 ITR 739 (AP).
19. Hindu law is applied to Hindus, subject to any legislative enactment for the time being in force. A joint Hindu family consists of all persons lineally descended from a common ancestor. It is much larger than a coparcenary and includes the females, i.e., the wife and unmarried daughters. A daughter ceases to be a member of her father's family on marriage and becomes a member of her husband's family. The existence of joint estate is not an essential requisite to constitute joint family and the family which does not, own any property may nevertheless be a joint family. A Hindu coparcenary is a much narrower body than a joint family. It consists of male members of a joint and undivided family who are related to the head of the family for the time being within four degrees. These are sons grandsons and great grandsons, i.e., three generations next to the holder of the joint property in an unbroken male descent. Coparcenary excludes female members of the joint family. A coparcener acquires by birth an interest in the ancestral property. Property inherited from father, grandfather and great grandfather is ancestral property whereas any other property inherited from other relations is the separate property of the inheritor. A coparcener, subject to local customary laws, can claim partition of his ancestral property from his father. A Hindu male has absolute right over his self-acquired property and can dispose of it at his will. The last male holder/sole surviving coparcener enjoys the same powers of disposition of the inherited property as self-acquired property.
20. A coparcenary, being a narrow body, may cease to exist even before the joint family, such as the one under consideration. In the absence of any other coparcener, Telu Ram, deceased, became the sole surviving coparcener/last male holder. As the deceased did not have son, son's son or son's son, he was the absolute owner of the property as if it was his separate and self-acquired property and could deal with it as he liked. Another established principle of the Hindu law is that the female member of a Hindu undivided family cannot claim partition. In CED v. Alladi Kuppuswamy [1977] 108 ITR 439 (SC), at page 444, their Lordships of the apex court observed that prior to the passing of the Hindu Women's Right to Property Act, 1937, "a Hindu woman had no right or interest at all in a Hindu coparcenary. She was neither a cpparcener nor a member of the coparcenary nor did she have any interest in it, except the right to get maintenance. She also had no right to demand partition of the coparcenary property after the death of her husband".
21. In Sat Pal Bansal v. CIT [1986] 162 ITR 582, a Full Bench of this court, while summarising the law on partition where the Hindu undivided family consisted of only one male member, held (headnote) :
"According to Hindu law, female members of a Hindu undivided family have no share in the joint family property and their interest is confined to maintenance only. A wife cannot herself demand a partition of the Hindu undivided family property, but if a partition takes place between her husband and his sons, she is entitled to receive a share equal to that of a son and to hold and enjoy that share separately even from her husband. The share which is allotted to the wife or the mother is in lieu of her right of maintenance and the allotment of such a share does not show that she has any right or interest in the Hindu undivided family property. Before a partition can be visualised or thought of, the property has to be owned by more than one person. The sole owner cannot divide the property. The grant of any share in the property by the sole surviving male member of the Hindu undivided family to the wife or to the mother would be only in the nature of settlement of the property upon them in lieu of their right of maintenance and cannot by any stretch of reasoning be said to be a partition of the property amongst them. Therefore, no partition, partial or otherwise, would be possible in the case of a Hindu undivided family consisting only of one male member or the sole coparcener. Therefore, a karta who is the sole surviving coparcener of a Hindu undivided family cannot effect partition of the family property between himself and his wife."
22. As has been observed by us earlier, the sole surviving coparcener can constitute a Hindu undivided family with a female member of the family which is a taxable unit under the Income-tax Act. The female can be a member of the Hindu undivided family but not of a coparcenary. She does not have interest in the Hindu undivided family property by birth and has no right to claim partition. She has only a right of maintenance. A Hindu undivided family property continues to be joint as a taxable unit in the Income-tax Act but the last male holder enjoys the same power on the property as if the same was his personal/self-acquired property. As he was possessed with right of disposal of the property under Section 6 of the Act, the whole of his interest would be deemed to have passed on his death to the accountable person. Section 7 of the Act applies when coparcenary interest in a joint family property ceases on death and Section 39(1) lays down the mode for valuation of that interest. Sections 7 and 39 would apply only if there are more than one coparcener in the joint Hindu family. In the case of a single coparcener, the whole estate vests in him, being the last male holder, and the question of ascertaining his right for valuation under Section 39(1) would not arise; The question of partition immediately before his death would also not arise as partition could only be amongst the coparceners.
23. Section 39 falls in Part V of the Act, which deals with value chargeable of the property for the purposes of estate duty. Section 36 provides for the mode of estimating the principal value of the property. Section 37 deals with valuation of shares in a private company where alienation is restricted. Section 38 deals with valuation of interests in expectancy, Section 39 deals with valuation of interest in coparcenary property ceasing on death. It has nothing to do with the mode of partition. Thus, Sections 37 and 39 of the Act would not apply.
24. With respect, we say that the Bombay High Court in P. G. Chaware's case [1993] 204 ITR 513 proceeded on a wrong premise. It was wrong in observing that the coparcener and the wife, with whom he constituted the Hindu undivided family, had equal interest in the property and in the event of partition, the deceased would have been entitled to a half share only. The wife could not claim partition. The question of deemed partition under Section 39 of the Act would not arise as there was only one surviving coparcener and there was no heritable coparcenary interest. Reliance upon Gurupad Khandappa Magdum's case [1981] 129 ITR 440 (SC) is also misplaced. The judgment in Gurupad Khandappa Magdum's case [1981] 129 ITR 440 (SC) is only for the proposition that a female member of the Hindu undivided family inherits an interest in the Hindu undivided family property by virtue of Section 6(1) of the Hindu Succession Act and on a notional partition under that Section, she is not only entitled to inherit the interest as an heir to the deceased but also the share she would have been notionally allotted as per Explanation 1 to Section 6 of the Hindu Succession Act. Similarly, reliance placed upon Alladi Kuppuswamy's case [1977] 108 ITR 439 (SC) to hold that a wife could claim partition/had a coparcenary interest, is also wrong. In Alladi Kuppuswamy's case [1977] 108 ITR 439 (SC), their Lordships were dealing with a special provision contained in the Hindu Women's Right to Property Act, 1937. Section 3 (2) and (3) of this Act, by fiction, created a coparcenary interest and right to claim partition in a female. Otherwise, it has been held that but for the Act of 1937, a Hindu woman had no right or interest in a Hindu coparcenary. She was neither a coparcener nor a member of the coparcenary and had no interest in it, except the right to get maintenance ; that she could not, as of right, demand partition of the coparcenary property.
25. The present case is not being considered under the Act of 1937. Their Lordships of the Bombay High Court in P, G. Chaware's case [1993] 204 ITR 513 were also not considering a case under the Act of 1937 and, therefore, Alladi Kuppuswamy's case [1977] 108 ITR 439 (SC) has no applicability.
26. For the reasons stated above, we answer the question referred to us in the affirmative, i.e., against the assessee and in favour of the Revenue.