Income Tax Appellate Tribunal - Hyderabad
Assistant Controller Of Estate Duty vs Rajah Manyam Kanakayya on 31 December, 1985
Equivalent citations: [1986]16ITD544(HYD)
ORDER
T.V. Rajagopala Rao, Judicial Member
1. This is an appeal filed by the revenue against the decision of the Appellate Controller dated 6-5-1982 allowing the appeal filed before him by the accountable person against the order of the Assistant Controller dated 31-3-1977. The relevant facts necessary and leading to this appeal may be stated as under:
2. Rajah Manyam Kanakayya used to be zamindar of Gootala, etc., villages in the territory of French Yanam. He is a vysya (merchant community). It is admitted that in last seven generations there were only adoptions in the family wherefrom Rajah Manyam Kanakayya hails. Rajah Manyam Kanakayya had extensive properties both movable and immovable. Among immovable properties there are agricultural, non-agricultural as well as house at Rajahmundry. The Assistant Controller" valued the estate devolved upon the accountable person on the death of Smt. Manyam Meenakshamma wife of Rajah Manyam Kanakayya at Rs. 7,42,487. Rajah Manyam Kanakayya died on 28-7-1949. Before his death, while he was in sound disposing state of mind he executed the registered will dated 23-7-1949. Meenakshamma is the wife of Rajah Manyam Kanakayya. Kamakshamma is the sister of Smt. Meenakshamma who was married to one Shri Yelamarthi Venkata Satyanarayanamurthy. The second son of Shri E. Venkata Satyanarayanamurthy through Kamakshamma is the one Krishna Rao. Incidentally it may be mentioned that Shri K. Venkata Satyanarayanamurthy managed the estate of Rajah Manyam Kanakayya. The discussion about the terms of the registered will dated 23-7-1949 may be reserved for the present and we may take it up a little later. To complete the narration, suffice for the present to know that Smt. Meenakshamma was given the right to adopt a son to her husband in his registered will. It is stated in the recitals of the will referred to above that preferably her sister's son Krishna Rao may be considered for adoption and if she does not adopt the said minor boy, the testator bequeathed and directed Rs. 35,000 to be given to the said boy. The deceased Smt. Meenakshamma adopted the said Krishna Rao while he was a minor on 20-8-1951 to her late husband and as evidence of the said adoption she executed a registered adoption deed of even date and got it registered as document No. 64/51 in Book No 4 in Rajahmundry sub-registry on 29-8-1951. On adoption the name of the adopted minor Krishna Rao was changed into Rajah Manyam Kanakayya. Even the consideration and the terms of this adoption deed as well as the legal effect of the terms of the deed are essential for disposal of this appeal. But we shall reserve the discussion about them to a little later.
3. Smt. Meenakshamma died on 4-6-1972. Her adopted son Rajah Manyam Kanakayya while submitting a statement of properties said to have passed on her death, submitted a covering letter stating that in fact no property of any significance passed on her death and estate duty should not be levied on the value of the estate. In support of his contention the following arguments were submitted before the Assistant Controller.
4. The rights of the adopted son are the same as the adoptive father of the joint family. The adopted son occupies the same position as the posthumous child. Therefore, the adopted son can question the alienation made by the adoptive father. As a logical corollary of this argument it was contended that the will dated 23-7-1949 executed by late Rajah Manyam Kanakayya is not binding on the adopted son. Alternately it was contended that admittedly all the properties held and bequeathed under the will of Rajah Manyam Kanakayya were joint family property. The adoption of the boy in 1951 relates back to the date of death of the adoptive father in 1949. The adopted son by virtue of his being a coparcener in the joint family is entitled to half share in the joint family properties and so at the most the deceased can have only an undivided half share of the properties left by Rajah Manyam Kanakayya. Late Rajah Manyam Kanakayya would have power of disposition with regard to undivided half share in the joint family properties and so under the terms of the will dated 23-7-1949 only half of the properties would devolve in view of the provisions of the Hindu Women's Right to Property Act, 1937 and the limited powers of Smt. Meenakshamma over those half properties would get themselves enlarged under Section 14 of the Hindu Succession Act, 1956 into a full estate and so in any event the estate duty over half the value of the estate only is liable to be paid.
5. These contentions were repelled or were not accepted by the Assistant Controller. He held that at the time of execution of the will Rajah Manyam Kanakayya stood in the position of a sole surviving coparcener with all legal rights and complete control of disposal over the same. The sole surviving coparcener Under Hindu law can dispose of the joint family properties in his hands as he likes by means of even gift or will or other testamentary document. Taking the circumstances or the position in which Rajah Manyam Kanakayya was placed at the time of execution of the will dated 23-7-1949 naturally his prime concern would have been very much as to how to protect the interests of his wife or provide her adequately after his death. In fact his wife Smt. Meenakshamma lived 20 years subsequent to his death. Therefore, the Assistant Controller held that Rajah Manyam Kanakayya left no room for any doubt in the language employed by him in the will. He made it clear in the said will that the future adopted son will have to wait until the death of his widow to receive the properties. So also it is made clear that as long as his widow is alive she will be the absolute owner of the properties with the absolute right of sale or gift, etc. The Assistant Controller also further opined that the will is perfectly valid and is in conformity with the provisions of the Hindu law. He further held that Rajah Kanakayya was the sole surviving coparcener and hence he had full power of disposal over the property and he can bequeath his whole property as he liked. The Assistant Controller also further held that the adopted son is bound by alienations made by the adoptive father prior to his adoption. The rights of the subsequently adopted son would not be more than the subsequently born natural son. Therefore, just like after born natural son is bound by the alienations found made before his birth so also the adopted son who was adopted subsequent to the alienation was also bound by the alienation made by the adoptive father prior to his adoption. Just like the after born son, the adopted son had no right of interdiction of alienations made prior to his adoption. He further held that the right of the adopted son would come into existence from the date of adoption. He also held that the legal fiction that adoption relates back to the date of death of the adoptive father would not extend further for defeating the will of late Rajah Manyam Kanakayya. He furtner mentioned in his assessment orders that in the adoption agreement dated 20-8-1951 also it was agreed by the natural father of the adopted son that the rights of the adopted son shall begin in the properties of the late zamindar only after the death of Smt. Meenakshamma. Thus, the Assistant Controller completed the assessment after valuing the dutiable estate at Rs. 7,42,487 as per his assessment order dated 31-3-1977.
6. Aggrieved against the order of assessment, the accountable person took the matter in appeal to the Appellate Controller. The learned Appellate Controller followed the decision of the Andhra Pradesh High Court in CED v. Estate of Late Smt. K. Narasamma [1980] 125 1TR 196 in which the Hon'ble High Court after considering the facts of the case before them held that the adoption in the case before them related back to the date of death of the adoptive father and the adopted son must be deemed to have succeeded to the properties of the adoptive father by survivorship immediately after the date of death of the adoptive father. In the light of the judgment of the Andhra Pradesh High Court it was argued on behalf of the accountable person that on the date of death of Rajah Manyam Kanakayya in 1949, the adopted son must be deemed to have succeeded to the properties of late Rajah Manyam Kanakayya by survivorship in which case the will dated 23-7-1949 executed by late Rajah Manyam Kanakayya cannot have any effect inasmuch as even before the death of the deceased all the properties of late Rajah Manyam Kanakayya became the absolute properties of the adopted son. Much force was found in this argument advanced on behalf of the accountable person as the said argument was found derived sufficient support from the authoritative decision of the Andhra Pradesh High Court in Estate of Late Smt. K. Narasamma's case (supra). Therefore, the learned Appellate Controller held that the entire property after the death of Smt. Meenakshamma had to be excluded for the urpose of estate duty and, hence, he allowed the appeal filed before him.
7. As against the impugned orders dated 6-5-1982 passed by the Appellate Controller the present second appeal by the revenue is filed and, thus, the matter stands for our consideration. The contentions of the revenue as per its grounds are as follows :
(i) The Appellate Controller erred in holding that the entire property of late Rajah Manyam Kanakayya had to be excluded for the purpose of estate duty on the death of the deceased.
(ii) The Appellate Controller ought to have held that the decision of the Andhra Pradesh High Court in the case of Estate of Late Smt. K. Narasamma (supra) does not apply to the facts of the case.
(iii) The learned Appellate Controller ought to have held that the will and the ante-adoption agreement conferred a life interest on Smt. Meenakshamma in the entire property.
(iv) The learned Appellate Controller ought to have held that disposition Under the will was not affected by the adoption and the adopted son was equally bound by the terms of the will.
(v) The learned Appellate Controller ought to have held that the entire property was dutiable under Sections 5, 6 and 7 of the Estate Duty Act, 1953 ('the Act').
Lastly, it was contended that at least half share of the deceased in the entire property should have been made liable to estate duty.
8. We have heard Shri M. Suryanarayanamurthy, the learned standing counsel for the Income-tax Department, at the High Court and Shri K. Ranganathachari, the learned advocate for the accountable person. Shri Suryanarayanamurthy, the learned standing counsel for the department, firstly tried to distinguish the Andhra Pradesh High Court's decision in Estate of Late Smt. K. Narasammd's case (supra) and tried to convince us that the facts of that case are quite different from the facts on hand and, therefore, the ratio which was evolved in that decision by the Hon'ble Andhra Pradesh High Court does not follow from the admitted facts before us and, hence, the ratio of the said case is misapplied to the facts of this case and, therefore, the impugned order of the Appellate Controller is vitiated by an error of law, or by wrong application of the ratio of the Andhra Pradesh High Court. On the other hand, Shri K. Ranganathachari, the learned advocate for the accountable person, seriously contended that the facts decided by the Hon'ble High Court in that case are similar to the facts on hand and so the ratio of that case equally applies to the facts before us and, hence, the Appellate Controller did not commit any mistake in following the said ratio basing his decision thereon. After evaluating the contentions on either side we are inclined to agree with the submissions of the learned standing counsel for the revenue. In the decided case before the Andhra Pradesh High Court Shri Kailasa Venlcanna got divided from his brother, Shri Kailasa Krishna sometime in 1895. Shri Kailasa Venkanna executed a registered will on 5-8-1907 by which deed he bequeathed to his wife Smt. Kailasa Narasamma all his immovable and movable properties. He died issueless in 1930. The anti-adoption agreement in that case was dated 15-2-1943. Therefore, it can be seen that either on the date of the execution of the will or on the date of the death of Shri Kailasa Venkanna in 1930 the then prevailing law of right of survivorship was not eroded in any way. It is only for the first time an attempt to erode the rights of survivorship was made by the Legislature by enacting the Hindu Women's Rights to Property Act. The provisions of Sub-sections (2) and (3) of Section 3 of the said Act are as follows :
(2) When a Hindu governed by any school of Hindu law other than the Dayabhaga School or by customary law dies having at the time of his death an interest in a Hindu joint family property, his widow shall, subject to the provisions of Sub-section (3), have in the property the same interest as he himself had.
(3) Any interest devolving on a Hindu widow under the provisions of this Sub-section shall be the limited interest known as a Hindu women's estate, provided however that she shall have the same right of claiming partition as a male owner.
So it can be seen from the above that from 1937 onwards in cases where the deceased having a right in the Hindu joint family died leaving a widow the succession to his interest in the Hindu joint family property would be governed not by right of survivorship as was the case hitherto but his interest used to devolve upon his widow. No doubt the nature of interest used to devolve upon his widow used to be the widow's estate known to law at that time. But at the same time she was also given a right of partition which only a coparcener used to enjoy under the Hindu law. Therefore, after the advent of the Hindu Women's Rights to Property Act enacted by the Legislature certain inroads were made into the prevailing law of survivorship as well as into the law of the right to demand partition. Therefore, it is obvious that their Lordships while considering the case before them in Estate of Late Smt, K. Narasamma (supra) had no occasion to consider the impact of the provisions of the Hindu Women's Rights to Property Act made upon both the right of survivorship and the type of estate held by Hindu woman after her husband's death as well as the right to claim partition. Therefore, the ratio of the Andhra Pradesh High Court that adoption related back to the date of the death of the adoptive father and that the adopted boy must be deemed to have succeeded to the properties of the adoptive father by survivorship immediately after his death does not, in our humble opinion, hold good in the present case where the right of survivorship does not apply at all and also in our humble opinion the doctrine of relation back also does not automatically follow in view of the fact that the widow of the deceased Hindu was given the right to demand partition which was hitherto unknown. Further in the impugned order the learned Appellate Controller held that the adoption related back to the date of death of the adoptive father and the adopted son must be deemed to have succeeded to the properties of the adoptive father by survivorship immediately after the death of the adoptive father. Lower down in his order it is held that after the death of the adoptive father in 1949 the adopted son became the sole survivor of the late Rajah Manyam Kanakayya for which he must be deemed to have succeeded to all the properties of the late Rajah Manyam Kanakayya existing as on the date of the death of late Rajah Manyam Kanakayya. The learned Appellate Controller also held that the will executed by the late Rajah Manyam Kanakayya, viz., the will dated 23-7-1949 will not have any effect inasmuch as even before the death of the late Rajah Manyam Kanakayya all his properties became the absolute properties of the adopted son. We fail to understand the correctness of the deductions by the learned Appellate Controller. We are at a loss to understand how even during the lifetime of late Rajah Manyam Kanakayya the accountable person can become the sole surviving coparcener. Is it correct to postulate that late Rajah Manyam Kanakayya had no rights in the properties held by him even during his lifetime ? Further, what is the effect of the will dated 23-7-1949 executed by the late Rajah Manyam Kanakayya admittedly at a time when he was the sole surviving coparcener and when the adoption took place much later on 20-8-1951 ? In our humble opinion, this aspect of the matter was never considered in depth in the Andhra Pradesh High Court's decision in Estate of Late Smt. K. Narasamma's case (supra). What is the effect of the doctrine of relation back and how far does it affect the will dated 23-7-1949, whether the will would be operative or will simply become inoperative, if so, for what reasons ? We do not find any answer whatsoever for the above questions in the judgment of the Andhra Pradesh High Court in Estate of Late Smt. K. Narasamma's case (supra). Further, whatever may be the position under law prior to 1937 or prior to advent of Hindu Women's Rights to Property Act, definitely after the advent of the said Act the above questions posed by us would become more relevant and require a reasoned answer for each one of them before rendering a decision on the subject before us. If the Andhra Pradesh High Court in their decision in Estate of Late Smt. K. Narasamma's case (supra) are to be taken to have held that because of the doctrine of relation back in the case before them the will executed by the adoptive father would automatically become invalid, we are constrained to observe that such a proposition is bereft of any authority and stare decisis. Before the Madras High Court in the case of Dowager Rani Lalitha Kumari Devi v. Raja of Vizianagaram AIR 1954 Mad. 19, similar arguments were advanced and the learned Chief Justice, Rajamannar who had considered the said argument felt that no considerable time need be spent in disposing of such contentions raised before them. Paragraph 10 of the Madras High Court's judgment is worth quoting and it is as follows :
Much time need not be spent in disposing of the contention of Mr. Rajagopala Ayyangar that on the adoption of Chittibabu by Alak Rajeshwari the will of Ananda Gajapathi became invalid by the application of the doctrine of relation back and therefore the only title which Chittibabu had was his title by virtue of the adoption. He was unable to cite any ruling in support of this novel contention which is opposed to the principles laid down both by this Court and by the Judicial Committee of the P.C. So far as I understand it, the argument is that as an adoption dates back to the death of the person to whom he is adopted, Chittibabu's adoption would date back to the death of Viziarama Gajapathi and therefore Ananda Gajapathi was not the sole surviving coparcener when he executed the will in 1897. It is sufficient to quote the following observations of Viscount Dunedin in -- 'Krishnamurthi Ayyar v. Krishna-murthi Ayyar' AIR 1927 PC 139 to reject this contention of Mr. Rajagopala Ayyangar.
'When a disposition is made inter vivos by one who has full power over property under which a portion of that property is carried away, it is clear that no rights of a son who is subsequently adopted can affect that portion which is disposed of. The same is true when the disposition is by will and the adoption is subsequently made by a widow who has been given power to adopt. For the will speaks as at the death of the testator, and the property is carried away before the adoption takes place.' As their Lordships of the Privy Council put it tersely in the First Pithapur case, 22 Mad. 383 (PC).
'If the Rajah had power to alienate he might do it by will and the title by the will would have priority to the title by succession' (p. 23) Further we have to hold that such a view is quite opposed to the ratio of the Hon'ble Supreme Court expressed in the case of Surjit Lal Chhabda v. CIT [1915] 101 ITR 776. Chief Justice Chandrachud clearly laid down the law as follows :
The property which the appellant has put into the common stock may change its legal incidents on the birth of a son but until that event happens the property, in the eye of Hindu law, is really his.
He can deal with it as a full owner, unrestrained by considerations of legal necessity or benefit of the estate. He may sell it, mortgage it or make a gift of it. Even a son born or adopted after the alienation shall have to take the family hotchpot as he finds it. A son born, begotten or adopted after the alienation has no right to challenge the alienation. (P. 795) Therefore, it is the contention of the learned standing counsel that the will executed by late Rajah Manyam Kanakayya on 23-7-1949 is fully operative and the finding given by the lower authority that the will is not operative is not correct under law. The learned standing counsel's argument proceeded that if we take that the said will of late Rajah Manyam Kanakayya dated 23-7-1949 is operative then under the terms of the said will all the movable and immovable properties were bequeathed to her absolutely with absolute powers of alienation. The learned standing counsel stressed upon the following words occurring in the registered will dated 23-7-1949. The following is the free translation of one of the terms of the will :
After me my wife Rajah Manyam Meenakshamma has to enjoy all my movable and immovable properties with absolute rights such as gift and sale.
The learned standing counsel contended that Smt. Meenakshamma herself died on 4-6-1972 and till her death she held all the properties bequeathed to her by her late husband and, therefore, even though till the advent of the Hindu Succession Act it may be open for argument that she had held only Hindu woman's estate in the whole property and so enjoyed only a limited right, i.e., life interest in the properties, however, her limited rights were enlarged into absolute rights under Section 14(1) and to substantiate his contention he had invited our attention to the decision of the Andhra Pradesh High Court in Kanuri Sri Sankara Rao v. Kanuri Rajyalakshamma AIR 1961 AP 241. Justice Umamaheswaram, speaking about the correct interpretation of Section 3, Sub-sections (2) and (3), held at paragraph 6 of his illustrative judgment as follows :
The question for consideration is whether, on a true construction of Section 3, Sub-sections (2) and (3) of the Hindu Women's Rights to Property Act, the widow acquires no rights as on the actual date of death of Venkatasiva Rao, viz., 7-6-1956. Sub-section (2) of Section 3 is quite clear that when a Hindu governed by Mitakshara school of Hindu law dies having at the time of his death an interest in a Hindu joint family property, his widow shall have in the property the same interest as he himself had.
Sub-section (3) provides that in respect of the interest which devolves on her under Sub-section (2) she shall have the limited interest known as the Hindu woman's estate and it further enacts that she shall have the same right of claiming partition as a male owner. It does not expressly or impliedly enact that the Hindu governed by the Mitakshara school of Hindu law is deemed to live till his widow claims a right of partition.
It is significant to note that under the terms of Sub-sections (2) and (3) of Section 3, the interest of the husband devolves upon the widow immediately on the date of his death. No legal fiction is imported in the section and the Legislature does not provide that the husband is deemed to live till she claims partition or files a suit for working out her rights. (p. 243) Ultimately he held confirming the judgment of the subordinate Judge that Rajyalakshamma, the widow of Venkatasiva Rao upon whom half the interest in the plaint scheduled property devolved on the date of death of her husband on 7-6-1956 had become an absolute owner under the terms of Section 14(1). A contention was raised before the learned Judge that Section 14 does not apply inasmuch as the first defendant did not acquire any property in her husband's half share before commencement of the Hindu Succession Act inasmuch as no partition having been effected. According to the plaintiff's counsel the widow did not acquire any interest till she effected a partition. Repelling the said contention, the learned Judge held that the argument has. no force inasmuch as the word 'acquire' means according to the Oxford Dictionary 'come into possession of ; or gain by onself'. The learned Judge further held that as soon as her husband died and as soon as his interest devolved on her it must be held that she had acquired an interest in the property. By a claim for partition she merely worked out that right. He further held that the Explanation under Section 14(1) is also wide enough and the words 'in any other manner whatsoever' are of wide import. The points sought to be stressed by the learned departmental counsel are further sought to be strengthened by relying upon a decision of the Gujarat High Court in Suketu Jayantilal Shah v. CED [1975] 100 ITR 439 in which the right of a Hindu widow inheriting her husband's share under the Hindu Women's Rights to Property Act and holding the property even after the Hindu Succession Act the nature of the property that passed on her death were all considered. The head-note of the decision clearly brings out the ratio laid down in that decision and it is as follows :
under Section 3(2) of the Hindu Women's Rights to Property Act, 1937, the widow of a member of a Hindu joint family is put in place of her husband and the husband's interest in the joint family property, though indefinite, would vest immediately upon his death in the widow. The widow who acquired the interest of her deceased husband under Section 3(2) of the Hindu Women's Rights to Property Act, 1937, and who was possessed of the said interest on the coming into force of the Hindu Succession Act, 1956, became the absolute owner of that estate by operation of Section 14 of the said Act and thus she would have all the rights of a full owner to possess, manage, and enjoy exclusively and of disposal either by any act inter vivos or by will the said estate. On her death intestate, her interest in the joint family properties would pass and devolve by succession on her heirs and to that extent it would be required to be included in the estate liable to pay duty under the Estate Duty Act.
In any case, the widow having become the absolute owner of the share which she inherited from her husband, would be competent to dispose it of, it being an incident of full ownership, and, therefore, her interest would be deemed to be property passing on her death under Section 6 of the Estate Duty Act. (p. 439)
9. The learned departmental counsel contended that Rajah Manyam Kanakayya being the sole surviving coparcener till his death in 1949 is absolutely entitled to deal with the property he held. He is empowered to gift away or sell away or alienate any part of the joint family property held by him and in support of that proposition, the learned counsel brought to our notice the decision of the Gujarat High Court in Anil-kumar B. Laskari v. C77[1983] 142 ITR 831, particularly the portion enunciating the law which is as follows :
There is, therefore, no doubt that the assessee as sole surviving coparcener was entitled to alienate the coparcenary property as if it were his separate property. It would not make any difference whether there was a female member who was entitled to claim maintenance from the coparcenary or HUF property living at the time when the alienation was made. Existence of such female member does not in any way curtail or restrict the right of the sole surviving coparcener to alienate the coparcenary property as if it were his separate property. It must, therefore, be held that the Tribunal was right in taking the view which it took. (p. 833) Another decision cited for the same purpose by the learned departmental counsel is CIT v. Anil J. Chinai [19841 148 ITR 3 (Bom.). In the head-note of the decision the law is stated succinctly as follows :
Under Hindu law a person who for the time being is the sole surviving coparcener is entitled to dispose of the coparcenary property as if it were his separate property. He may sell or mortgage the property without legal necessity or he may make a gift of it. If a son is subsequently born to him or adopted by him, the alienation, whether it is by way of sale, mortgage or gift, will nevertheless stand, for a son cannot object to alienations made by his father before he was born or begotten. It is equally well settled that the existence of a female member does not in any way curtail or restrict the right of the sole surviving coparcener to alienate the corparcenary property as if it were his separate property. (p. 3) On the strength of the above judgments the learned departmental counsel contended that the will dated 23-7-1949 is perfectly a valid will, fully operative and confers full and absolute rights in all the property held by the late Rajah Manyam Kanakayya before his death in 1949. He also contended that the adoption having taken place only on 20-8-1951, the adopted boy should rest content to receive the family hotchpot as he finds it on the date of his adoption, i.e., 20-8-1951. He has no authority to question the will executed by his adoptive father while he was the sole surviving coparcener. On the other hand, the said will is fully binding against the adoptive son. The learned standing counsel contended that the fundamental principle under law is the dictum that once a property or a right is vested it cannot be divested and he contends that when once Smt. Meenakshamma derives the whole property under the terms of the will dated 23-7-1949 after the death of her husband on 28-7-1949 her right in the property cannot be divested simply because she adopted a boy to her husband on 20-8-1951 and in support of his contention he drew our attention to the judgment of the Andhra Pradesh High Court in CWT v. Smt. T. Yasodamma [1984] 146 ITR 445. There the law was stated as follows as per the head-note of the decision:
Held, that once partition took place between C and the assessee, she became the absolute owner of the property which fell to her share, by virtue of Section 14 of the Hindu Succession Act, 1956. The assessee was competent to adopt a boy but such an adoption did not result in divesting her of the property which had already vested in her. Therefore, the assessee was the absolute owner of the properties and should be assessed only as an individual.(p. 445) Thus, he contended that the whole property derived by her under the terms of the will should be deemed to have passed on her death on 4-6-1972 and, therefore, the value of her whole estate is liable to estate duty. According to the learned standing counsel for the department even the recitals in the adoption deed dated 20-8-1951 support his contention. The natural father of the adopted son agreed with Smt. Meenakshamma that his son should get properties covered under the will dated 23-7-1949 with full rights only after her death. Alternatively it is argued that even assuming for a while that by virtue of doctrine of relation back the adopted son would divest the adoptive mother from the properties derived under the terms of the will dated 23-7-1949 even then and even on the supposition that the adopted son must be deemed to be present on the date of death of his adoptive father the adopted son could utmost claim half interest in the joint family property as a coparcener. That means the will dated 23-7-1949 would become inoperative only as regards half interest held by the adopted son in each of the properties covered by the will. Even in such a case at least half the properties should have been inherited or derived by Smt. Meenakshamma either under the will or under succession by virtue of Sections 3(2) and 3(3) of the Hindu Women's Rights to Property Act. Even in such a case half the estate held by her would enlarge itself into her absolute estate after the advent of Section 14 of the Hindu Succession Act and, therefore, after her death in 1972 half the property should be deemed to have passed to the adopted son and so even in the event of taking an extreme position like this half the estate is dutiable.
10. Shri K. Ranganathachari, the learned advocate for the accountable person, contended that Smt. Meenakshamma was conferred only with life interest but not with absolute interest, if we read the will dated 23-7-1949 and the ante-adoption agreement dated 20-8-1951 together. He further contended that the facts of the case are absolutely in part materia with Estate of Late Smt. K. Narasamma's case (supra) except the fact that the will in that case is prior to the Hindu Women's Rights to Property Act whereas it is not so in this case. He further contended that the enjoyment of property by Smt. Meenakshamma is only by sufferance and permission. He also contended that the Hindu Women's Rights to Property Act had no impact on the facts before us. In order to explain the real character of the right derived by Hindu women under Section 3(2) and 3(3), the learned advocate for the accountable person brought to our notice that the said right cannot be said to be either a right of survivorship or a right of inheritance but it is a special type of interest which is a creation of the statute and in this connection he invited our attention to the commentary of Mulla's Principles of Hindu Law, Fifteenth edn., which is as follows :
Where property devolves on a widow and the property was the separate property of her husband, she takes in it the same share as a son. This is by inheritance under Section 3(1). The interest that she acquires in a case where the husband was a member of a joint family does not devolve on her by survivorship. All the High Courts are agreed on this but there was difference of opinion on the question whether she can be said to have acquired the interest in such property by inheritance till the conflict was set at rest by the Supreme Court in Lakshmi Perumallu v. Krishnavenamma ('65) A.S.C. 825 when it was held that such interest is neither by survivorship nor by inheritance but a special type of interest which is the creation of statute. (p. 106) He argued that under the ante-adoption deed dated 20-8-1951 she released her right in favour of her adopted son. Ultimately he argued that the decision in Estate of Late Smt. K. Narammma's case (supra) fully govern all the facts of the case before us and, therefore, the decision of the lower authority which is based on the said binding authority on this Tribunal is not liable to be disturbed and, hence, the departmental appeal should be dismissed.
11. We have considered the arguments advanced on both sides. Before proceeding to decide the matter at issue, we have to see the terms of the will dated 23-7-1949 as well as the terms of the anti-adoption agreement dated 20-8-1951. Both were registered. Neither their genuineness nor their validity was in doubt. The will dated 23-7-1949 was very crisp and to the point. The English translation of the said will is as under:
The will executed by Rajah Manyam Kanakayya, Zamindar, Gootala etc. Taluka Estate dated 23-7-1949:
My wife Rajah Manyam Meenakshamma is to enjoy with absolute rights all my movable and immovable properties after my death. My wife was given permission to adopt a boy. Even after adoption my wife only has the rights over the properties during her lifetime. Subsequent to her only the properties should devolve upon the adopted boy. If she is willing my wife can adopt Krishna Rao, the second son of Shri Yelamarthy Venkata Sathyanarayanamurthy of Atreyapuram who is now looking after me. If she is not willing she has to give Rs. 35,000 worth of property to the said Krishna Rao absolutely. I reserve the right to alter the will during my lifetime. This is the will which I had got written when I was alert and possessed full mental faculty and of my free will and volition. The terms of the will should come into operation only after my death.
The English translation of the anti-adoption agreement dated 20-8-1951 is already furnished and it is as follows :
Executed in favour of Manyam Kanakayya, 2nd son of Yelamarthy Venkata Sathyanarayanamurthy, vysya, business, inamdars, resident of Atreyapuram, Kothapeta Tq., E.G. District, and adopted son of Meenakshamma wife of late Manyam Kanakayya, zamindar, vysya and zamindar of Gootala etc. estates resident of French Yanam and at present resident of Rajahrriundry, E.G. District by:
Manyam Meenakshamma Zamindarini, wife of Shri Raja Manyam Kanakayya Zamindar, Vysya, Zamindar of Gutala and other estates, resident of French Yanam, now resident of Rajahmundry, E.G. District. I have no issues, male or females. You are the 2nd son of my sister Yelamarthy Kamakashamma, wife of Venkata Sathyanarayanamurthy. For perpetuation of lineage and for spiritual attainment in next world, I and my late husband Kanakayya Zamindar, intending to bring you up and adopt you asked your natural father and my sister's husband Yelamarthy Venkata Sathyanarayanamurthy. In pursuance of his acceptance, we have brought you to our house. You were aged about 10 years by then. Since last 8 years, we are giving education and bringing you up and treating you as our son. I and my husband were contemplating to adopt you and to perform you the thread ceremony as you are attaining age. Due to will of God, having fell ill, and thinking that he may not survive on 23-7-1949, your adopted father and my husband Shri Raja late Kanakayya Zamindar had executed a will and got it registered in the Sub-Registrar Office, Rajahmundry in Book No. 3, Vol. 53, pages 64, 65, document No. 66 of 1949. He died on 28-7-1949. Therefore, in pursuance of the above will and wishes of my husband and my wish and also on account of affection for bringing you up to grown up age, since you crossed the age of eighteen years and as thread ceremony, marriage ceremonies have got to be performed, for continuance of our family lineage and for the spiritual benefit of himself and my husband having decided to adopt you, I have adopted you on 20-8-1951 at 11.26 Accountant Member at my house at Rajahmundry as per Hindu Dharma Sastras and took you in adoption from your natural parents in the presence of your natural parents, relations and friends, my relations and friends and learned scholars. Hitherto you are being called Yelamarthy Ramakrishna Rao. On the date of adoption you arc named as Manyam Kanakayya. Hereafter from today you should be as our natural son and treated as Shri Raja Manyam Kanakayya Zamindar.
In pursuance of the above referred will of late Shri Raja Manyam Kanakayya Zamindar my husband and your adopted father the properties that have devolved on me and the properties that may devolve on me all immovable and movable properties, you should enjoy them after me with absolute rights from generation to generation without hindrance.
This is the adoption deed executed by me voluntarily.
Manyam Meenakshamma.
It is seen that from several generations there were only adoptions in the family of Raja Manyam Kanakayya. Theirs was a zamindari family and they held Gootala, etc., villages as their estate. Their estate was located in the erstwhile French Yanam territory. On 23-7-1949 when Rajah Manyam Kanakayya executed the will which was subsequently registered as document No. 66 of 1949 in Rajahmundry Sub-Registry the property held by him was of joint family property in his hands and he was the sole surviving coparcener to the whole estate. No doubt his wife Smt. Meenakshamma had got only the right to maintain out of the estate. Her mere right to derive maintenance from out of the joint family estate did not any the less make Raja Manyam Kanakayya the sole surviving coparcener of the said estate. As sole surviving coparcener he is entitled to deal with any item of joint family property in his hands as if it is his self-acquired property. He is entitled to gift, sell or alienate any item of the property as he liked. In our considered opinion, the will dated 23-7-1949 is fully operative and clearly valid and enforceable and becomes operative after the death of Rajah Manyam Kanakayya. Rajah Manyam Kanakayya died on 28-7-1949. By that date the adoption of the minor boy Krishna Rao did not take place. Smt. Meenakshamma adopted the boy only on 20-8-1951. Again neither the factum of adoption nor the validity of adoption were in question before us. Under the circumstances we hold that the right of the adopted boy in the joint family property commenced only from the date of adoption, i.e., 20-8-1951. We also hold that all the alienations prior to the date of adoption including the will dated 23-7-1949 are fully binding against the adopted son they being alienations made by the sole surviving coparcener. He had the requisite authority to do so. We respectfully follow the declaration of law by the Hon'ble Supreme Court in Surjit Lal Chhabda's case (supra), where it is held that a son either born or adopted after alienation shall take the family hotchpot as he finds it. A son born, begotten or adopted after the alienation has no right to challenge the alienation. After Smt. Meenakshamma adopted Krishna Rao and renamed him as Rajah Manyam Kanakayya on 20-8-1951 a joint family had come into existence between the accountable person and the deceased. A joint family need not necessarily possess any joint family property. The doctrine of relation back no doubt operates, in our considered opinion, only to continue the lineage and the doctrine cannot be extented for any other purpose. For instance, it cannot be used to interdict alienation made by the last male holder as the sole surviving coparcener to any outsider. The right of a subsequently adopted son is. similar to that of the posthumous son or after born son and his rights would not in any way be better than those persons. In order to buttress our rinding that simply because Smt. Meenakshamma happened to adopt the accountable person as an adopted son of her late husband on 20-8-1951 that by itself does not defeat either the efficacy or the validity of the terms of the will dated 23-7-1949, we may quote from Mulla's Principles of Hindu Law, Fifteenth edn. at this juncture which is as follows :
The will of a Hindu disposing of his separate property is not revoked by the subsequent adoption of a son by him.
Where a Hindu disposes of his separate property by will, and an adoption is made to him by his widow after his death, the disposition by will is not affected by the adoption, for the will speaks as at the death of the testator, and the property is carried before the adoption takes place. The same principle applies when the last surviving coparcener of a joint family makes a testamentary disposition of his property or alienates the property in any way before the adoption takes place. The adopted son takes subject to the provisions of the will, or the previous alienations.(p. 609) The authority for the above exposition of the law is also found by the learned author from the decision of the Andhra Pradesh High Court in Duvvuri Lakshminarasimham v. Garimella Rajeswari AIR 1955 AP 278. Having regard to all the legal authorities cited before us and having noted the ratio enunciated therein we agree with the comment made by the earned departmental standing counsel that the decision of the Andhra Pradesh High Court in Estate of Late Smt. K. Narasamma's case (supra) did not consider several binding authorities on them. Further the point seemingly decided by the said decision went against the unequivocal declaration of law made by the Hon'ble Supreme Court in Surjit Lal Chhabda's case (supra) and, therefore, we are unable to follow the effect of the decision of the Andhra Pradesh High Court in Estate of Late Smt. K. Narasamma's case (supra) even though it may help to support the case set up by the assessee.
12. Our task is not over by simply considering what is the correct legal position to be applicable to the facts of the case. Now we have to decide by applying the above legal principles to the facts of the present case. We have already held that the will dated 23-7-1949 is fully valid and fully operative. But what are the actual terms of the will and what type of estate was conferred by Smt. Meenakshamma in different situations ? In our considered opinion, the learned departmental standing counsel stressed only on a disposition found in the said will which comes into operation had not Smt. Meenakshamma adopted anybody during her lifetime to her husband but he did not take us through the types of bequests contemplated under the will if Smt. Meenakshamma adopted a boy to her late husband, Raja Manyam Kanakayya the testator provided for both the situations in different ways he had provided for situation where his wife Smt. Meenakshamma does not want to go for adoption and in such a case the testator bequeathed all his properties both movable and immovable absolutely to her except for implementing the direction that an amount of Rs. 35,000 should be given to Krishna Rao, the second son of Yelamarthy Venkata Sathyanarayanamurthy. The testator also contemplated situation where his wife adopts a son to him. In such a case he ordained through the terms of the will that his widow Smt. Meenakshamma should enjoy all the properties both movable and immovable only up to her life, and subsequent to her death all his properties should vest absolutely in his adopted son. According to us the terms of the ante-adoption agreement dated 20-8-1951 conformed to the recitals made in the will dated 23-7-1949. Neither Smt. Meenakshamma nor Yelamarthy Venkata Sathyanarayanamurthy the natural father of the adopted son had any misapprehension about the true dispositions or about the two different types of dispositions contemplated in the will dated 23-7-1949. Both of them had correctly understood the terms of the will dated 23-7-1949. In the last but one paragraph of the ante-adoption agreement dated 20-8-1951 (as per English translation given to us) the following is what is stated:
In pursuance of the above referred will of the late Raja Manyam Kanakayya Zamindar my husband and your adopted father the properties that have devolved on me and the properties that may have devolved on me all immovable and movable properties, you should enjoy them after me with absolute rights from generation to generation without hindrance.
The above paragraph would make it very clear that in the clear understanding of the parties to the said document, the adopted son has no rights in the properties covered by the will dated 23-7-1949 during the lifetime of Smt. Meenakshamma. The parties to that document clearly felt that it is only after her death that the accountable person should enjoy all the properties both movable and immovable properties so derived from the terms of the will and the properties which may further be acquired by her should be enjoyed with absolute rights by her adopted son from generation to generation. Thus, it is patent, in our humble opinion, that the ante-adoption agreement dated 20-8-1951 is only implementing the terms of the will dated 23-7-1949. We have already held that the long and the short of our discussion till now is that the terms of the will dated 23-7-1949 should govern the disposition and it is quite valid, legal and enforceable. If that is so, it is apparent from the terms of the will dated 23-7-1949 as well as the ante-adoption agreement dated 20-8-1951 that Smt. Meenakshamma is entitled only to the life interest, whereas the accountable person is entitled to the vested remainder rights after her death. If that is the correct intendment of the bequeathals made in the will dated 23-7-1949 the life estate enjoyed by Smt. Meenakshamma and the vested remainder rights in each of the properties covered by the will dated 23-7-1949 passed to the accountable person under the terms of the will. Therefore, in our considered opinion, the accountable person became entitled to the properties not because he inherited the said properties from his adoptive mother Smt. Meenakshamma but because he obtained them as a legatee under the will dated 23-7-1949 under the dispositions made under it. Therefore, in our considered opinion, Section 5 does not come into operation. In our opinion, Section 7(1) does attract. The said provision is as follows:
Interests 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 Aliyasantana law.
Properties which were devolved on the accountable person after the death of Smt. Meenakshamma can easily be postulated as falling under two categories -- first being the category of properties on which benefit accrues or arises by the cesser of the life interest and the second being properties the benefit over which accrues or arises by the cesser of interest. The properties falling under the first category cannot pass any interest on the death of the deceased. In this connection we may refer to the Bombay High Court decision in D.J. Gazdar v. CED [1982] 138 ITR 607. In that case, one J, who died in 1951, had a share in an own occupied property made a will in regard to his half share in the property. Under the terms of the said will it was provided that during the lifetime of his wife, B, she would be allowed to reside in the property free of rent and after the death of his wife his sons were to reside. After the death of the testator J his wife B lived in the house including the portion belonging to her husband J. B died on 13-5-1963, and the question which arose was whether the value of the half share in the property belonging to her husband J could be deemed to pass on the death of B. The High Court held that the will did not create any interest which extended to any income from the property. The provisions in the will merely provided for a right of residence which could not be treated as a right extending to any income from the property. If the right of free residence could not be treated as an interest which extends to any income from the property, the valuation of the benefit accruing or arising out of the cesser of such interest, namely, the right of free residence, could not be computed in accordance with the manner prescribed under Section 40 of the Act. Therefore, in that case the Bombay High Court held that though there was a cesser of interest and property could be said to be deemed to pass, the benefit accruing therefrom was not liable to estate duty as Section 40(a) did not contemplate a computation of the value of such benefit. Applying the ratio of the said Bombay High Court decision we have to hold that the house property in which the deceased resided should be valued left out and it should be held not liable to estate duty. Even with regard to other property the Assistant Controller should value only such property over which the deceased was deriving income and the value of such estate only should be considered for levy of estate duty under Section 7(1), read with Section 40. The said valuation of cesser of life interest in the income yielding properties bequeathed under the will of the testator should be determined as per the actuarial valuation and as per the Board's circulars which are in vogue on the subject duly taking into consideration the age of the deceased.
13. In the result, the appeal of the department is partly allowed to the extent noted above.