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Arshad Waliullah Vs. Controller of Estate Duty - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberEstate Duty Reference No. 243 of 1967
Judge
Reported in[1972]83ITR150(All)
ActsTransfer of Property Act - Sections 116
AppellantArshad Waliullah
RespondentController of Estate Duty
Appellant AdvocateB.C. Dey and ;V. Sarup, Advs.
Respondent AdvocateB.L. Bupta and ;R.R. Misra, Advs.
Excerpt:
- - 8. the first question for consideration is whether the deceased enjoyed any interest in the property upon the expiry of the lease in 1958. only if he did so does the further question arise whether any interest in the property can be deemed to have passed on his death. commissioner of tirhul division air1959pat1 .but we are not satisfied that anything said there advances the case of the accountable person......v. jamini lal roy : air1940cal89 . in raman lal this court held that by reason of the terms of the lease a month to month tenancy could not be implied under the law, that the lessee at no time held over, and, therefore, could not be said to have become a tenant from month to month, that he was only a tenant at will, that the interest of a tenant at will is not heritable but determined by his death and, therefore, no interest passed to his son. in anwarali the calcutta high court held that while a tenancy at will was determined by the death of either the tenant or the landlord, a tenancy from monthto month resulting from a tenant holding over under section 116 of the transfer of property act was transferable and heritable.16. on behalf of the accountable person reliance is placed upon.....
Judgment:

Pathak, J.

1. The Appellate Tribunal has referred the following question under Section 64(1) of the Estate Duty Act, 1953 :

' Whether, on the facts and in the circumstances of the case, the estate duty was rightly levied in respect of the house property at No. 12, Elgin Road, Allahabad, as property passing on the death of the deceased '

2. The immovable property known as 12, Elgin Road, Allahabad, is Nazul land. It was first leased out of one E. E. Moreau by the Secretary of State for India in 1858, for a period of 50 years on terms with gave the lessee an option of renewal of the lease. The lease expired in 1908. Thereafter, by a deed of 1911 it was renewed with effect from 1908 for a further period of 50 years. There was no provision for any further renewal and the lease expired on November 29, 1958.

3. Dr. Mohammad Waliullah became the owner of the lease-hold rights in the land and of the bungalow standing thereon some years before the lease expired in 1958. On March 29, 1958, the Collector of Allahabad, on behalf of the State Government, the successor to the right and interest of the then lessor, the Secretary of State for India, served a notice requesting him under the terms of the lease to surrender the land and hand over vacant possession upon the expiry of the lease. Dr. Waliullah applied for the grant of a fresh lease in respect of the property. On December 14, 1959, the Collector wrote to him that on payment of a premium of Rs, 30,169.46 and ground rent of Rs. 588'94 per annum a lease for 30 years with effect from November 30, 1958 in the first instance, renewable for two terms of 30 years each, subject to an enhancement of rent not exceeding 50 per cent, on each renewal, would be granted. It seems that the parties entered into negotiations as regards the final terms of the proposed lease, but before any decision could be taken Dr. Waliullah died on February 21, 1960. On October 31, 1960, the Collector wrote to his widow informing her that upon representations made by the lease-holders of the civil station, Allahabad, the Government had decided as a special' concession to reduce the rates of premium and rent provided the concession was availed of by the execution of a fresh lease within three months. The totalpremium now payable, in respect of the property was specified as Rs. 23,459.50 and the ground rent as Rs. 295.48 per annum. The period of the leare and the terms of renewal remained the same. On September 12, 1962, the Collector wrote to Mrs. Waliullah for payment of the premium and rent to enable the grant of a fresh lease and warned that in case payment was not made within a month it would be presumed that she was not desirous of obtaining a fresh lease. On October 19, 1962, she replied that her husband had left six heirs, that the fresh lease had to be executed in favour of all, that the amount of premium and annual rent should be reduced and that pending final decision permission should be granted to pay the premium in five annual instalments. Thereafter, on November 15, 1962, the Collector wrote to Mrs. Waliullah and the other heirs according permission for payment of premium in five equal annual instalments and agreed to execute a fresh lease in favour of all the heirs after the enquiry.

4. From the statement of the case it appears that while negotiations regarding the amount of the premium and ground rent under the proposed lease were in progress, the deceased continued in occupation and the Collector continued to accept ground rent from him, and after his death from his heirs.

5. Arshad Waliullah, one of the sons of the deceased, filed a return of the estate. The return did not include the property at 12 Elgin Road, Allahabad. The return was adopted by the widow as having been filed on her behalf also. The Assistant Controller valued the property at Rs. 71,452. The cost of construction of the buildings and the cost of the land was taken and from the aggregate an amount of Rs. 30,169 was deducted on account of the premium. The accountable person appealed to the Assistant Controller and the appeal being dismissed, he filed a second appeal before the Appellate Tribunal and that appeal has also been dismissed. And now, at the instance of the accountable person, this reference has been made.

6. Before the Appellate Tribunal the principal contention of the accountable person was that the lease having expired in 1958 there was no interest in the property left to the deceased which he was competent to dispose of. The Appellate Tribunal observed :

'The most significant facts are that though the lease expired on November 29, 1958, the deceased did not vacate the lease-hold premises; that negotiations for the grant of a fresh lease were going on between the deceased and the Collector; that the Collector accepted the ground rent from the deceased and after his death from the legal heirs of the deceased; that the Collector actually agreed to grant a fresh lease for a period of 30 years in the first instance if the deceased was prepared to pay a total premium of Rs. 30,169 and ground rent of Rs. 588 per annum ; that the deceased never vacatedthe premises and that the Collector also did not take any steps to oust the deceased from the lease-hold premises and that subsequently the Collector agreed to renew the lease in favour of the legal representatives of the deceased at a reduced premium and reduced ground rent.'

7. From this the Appellate Tribunal inferred that although during the life-time of the deceased a fresh lease was not actually granted yet the intention of the parties was that a fresh lease would be granted. The Appellate Tribunal held that, therefore, the deceased had an interest in the property which passed on his death. It also referred to the circumstance that a lease deed was executed subsequently after the death of the deceased and that related back to November 29, 1958, when the earlier lease had expired. As there was no dispute regarding the valuation of the house and the land, it confirmed the valuation made by the Assistant Controller.

8. The first question for consideration is whether the deceased enjoyed any interest in the property upon the expiry of the lease in 1958. Only if he did so does the further question arise whether any interest in the property can be deemed to have passed on his death. The lease expired on November 29, 1958. The deceased was served with a notice dated March 29, 1958, by the Collector pointing to the impending expiry of the lease and requiring him to surrender the land and hand over vacant possession. Upon that it appears that the deceased applied for the grant of a fresh lease. Negotiations commenced in regard to the terms of the proposed lease such as the' premium and the ground rent payable. But they remained unconcluded when the deceased died and no agreement regarding the proposed lease was reached during his lifetime. But, notwithstanding the expiry of the lease, the deceased did not vacate the property and continued in possession and the Collector accepted ground rent from the deceased up to the date of his death. There is nothing to suggest that the acceptance of the ground rent by the Collector was provisional only. There is no such finding by the Appellate Tribunal. It would, therefore, seem that upon the expiry of the lease the deceased became a tenant holding over by virtue of Section 116 of the Transfer of Property Act. Section 116 provides:

' 116. If a lessee or under-lessee of property remains in possession thereof after the determination of the lease granted to the lessee, and the lessor or his legal representative accepts rent from the lessee or under-lessee or otherwise assents to his continuing in possession, the lease is, in the absence of an agreement to the contrary, renewed from year to year, or from month to month, according to the purpose for which the property is leased, as specified in Section 106. '

9. The deceased remained in possession after the determination of the lease and the Collector accepted rent from him thereby assenting to hiscontinuing in possession. Consequently, the lease must be considered as renewed. The original lease was not a lease for an agricultural or manufacturing purpose and, therefore, the renewal cannot be treated to be a renewal from year to year. It must be considered as a renewal from month to month. The position, therefore, is that after November, 1958, the deceased became a tenant from month to month holding over under section 116 of the Transfer of Property Act.

10. But it is contended, for the accountable person that the original lease must be treated as falling within the contemplation of the Crown Grants Act, 1895. It is urged that thereby the provisions of the Transfer of Property Act, including Section 116 thereof, are excluded. Section 2 of that Act provides:

' Nothing in the Transfer of Property Act, 1882, contained shall apply or be deemed to have ever applied to any grant or transfer of land or of any interest therein heretofore made or hereafter to be made by or on behalf of the Government in favour of any person whomsoever and that every such grant and transfer shall be construed and take effect as if the said Act had not been passed. '

11. The operation of this provision has been the subject of decision by this court in several cases. In Dost Mohammad Khan v. Bank of Upper India Ltd. [1906] 3 A.L.J. 129, Dost Mohammad Khan v. Bank of Upper India Ltd. [1906] 3 A.L.J. 628 and Munshi Lal v. Gopi Ballabh, [1914] I.L.R. 36 All. 176; 22 I.C. 931.it was held that Section 2 of the Crown Grants Act, 1895, does not render all the provisions of the Transfer of Property Act inapplicable to lands held under grant from the Crown, but the meaning of the section is that if the court is called upon to construe an instrument granting land by the Crown, it shall construe such grant irrespective of the provisions of the Transfer of Property Act. Following those decisions, it was held in Kishan Chand v. Sheo Dutta : AIR1958All879 that Section 2 of the Crown Grants Act does not exclude the operation of sections 106 and 116 of the Transfer of Property Act. The view was reiterated by the court in Zahoor Ahmad v. State of U.P. : AIR1965All326 It is said that the last two cases concern grants made after the Transfer of Property Act had already been enacted. But it will be noticed that Section 2 of the Government Grants Act applies not only to grants made before 1896 but also to those made after. Apparently it is for that reason that reliance was placed before the court on Section 2 of the Act. The court did not repel the contention on the ground that the Government Grants Act had ceased to operate on the enactment of the Transfer of Property Act. It proceeded on the basis that it continued in operation and proceeded to examine its impact upon the application of the Transfer of Property Act.

12. We have been referred to Section 2(c) of the Transfer of Property Act which provides that the provisions of that Act will not be deemed to affect:

' (c) any right or liability arising out of any legil relation constituted before this Act comes into force, or any relief in respect of any such right or liability. '

13. We are unable to see how this provision is relevant. If the deceased continued as tenant after November, 1958, he did so not by virtue of any right arising out of the lease operating until1 then. If he continued as tenant, it was because of Section 116 of the Transfer of Property Act. What Section 2(c) of that Act contemplates is the continued legal effect of rights and liabilities arising out of the legal relations constituted before the Transfer of Property Act came into force and not rights and liabilities which came into existence subsequently by virtue of independent provisions of the Act itself. It was held in Lala Jugdeo v. Brij Behari Lal, [1886] I.L.R. 12 Cal 505 and Rathnasami v. Subramanya, [1886] I.L.R. 11 Mad. 56 that the Act would apply to a legal relation created after the Act, and, therefore, an assignment of a mortgage after the Act would be governed by the Act even though the mortgage was executed before the Act came into force.

14. In our opinion, therefore, the deceased was holding over under Section 116 of the Transfer of Property Act upon the determination of the lease in November, 1958, and he became a tenant from month to month.

15. The next question is whether upon the death of the deceased his interest as a tenant from month to month passed to his heirs. It appears to be the settled view of this court that the interest of a tenant from month to month holding over under Section 116 of the Transfer of Property Act is heritable. One of the recent decisions on the point is Ram Nath v. Neta : AIR1962All604 . In that case the lease expired On October 24, 1916, but the tenant continued in possession. The court held that under Section 116 of the Transfer of Property Act, he became a tenant from month to month. On his death in 1922, the rights under the monthly tenancy devolved on his son. Reliance was placed on Raman Lal v. Bhagwan Das : AIR1950All583 and Anwarali v. Jamini Lal Roy : AIR1940Cal89 . In Raman Lal this court held that by reason of the terms of the lease a month to month tenancy could not be implied under the law, that the lessee at no time held over, and, therefore, could not be said to have become a tenant from month to month, that he was only a tenant at will, that the interest of a tenant at will is not heritable but determined by his death and, therefore, no interest passed to his son. In Anwarali the Calcutta High Court held that while a tenancy at will was determined by the death of either the tenant or the landlord, a tenancy from monthto month resulting from a tenant holding over under Section 116 of the Transfer of Property Act was transferable and heritable.

16. On behalf of the accountable person reliance is placed upon Vadapalli Narasimham v. Dronamraju Seetharamamurthy, [1907] I.L.R. 31 Mad. 163. That was a case, however where a tenant upon the expiry of his lease continued in possession without paying any rent and without the assent of the lessor and thereafter his representatives continued in possession. It was held that upon the expiry of the lease the tenant was merely a tenant on sufferance and that in the absence of the lessor's assent the tenancy could not be converted into a tenancy from month to month or from year to year. His representatives, as the representatives of a tenant on sufferance, were mere trespassers. It was not a case where the original tenant became a tenant from month to month upon the expiry of the lease. In any event, the correctness of the decision in Vadapalli Narasimham was doubted by the same court subsequently in Sub-bravati Ramiah v. Gundala Ramanna, [1909] I.L.R. 33 Mad. 260. In Sheo Dulare Lal Shah v. Anant Ram : AIR1954All475 it was pointed out that a tenant remaining in possession after the determination of the tenancy would be a tenant on sufferance, but on the landlord assenting to his continuing in possession by giving a notice demanding rent for the period after the determination of the tenancy, the tenancy on sufferance would become a tenancy from month to month. The decision in Vadapalli Narasimham was explained and reference was also made to the view taken of it in Subbravati Ramiah. For the accountable person reliance is also placed on Charan Mahton v. Kumar Kamakhya Narayan Singh, A.I.R. 1925 Pat. 357. But in that case it appears that the heirs of the grantee and not the grantee himself sought the benefit of Section 116 of the Transfer of Property Act. It was pointed out that while the lessee himself could, on the determination of his lease remain in possession with the consent of the landlord and hold over within the meaning of Section 116, that was not open to his heirs if the lease came to an end upon the death of the lessee and the heirs were in possession without any right whatsoever. It was held that the interest created by the grant became extinct upon the death of the last surviving grantee and the possession of the heirs was that of trespassers. Reliance was also placed on Digambar Narain Chaudhary v. Commissioner of Tirhul Division : AIR1959Pat1 . But we are not satisfied that anything said there advances the case of the accountable person.

17. We have then been referred on behalf of the accountable person to Subodh Gopal Bose v. Province of Bihar : AIR1950Pat222 where the Patna High Court held that if upon the expiry of the lease the lessee continued in possession under an express agreement to do so till the lessor reached a final decision as to the granting of a fresh lease, there is no holding over by the lessee for the purposes of Section 116 of the Transfer of Property Act. In that case, the evidence disclosed the existence of an express agreement between the Province of Bihar and the lessee under which the lessee was allowed to remain in possession until such time only as a final decision was not reached by the Province of Bihar with regard to fresh leases. There is no evidence of any such express agreement between the State Government and the deceased. We have examined the correspondence which passed between them, and there is no reference whatever to any agreement entitling the deceased to continue in possession on payment of rent until the negotiations continued between them had come to an end. The correspondence concerns itself entirely with the fresh lease desired by the deceased and does not anywhere refer to the present possession of the deceased and the terms, if any, to which it was subject.

18. We are of opinion that the interest of the deceased as a tenant arising under Section 116 of the Transfer of Property Act passed upon his death to his heirs, an interest which was transferable and heritable. It was an interest which the deceased at the time of his death was competent to dispose of. Consequently, it was property which must be deemed to have passed on his death.

19. No dispute was raised before the Appellate Tribunal in regard to the valuation set by the estate duty authorities and that valuation has been, therefore, affirmed by the Appellate Tribunal. In the circumstances, it is not a question which we can enter into in this reference.

20. Accordingly, we answer the question referred in the affirmative. The Controller of Estate Duty is entitled to his costs, which we assess at Rs. 200. Counsel's fee is assessed in the same figure.


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