Gujarat High Court
Controller Of Estate Duty vs Smt. Geetaben Vipinbhai Shah on 7 May, 2003
Equivalent citations: (2004)190CTR(GUJ)612, [2004]270ITR282(GUJ)
JUDGMENT R.K. Abichandani, J.
1. The Income-tax Appellate Tribunal Ahmedabad Bench "A" has referred the following question of law for the opinion of this Court under Section 64 of the Estate Duty Act, 1953.
"Whether, in law and on facts, the Appellate Tribunal is right in holding that the interest of the wives of the co-parceners has to be excluded in determining the share of the lineal descendants which is to be included in the principal value of the estate left by the deceased for rate purposes u/s. 34(1)(c) of the E. D. Act, 1953?"
2. The Estate Duty account in respect of the estate of Dahyabhai Maneklal who passed away on 9.11.1962, was filed on 21.11.1963. The Assistant Controller of Estate Duty, Ahmedabad, in the assessment order made under Section 58(3) of the said Act worked out the value of the estate of the deceased in the H.U.F. and came to the conclusion that 1/5th share of the deceased in the HUF was of the value of Rs. 3,23,541/-. The interest of three lineal descendants of the deceased was valued at Rs. 9,70,623/- and this exercise was done for aggregation as contemplated by the provisions of Section 34(1) of the Act under which for the purpose of determining the rate of the estate duty to be paid on any property passing on the death of the deceased, all property so passing, and, where it consisted of a coparcenary interest, also the interests in the joint family property of all the lineal descendants of the deceased member were required to be aggregated so as to form one estate and the estate duty was to be levied thereon at the rate applicable in respect of the principal value thereof.
2.1 In the appeal, the Controller of Estate Duty, in para 6 of his order, found that the Assistant Controller of Estate Duty was justified in including the share of the lineal descendants in the principal value of the HUF estate. The contention that the share of the wives of the lineal descendants should have been deducted from the share of the lineal descendants and the balance alone should have been added, was negatived by the Controller of Estate Duty.
2.2 The Accountable Person carried the matter to the Tribunal and the Tribunal dealing with the above contention held that the share of the wives of the co-parceners should not have been taken into consideration while working out the interests of the lineal descendants of the deceased in the joint family property, relying upon the decision of the Calcutta High Court in the case of SATYANARAYAN SARAF VS. ASSISTANT CONTROLLER reported in 111 I.T.R. 432, in which it was held that the interest of wives of the coparceners was to be excluded in determining the share of lineal descendants which is to be included in the principal value of the estate of the deceased for rate purposes. The assessment was directed to be modified accordingly. This has led to the present reference.
3. Estate Duty is to be levied in accordance with Section 35 of the Act upon the principal value, ascertained as provided in Section 5 of the Act, of all property, settled or not settled, which passes on the death of a person after the commencement of the Act. Under Section 7(1) it is, inter alia, provided that the 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 Mitakshara, Marumakattayam or Aliyasantana law.
3.1 Part IV of the Act deals with aggregation of property and rates of duty. Section 34(1)(c) which falls for our consideration reads as under:
"34(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."
3.2 The principal value is required to be worked out under the said provision for the purpose of determining the rate of estate duty to be paid on any property passing on the death of the deceased, though interest of all coparceners other than the deceased in the joint family property of a Hindu family falls within the expression "property exempt from estate duty", due to the effect of the provision of sub-Section (2) of Section 34 read with Explanation (iii) thereof.
3.3 For the purpose of working out the rate under Section 34(1)(c) of the Act, the interest in the joint family property of all the lineal descendants of the deceased member is to be aggregated with all the property passing on the death of the deceased. The said provision of sub-Section (c) is not concerned with the devolution of the interest of the deceased in the joint family property which would devolve as per the provisions of Section 6 of the Hindu Succession Act, 1956. The interest of male Hindu in coparcenary property shall devolve by survivorship upon the surviving members of the coparcenary, provided that, if the deceased had left behind him a 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 Mitakshara coparcenary property shall devolve by testamentary or intestate succession, as the case may be, under the Hindu Succession Act, 1956 and not by survivorship as laid down in Section 6. For the purpose of that Section, under Explanation 1, it is provided that 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. Therefore, in cases where a male Hindu dies having interest in the coparcenary property without leaving behind him a surviving a female relative or a male relative claiming through such female relative of Class I of the Schedule, such share would devolve by survivorship and upon surviving members of the coparcenary and in view of the Explanation (iii) to sub-Section (2) of Section 34 the interest of such surviving coparceners would fall within the expression "property exempt from estate duty". However, the interest of the deceased in the coparcenary property which passes by succession, testamentary or intestate, would attract the provisions of the said Act including the provisions relating to aggregation for the purpose of applying the rate.
4. The expression "the interest in the joint family property of the lineal descendants of the deceased member" in Section 34(1)(c) is to be viewed in the context of the notional partition contemplated under Section 39(1) of the Estate Duty Act, 1953 which provided that the value of the benefit accruing or arising from the cesser of a coparcenary interest in any joint family property governed by 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. Thus, we are concerned with the situation that may arise on a notional partition of joint family property of a Hindu family immediately before the death of a coparcener. The words "lineal descendants" occurring in clause (c) of sub-Section (1) of Section 34 would mean persons in the direct line of descent of the deceased such as child or grandchild as contrasted with a collateral descendant. Wives of lineal descendants would obviously not be lineal descendants of the deceased.
5. The moot question, however, is whether wife of one of the three sons of the deceased who was married and in respect of whom the question has arisen, had any share in the property of the HUF on the notional partition resulting due to death of the father.
5.1 The only property that can be divided on partition is coparcenary property. The joint family or coparcenary property is that in which every coparcener has a joint interest. In STATE BANK OF INDIA Vs. GHAMANDI RAM reported in AIR 1969 SC 1330 the Supreme Court observed that coparcenary property is held in collective ownership by all the coparceners in a quasi corporate capacity. The incidents of coparcenary are: (i) the lineal male descendants of a person up to the third generation, acquire on birth ownership in the ancestral properties of such person; (ii) that such descendants can at any time work out their rights by asking for partition; (iii) that till partition each member has got ownership extending over the entire property conjointly with the rest; (iv) that as a result of such co-ownership the possession and enjoyment of the property is common; (v) that no alienation of the property is possible unless it be for necessity, without the concurrence of the coparceners and (vi) that the interest of a deceased member passes on his death to the surviving coparceners.
5.2 It is a settled legal position that no female can be a coparcener under Mitakshara Law (See: Commissioner of Income Tax Vs. Mills reported in AIR 1966 SC 240; Puspha Devi Vs. Commissioner of Income tax reported in AIR 1977 SC 2230). A coparcener is entitled to a share upon partition. (See: Narayanaswami Vs. Ramakrishna AIR 1965 SC 289). According to Mitakshara Law the mother or grand-mother is entitled to a share when sons or grand-sons divide the family estate between themselves, but she cannot be recognised as the owner of the share until the devolution is actually made else she has no pre-existing right in the estate except right of maintenance. (See: Mayne's Hindu Law, 11th Edition, page 534 paragraph 434, referred to in para 14 of the judgement of the Supreme Court in Lakshmi Chand Vs. Ishroo Devi AIR 1977 SC 1694). In Mulla's Hindu Law, 17th Edition, it is noted in paragraph 315, on the basis of judicial pronouncements, that, a wife cannot herself demand a partition, but if a partition does take place between her husband and his sons, she is entitled (except in Southern India) to receive a share equal to that of a son and to hold and enjoy that share separately even from her husband. In paragraph 317, after referring to a paternal grandmother's entitlement to share when partition takes place at the end of the paragraph it is stated that: "No female except those mentioned in paragraphs 315 to 317 is entitled to a share on partition. Thus daughter, sisters etc. are not entitled to a share on partition. However, on a partition provision must be made for their maintenance and marriage expenses".
5.3 Thus, the wife of one of the three lineal descendants of the deceased was not entitled to a share on partition between the father and three sons in the present case. It is only the widowed mother who was entitled to a share on the notional partition occurring due to the death of her husband, between her husband and his three sons. Therefore, there was no occasion whatsoever to compute any share of the wife of the lineal descendant of the deceased who did not get any share in the property on the notional partition. On the death of Dahyabhai there were five sharers as a result of the notional partition taking place immediately before his death, namely, share of the deceased, his wife and his three sons. This is why the share of the deceased in the HUF was computed as 1/5th in the HUF property. Therefore, in our opinion, the Assistant Controller of Estate Duty had correctly computed the value of the interest of three lineal descendants for the purpose of aggregation under Section 34(1)(c) and aggregated the value of that share with the value of 1/5th share of the deceased and thereby worked out the principal value under Section 34(1)(c) of the Act. 6. The Revenue has relied on the decision of the Calcutta High Court in the case of SATYANARAYAN SARAF VS. ASSISTANT CONTROLLER reported in 111 ITR 432 in which it was held that Section 39 of the Act contemplates a notional partition of the joint family property immediately before the death of the deceased in order to ascertain the principal value and as a notional partition has to be resorted to, full effect should be given to the principles of Hindu law relating to partition of property. It was held that if any person other than a lineal descendant is entitled to a share such share should be allotted to him and after such allotment the shares of the lineal descendants should be ascertained. In that case the Karta of HUF Hanuman Prasad Saraf died in 1961, leaving his wife, son, son's wife and grandson in the family. The Court held that in order to ascertain the shares of the lineal descendants of Hanuman Prasad Saraf, a notional partition of the smaller HUF of his son Satyanarayan Saraf with his son Bhagawati Prasad was also contemplated and therefore as a result of such notional partition of the smaller HUF wife of son Satyanarayan Saraf was entitled to receive a share equal to that of her son Bhagwati Prasad. The learned judge relied on the observations made in paragraph 315 in Mulla's Hindu Law, which have been referred to hereinbefore, for coming to this conclusion.
6.1 It may be noticed that the notional partition is contemplated to cull out the share of the deceased coparcener for the purpose of the provisions of the said Act. As noticed above, even in Section 6 of the Hindu Succession Act, a notional partition is contemplated so that the interest of the deceased coparcener, who was having a female heir of Class I or male heir claiming through such female heir falling in that class could devolve on the heirs by testamentary or intestate succession and not by principle of survivorship in favour of the surviving coparceners.
6.2 The general principle is that every Hindu family is presumed to be joint unless the contrary is proved. When a fiction of notional partition is adopted by the statute in context of a deceased coparcener to determine his share, it cannot be said that all other coparceners have also decided to partition and separate their respective shares. The case of notional partition should be confined to the share of the deceased coparcener as if he alone is separating from the other coparceners, because, the statutory assumption underlying the notional partition has no backing of the intention of all other coparceners to bring about the partition of even their shares in the HUF property. It is open to the non-separating members to remain joint and to enjoy as members of a joint family what remained of the joint family property after such a notional partition. It would be a question of fact to be determined in each case whether a partition takes place and whether there was a separation among other coparceners or they remain united, in case where partition takes place at the instance of any coparcener. However, in case of a notional partition no intention to separate can be attributed to the remaining coparceners merely by virtue of such notional partition which is deemed to have taken place immediately before the death of the deceased coparcener for the purpose of the Act. Such partition should be viewed as a separation of the deceased coparcener from the other coparceners and not a partition amongst all the coparceners, unless otherwise intended by them on the demise of the coparcener.
6.3 On a partition between father and son each takes a share equal to that of the father. Thus, if a joint family consists of a father and three sons, the property will be divided into four parts, each of the four members taking one-fourth and each branch taking "per stirpes" i.e. according to the stock. As noted above, if the partition takes place between her husband and his son, the wife is entitled to receive a share equal to that of son and no female, except those mentioned in paragraphs 315 (wife), 315A (widow), 316 (widow-mother), 317 (grandmother), is entitled to a share on partition. Therefore, when there is a partition between father and his sons, the mother would be the female heir entitled to receive a share equal to that of their son, and son's wife does not come into picture at all for claiming any share in such a partition. She would come in picture only when there is a partition between her husband and his sons i.e. partition between the smaller HUF. No partition of smaller HUF can be presumed merely on the basis of a notional partition on the death of the father between father and the sons due to operation of the provision of Section 39(1) of the said Act or Explanation 1 to Section 6 of the Hindu Succession Act. It is therefore difficult to agree with the ratio of the decision in the case of SATYANARAYAN SARAF (supra) that on the death of the father which brought about a partition between the father and his son, there would automatically take place a further partition of the smaller HUF of the son with his own son so as to entitle his wife to get a share.
7. A Division Bench of the Madhya Pradesh High Court in the case of CED Vs. Prakashchand reported in 147 ITR 1 while dealing with the provisions of Section 34(1)(c) and 39 of the said Act, in context of the case where the deceased was survived by his wife and three sons who were married, held that the result of the notional partition under Section 39 of the Act would be that wife and three sons of the deceased would, along with the deceased, were entitled to a share and that the wives of the sons would not be entitled to any share in such partition. Disagreeing with the ratio in the case of SATYANARAYAN SARAF (supra), the Court held that the notional partition as contemplated by Section 39 of the Act was between the deceased and the other members of the HUF who were entitled to a share in the joint family property if a partition were to take place in the life time of the deceased and the wife of the son of the deceased cannot be brought in to picture at that stage. It was held that what was required to be aggregated by virtue of the provisions of Section 34(1)(c) of the Act was the interest of the lineal descendants on a notional partition in the joint family as provided by Section 39 of the Act. We are in respectful agreement with the ratio of the said decision. The decision in CED Vs. PRAKASHCHAND (supra) was followed by the Punjab & Haryana High Court in CONTROLLER OF ESTATE DUTY Vs. JUGAL KISHORE reported in 230 ITR 182.
8. For the foregoing reasons, we hold that the Tribunal committed an error in holding that the interest of wives of the coparceners has to be excluded in determining the share of lineal descendants which is required to be aggregated for the purpose of working out the principal value of the estate left by the deceased in order to determine the rate which could be applied as per the provisions of Section 34(1)(c) of the Act. The question referred to us is accordingly answered in favour of the Revenue and against the assessee. The Reference stands disposed of accordingly with no order as to costs.