Punjab-Haryana High Court
Controller Of Estate Duty vs Jugal Kishore on 11 March, 1997
Equivalent citations: [1998]230ITR182(P&H)
Author: Iqbal Singh
Bench: Iqbal Singh
JUDGMENT G.S. Singhvi, J.
1. By its order dated February 27, 1982, the Income-tax Appellate Tribunal, Delhi Bench "D", New Delhi, has referred the following questions of law for the opinion of the High Court under Section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as the Act) :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal has been right in upholding the order of the Commissioner of Income-tax (Appeals) on the point that the Assistant Controller of Estate Duty should recompute the share of lineal descendants in accordance with the decision of the Calcutta High Court in the case of Satyanarayan Saraf v. Asst. CED [1978] 111 ITR 432 ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal has been right in law in upholding the decision of the Commissioner of Income-tax (Appeals) to the effect that the share of lineal descendants should be computed after excluding the shares of the wives of the coparceners for the purposes of aggregation under the Estate Duty Act ?"
2. A brief statement of facts would enable us to properly appreciate the question referred by the Tribunal.
3. When Jamuna Das of District Gohana-Bhiwani (Haryana) died on May 17, 1976, he left behind some properties. The properties belonging to the Hindu undivided family were valued at Rs. 3,66,205. 1/4th share of the deceased was taken at Rs. 91,551 and subjected to assessment under the Act. Rs. 2,74,654 were taken as the share of the lineal descendants of Jamuna Das and it was added only for rate purposes. The assessment was framed under Section 58(3) of the Act. Being the accountable person, Shri Jugal Kishore filed an appeal against the order of the Assistant Controller of Estate Duty. The Commissioner of Income-tax (Appeals) accepted the plea raised on behalf of the accountable persons that the share of the deceased should be computed after excluding the share of the wives of Shri Jamuna Das, Mahavir Parshad and Puran Chand. On that premise, the appellate authority directed the Assistant Controller of Estate Duty to compute the shares of the lineal descendants in accordance with the decision of the Calcutta High Court in Satyanarayan Saraf v. Asst CED [1978] 111 ITR 432. The appeal filed by the Revenue against the order of the appellate authority was dismissed by the Tribunal on February 10, 1981.
4. Shri R. P. Sawhney argued that the Commissioner of Income-tax (Appeals) as also the Tribunal have acted illegally in passing the impugned orders because the shares of the lineal descendants of Jamuna Das only could have been taken into consideration for the purpose of determination of the rate of duty and not the so-called shares of the wives of the coparceners. Shri Sawhney argued that the decision of the Calcutta High Court in Satyanarayan Saraf v. Asst. CED [1978] 111 ITR 432 does not lay down the correct proposition of law.
5. Section 34(1)(c) and Section 39 (1) and (3) of the Act which have a bearing on the questions referred to this court are reproduced below :
34. Aggregation.--(1) For the purpose of determining the rate of the estate duty to be paid on any property passing on the death of the deceased . . .
(c) in the case of property so passing which consists of a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law, also the interests in the joint family property of all the lineal descendants of the deceased member ;
shall be aggregated so as to form one estate and estate duty shall be levied thereon at the rate or rates applicable in respect of the principal value thereof."
"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 . . .
(3) For the purpose of estimating the principal value of the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law in order to arrive at the share which would have been allotted to the deceased had a partition taken place immediately before his death, the provisions of this Act, so far as may he, shall apply as they would have applied if the whole of the joint family property had belonged to the deceased."
6. In Satyanarayan Saraf v. Asst CED [1978] 111 ITR 432 (Cal), the facts were that the karta of the family (H) died in 1961 leaving his wife, sons and grandsons. The Assistant Controller assessed the principal value of the estate of H in respect of 1/3rd interest. Subsequently, the Assistant Controller rectified this order and acting under Section 34(1)(c) of the Act he aggregated 2/3rds share of the sons and grandsons overruling the contention of the sons that 1/9th share of his wife who was not a lineal descendant should have been excluded for the purpose of aggregation. The Appellate Controller and the Tribunal held that the order of rectification was not appealable. A learned single judge of the High Court quashed the order. While quashing the order of the Assistant Controller, the learned single judge of the High Court held :
"Under the Hindu law, in order to ascertain the share of the lineal descendants of H, a notional partition of the smaller Hindu undivided family was also contemplated between son and the grandson. In such a partition the wife of the son would be entitled to a share equal to that of grandson. The share of the wife of the son would work out at 1/9th. This 1/9th share was not liable to be taken into account for the purpose of aggregation under Section 34(1)(c)."
7. In CED v. Prakashchand [1984] 147 ITR 1 (MP), a Division Bench of the Madhya Pradesh High Court dealt with an issue which is identical to the issue raised in the case in hand. In that case, the deceased was survived by his three sons and the wife. All the three sons were married. One of the sons had five sons out of whom three were married. The Assistant Controller of Estate Duty added 3/5ths share of the lineal descendants of the deceased in the Hindu undivided family property as provided by Section 34(1)(c) of the Act. The Appellate Controller of Estate Duty upheld the order of the Assistant Controller. However, the Tribunal reversed these orders and held that in a notional partition the entire family including the wives of the sons of the deceased were also entitled to shares equal to the shares of the sons. On a reference made to it under Section 64(1) of the Act, the High Court of Madhya Pradesh expressed its disagreement with the views of the Calcutta High Court and held (page 3) :
"As provided by Section 39 of the Act there would be a notional partition, i.e., a partition immediately before the death of the deceased. The result of such partition would be that the wife and the three sons of the deceased would along with the deceased be entitled to a share. The wives of the sons would not be entitled to any share in such partition. Therefore, the interest of the lineal descendants in the Hindu undivided family property as provided by Section 34(1))c) of the Act would be 3/5ths and not 39.51 per cent. as computed by the Tribunal. The Tribunal has relied on the decision in Satyanarayan Saraf v. Asst. CED [1978] 111 ITR 432 (Cal). It has been held in that case that in order to ascertain the shares of the lineal descendants of the deceased a notional partition of the smaller Hindu undivided family consisting of the son of the deceased and the wife and sons of that son was also contemplated. With respect, we find ourselves unable to agree with that view. The notional partition as contemplated by Section 39 of the Act is between the deceased and other members of the Hindu undivided family who are entitled to a share in the joint family property if a partition were to take place in the lifetime of the deceased. The wife of the son of the deceased cannot be brought into the picture at that stage. What has to be aggregated by virtue of the provisions of Section 34(1)(c) of the Act is the interest of the lineal descendants on a notional partition in the joint family as provided by Section 39 of the Act." (emphasis* added)
8. In CED v. Dulichand Chopra [1984] 148 ITR 144, the Madhya Pradesh High Court again expressed its disagreement with the decision of the Calcutta High Court in Satyanarayan Saraf's case [1978] 111 ITR 432.
9. After having carefully perused Section 34(1)(c) and Section 39 (1) and (3), we respectfully agree with the Madhya Pradesh High Court that while applying the provisions of Section 34(1)(c), the notional partition can be taken into consideration only between the deceased and other members of the Hindu undivided family who would have been entitled to a share in the joint family property if partition had taken place during the lifetime of the deceased. At that stage, the wives of the sons of the deceased cannot be brought into the picture. We respectfully disagree with the decision of the learned single judge of the Calcutta High Court which runs contrary to the plain language of Section 39(1) of the Act.
10. In view of the above, we hold that the appellate authority as well as the Tribunal committed an illegality when they held that the share of the lineal descendants should be computed after excluding the shares of the wives of the coparceners for the purpose of aggregation under the Estate Duty Act.
11. Accordingly, we answer the questions referred to this court in favour of the Department.