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Kancharla Kesava Rao Vs. Controller of Estate Duty - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 28 of 1965
Judge
Reported in[1969]74ITR248(AP)
ActsEstate Duty Act, 1953 - Sections 16(2), 24 and 24(1); Hindu Women's Rights to Property Act, 1937 - Sections 3(2) and 3(3)
AppellantKancharla Kesava Rao
RespondentController of Estate Duty
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateT. Ananta Babu, Adv.
Excerpt:
.....hindu women's rights to property act, 1937 - partition effected between members of joint family - life estate in respect of land created in favour of widow and her daughter-in-law of deceased son - conferment of life interest was disposition which fall within section 24 - daughter-in-law had rights in joint family property and was also party to partition deed by which life interest created in favour of widow - to extent of life interest created in favour of widow it was deemed that daughter-in- law released properties from her claim - daughter in law to be treated as disponer to extent of interest she possessed in joint family estate - held, provisions of section 24 (1) satisfied as reverter being absolutely to all disponers. - - 2 to 7, has relinquished all rights though she has..........registered partition deed dated 16th june, 1943. under one of the clauses of the partition deed, a life estate in respect of ac. 25.00 of agricultural lands was created in favour of the widow, smt. kancharla kotamma, with a vested remainder in favour of the other son, kesava rao, and the minor sons and widow of late chandrasekhara rao, the said clause roads as follows : ' kotamma wife of late venkataramayya being no. 9 out of us is the mother of no. 1 and grand-mother of nos. 2 to 7, has relinquished all rights though she has got rights to enjoy exclusively one portion of the family properties and she should enjoy the properties described in c schedule for her lifetime without power of gift or sale and she should not have any claims in the remaining movable and immovable properties of.....
Judgment:

Ramachandra Rao, J.

1. The following question has been referred to this court under Section 64(1) of the Estate Duty Act of 1953 (hereinafter called ' the Act'), by the Income-tax Appellate Tribunal, Hyderabad Bench :

' Whether the value of Ac. 25'00 of wet land is exempt from levy of estate duty under Section 24 of the Estate Duty Act, 1953 '

2. The facts relevant for the purpose of this reference are as follows :

One Smt. Kancharla Kotamma died on 9th April, 1958. She was the widow of one Kancharla Venkataramayya, who died in April, 1940, leaving his widow, the aforesaid Kotamma, and two sons. They constituted a Hindu joint family. Before partition could be effected, the elder son, Sri Chandrasekhara Rao, died in the year 1941, leaving behind six minor sons and his widow. Subsequently, a partition was effected between the members of the family by a registered partition deed dated 16th June, 1943. Under one of the clauses of the partition deed, a life estate in respect of Ac. 25.00 of agricultural lands was created in favour of the widow, Smt. Kancharla Kotamma, with a vested remainder in favour of the other son, Kesava Rao, and the minor sons and widow of late Chandrasekhara Rao, The said clause roads as follows : ' Kotamma wife of late Venkataramayya being No. 9 out of us is the mother of No. 1 and grand-mother of Nos. 2 to 7, has relinquished all rights though she has got rights to enjoy exclusively one portion of the family properties and she should enjoy the properties described in C schedule for her lifetime without power of gift or sale and she should not have any claims in the remaining movable and immovable properties of the family and after her lifetime an arrangement has been made that No. 1 and Nos. 2 to 8 to divide equally the said C schedule property. '

The accountable person contended before the Assistant Controller of Estate Duty that the value of the two properties, viz., Ac, 25.00 of wet land and a portion in the residential house in which the deceased Kotamma had a life interest, should be exempted from estate duty by reason of the provisions of Section 24 of the Act. The Assistant Controller rejected the said contention stating that what was done by the partition deed was only an exchange of properties in which the deceased had a life interest and that Section 24 of the Act was inapplicable to such a disposition. On appeal, the Appellate Controller held that the properties did not revert back to the disponers who made the disposition, that the agricultural lands reverted back not only to the male coparceners as to the original disponers but also to the widow of Chandrasekhara Rao, who had no vested interest at the time the partition was effected. On further appeal to the Income-tax Appellate Tribunal, it was held that the life interest created in favour of the widow was in substitution of the rights which she had otherwise in the estate of her deceased husband under Sub-section (2) of Section 3 of the Hindu Women's Rights to Property Act of 1937 and that on relinquishment by her of the said rights she got the right to enjoy the properties described in the C schedule of the partition deed dated 16th June, 1943,for her lifetime, that the disponers got a valuable right in respect of the share which otherwise would have fallen to the widow on the death of Venkataramayya and that it was therefore a benefit got by the disponers under a contract. The Tribunal further held that the persons to whom the property now reverted were not the same as those who were the disponers. In this view the Tribunal rejected the appeal.

3. Before us, Sri P. Rama Rao, the learned counsel for the applicant, contended that the view taken by the estate duty authorities as well as the Appellate Tribunal is erroneous in law and that, on a proper interpretation of the recitals in the partition deed, the 25 acres of agricultural land should have been exempted from the levy of estate duty under Section 24 of the Act. Before dealing with the contentions raised by the learned counsel for the applicant, it is necessary to read the provisions of Section 24 of the Act, which are as follows :

'24. Property reverting to disponer.--(1) Where by a disposition of any property an interest is conferred on any person, other than the disponer, for the life of such person or determinable on his death, the remainder being conferred upon the disponer absolutely, and such person enters into possession of the interest, and thenceforward retains possession of it, then, on the death of such person, the property shall not be deemed to pass by reason only of its reverter to the disponer in his lifetime.....

Provided that Sub-section (1) shall not apply where such person or persons taking the said life or determinable interest had at any time prior to the disposition been himself or themselves competent to dispose of the said property. '

4. The said section provides for exemption from the estate duty if, by the disposition of the property, an interest is conferred on any person other than the disponer for the life of such person or determinable on his death and that the property must revert to this disponer in his lifetime and the person taking the life estate or determinable interest must not at any time prior to the disposition have been competent to dispose of the said property. There is no controversy before us that by reason of the clause contained in the partition deed a life estate is created in respect of 25 acres of agricultural land which is the subject-matter of the reference. The contention of the learned counsel for the revenue is that the life estate is not conferred by a disposition of the property as required by the section. In other words, what the learned counsel says is that the deceased, Kotamma, herself had an interest in the joint family properties to the extent of the non-agricultural properties and that what was effected by the partition deed was only a mere exchange of the said right with the life estate created under the said clause. Sri T. Ananta Babu contended that there is no conferment of an interest but only a conversion of her interest in the joint familyproperties to that of life estate and that it is outside the purview of Section 24. In this context, we have to determine what the rights of the deceased, Kotamma, were in the joint family properties at the time of her husband's death in April, 1940. By that date, the Hindu Women's Rights to Property Act, 1937, which is an enactment of the Central legislature, was in force. Under Section 3(2) and (3) of the said Act a widow of a Hindu governed by any school of Hindu law other than the Dayabhaga school or customary law is entitled to the same interest which her husband had in the joint family property and she will be entitled only to a limited interest known as the Hindu women's estate but with a right of claiming partition. This Act was held inapplicable to agricultural lands in In re Hindu Women's Rights to Property Act, 1937, A.I.R. 1941 F.C. 72 ; 4 F.L.J. 1. Though this Act was extended to agricultural properties by the Madras Hindu Women's Rights to Property Act, 1947, we are not concerned with the provisions of the said Act inasmuch as the rights of the deceased, Kotamma, have to be decided with reference to the Central Act, 1937, which was in force at the time of the death of her husband. Admittedly, Kotamma had a right to exclusive possession of one portion in the non-agricultural properties and a right to be maintained out of the agricultural properties belonging to the joint family. Similarly, the widow of Chandrasekhara Rao, one of the sons who died in the year 1941, had similar rights in the joint family properties. On 16th June, 1943, when the partition was effected, it is only the Central Act that was in force and in effecting the partition what happened was that the widow, Kotamma, relinquished her rights in the joint family properties and was conferred a life estate in respect of the C Schedule properties mentioned therein which included the 25 acres of agricultural land. It further provided that the aforesaid C Schedule property should revert to other parties to the partition deed in equal shares. Whether it is a partition or an exchange or a substitution of one right for the other, it is still an arrangement or an agreement by which the widow was conferred a life estate in respect of certain properties. We are inclined to think that this amounts to a disposition which conferred a life estate on the widow within the meaning of Section 24 of the Act. The word ' disposition ' is not defined in the Act. But the said expression has been denned in Section 16(2)(b) of the Estate Duty Act as follows :

'' disposition ' includes any trust, covenant, agreement or arrangement. '

5. There is no reason why the partition arrangement come to between the members of the joint family including the two widows should not be treated as an agreement or arrangement. According to the Twentieth Century Chamber's Dictionary, the word 'disposition' means arrangement, distribution, plan for disposing one's property. The term ' disposition ' musthave been intended to eover every mode by which property can pass by act of parties and, therefore, the said expression should be liberally construed. If so, the partition effected by the deed dated 16th June, 1943, would constitute an arrangement or an agreement and falls within the meaning of the expression ' disposition '. Admittedly, the widow had no rights to the possession of the agricultural lands. For the first time under the said document, a life estate was created in her favour in respect of the 25 acres of agricultural land. This would certainly amount to conferment of a life estate under the partition. Therefore, we are of the opinion that the conferment of the life interest is a disposition falling within Section 24 of the Act.

6. The next submission of the learned counsel for the revenue is that the reverter of the property is not to the disponers only, but to the disponers and a third party, namely, the widow of Chandrasekhara Rao, and that the exemption under Section 24 of the Act cannot be claimed. We have already mentioned that the widow of Ghandrasekhara Rao had similar rights in the joint family properties as the widow, Kotamma, had and she was also a party to the partition deed or arrangement by which a life estate was created in favour of Kotamma. She had sufficient interest in the estate. Therefore, the widow of late Chandrasekhara Rao had an interest in the joint family properties including the 25 acres of agricultural land and a portion of the residential house in which a life interest was created in favour of the widow, Kotamma. But, to the extent of the life interest created in favour of the widow, Kotamma, we must take it that the widow of Chandrasekhara Rao had released the said properties from her claim. Therefore, she should also be treated as a disponer to the extent of the interest she possessed in the joint family estate. It is not disputed that the remainder of the property disposed of has been conferred upon the disponers absolutely. Therefore, we are of the opinion that the reverter being absolutely to all the disponers, the provisions of Section 24(1) are satisfied.

7. The next submission made by the learned counsel for the revenue is on the basis of the proviso to Section 24. The learned counsel contends that under the proviso the person taking the life interest should not have at any time prior to the disposition been competent to dispose of the said property in which the life estate was conferred on that person. This submission is devoid of any merit as it is obvious that the widow, Kotamma, had no interest in the 25 acres of agricultural land at any time prior to the partition deed. She had only a right to be maintained out of the income from the agricultural properties and she had no right to be in possession of the corpus itself. The proviso is, therefore, clearly inapplicable to the facts of the case.

8. Sri Ananta Babu sought to rely upon a decision in Inland Revenue v. Lyel, [1918] Scottish Cases 125. But this case is decided on the language of Section 15 of the U.K. Finance Act, 1896. Though Section 24 is based upon the provisions of Section 15 of the U.K. Finance Act, the scope of Section 24 in the Indian Act is more liberal than the corresponding section under the English Act. Secondly, the concept of Hindu law and the rights of a Hindu widow are foreign to the provisions of the English Act and in determining the scope and ambit of the provisions of Section 24, we think it is not safe to rely upon the decisions rendered on the basis of the English enactment.

9. For all the foregoing reasons, the answer to the question referred is in the affirmative and in favour of the assessee. The applicant will have his costs from the respondent. Advocate's fee, Rs. 250.


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