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Controller of Estate Duty Vs. Smt. Rani Bahu - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 35 of 1972
Judge
Reported in[1983]142ITR843(MP); 1981MPLJ747
ActsEstate Duty Act, 1953 - Sections 10, 39 and 57; Hindu Succession Act, 1956 - Sections 14
AppellantController of Estate Duty
RespondentSmt. Rani Bahu
Appellant AdvocateP.S. Khirwadkar, Adv.
Respondent AdvocateB.L. Nema, Adv.
Cases ReferredGeneral of Ceylon v. Arunachalam Chettiar
Excerpt:
- - 20,000 to each of the sons and the donees bad retained possession and enjoyment of the amounts transferred to them to the entire exclusion of the possession and enjoyment of the donor......nos. 1 and 2 are that the deceased, his wife. rani bahu, and his four sons constituted a joint hindu family. one of the sons died in 1944 leaving a grandson. the grandson stepped into the shoes of his rather. on november 11, 1950, there was a partition by a surrenderdeed executed between the deceased and his three sons and the grandson of the pre-deceased son. the surrender deed gave particulars of the property which was allotted to the deceased. clause (3) of the surrender deed stated that the deceased relinquished all his rights and other claims over the remaining assets of the joint family property. the sons and the grandson likewise declared that they had no claim or share in the property allotted to the deceased. the deceased and his wife continued as members of a joint hindu.....
Judgment:

G.P. Singh, C.J.

1. This is a case stated by the Income-tax Appellate Tribunal under Section 64(1) of the E.D. Act, 1953, referring for our answer the following questions of law :

' 1. Whether the Tribunal was justified in accepting that only half the property will be deemed to have passed on the death of Chhotelal?

2. Whether the Tribunal has correctly interpreted Section 39(1) of the E.D. Act and held that on the death of a sole coparcener it must be deemed that there was a partition of a HUF and that the wife was entitled to have a share equal to that of her son ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that Section 10 of the E.D Act is not applicable to the facts of the case and whether it was justified in deleting the amount of Rs 88,000 '

2. The reference arises in respect of the principal value of the estate left by one Chhotelal Nanhelal who died on March 2, 1967. The accountable person. Rani Bahu, is the widow of the deceased. The facts relevant to questions Nos. 1 and 2 are that the deceased, his wife. Rani Bahu, and his four sons constituted a joint Hindu family. One of the sons died in 1944 leaving a grandson. The grandson stepped into the shoes of his rather. On November 11, 1950, there was a partition by a surrenderdeed executed between the deceased and his three sons and the grandson of the pre-deceased son. The surrender deed gave particulars of the property which was allotted to the deceased. Clause (3) of the surrender deed stated that the deceased relinquished all his rights and other claims over the remaining assets of the joint family property. The sons and the grandson likewise declared that they had no claim or share in the property allotted to the deceased. The deceased and his wife continued as members of a joint Hindu family after the partition. The Trubunal held that although the deceased was the sole coparcener in the joint Hindu family consisting of himself and his wife, yet having regard to Section 39(1) of the Act his share in the joint family property would be one-half and only this share passed on his death under Section 7(1) of the Act.

3. A perusal of the surrender deed would go to show that no share whatsoever was allotted to the deceased's wife and she is not mentioned in the deed at all. It is also not her case that, although not separately mentioned her share was included in the deceased's share at the time of partition. She did not sue for reopening the partition during the deceased's lifetime.

4. A wife is entitled to a share when there is a partition between her husband and his sons. But under the strict Hindu law the wife did not get any right of ownership in the joint family property until the property was divided by metes and bounds and a share was allotted to her. Even a declaration of her share in a preliminary decree did not confer on her any right of ownership. A wife could no doubt sue for reopening a partition if no share was allotted to her in the partition but her right of ownership did not arise till the actual division and allotment of a share to her [Pratapmull Agarwalla v. Dharibati Bibi , Radhabai v. Pandharinath AIR 1941 Nag 135]. But this strict rule of Hindu law has no application after the enactment of the Hindu Succession Act, 1956. Section 14(1) of this Act declares that any property possessed by a female Hindu, whether acquired before or after the commencement of this Act, shall be held by her as full owner thereof and not as a limited owner. The Explanation to the section defines ' property ' in very wide language to include both movable and immovable property acquired by a female Hindu by inheritance or devise or at a partition, or in lieu of maintenance or arrears of maintenance, or by gift from any person, whether a relative or not, before, at or after her marriage, or by her own skill or exertion, or by purchase or by prescription, or in any other manner whatsoever, and also any such property held by her as stridhana immediately before the commencement of this Act.

5. The wide definition of ' property ' in the Explanation has not to be narrowly construed with a gloss of Hindu law over it. The Act has an overriding effect and any text, rule or interpretation of Hindu law onmatters dealt with by the Act cease to have effect after its commencement. This is specifically provided in Section 4. The effect of Section 14 is that if a female Hindu was possessed of any right which could be described as property in the generic sense, the same became vested in her as a full owner in spite of the act that the right was not recognised as property under the strict Hindu law. Section 14 is retrospective and it is immaterial for the application of this principle whether such a right was acquired before or after the commencement of the Act. This is how Section 14 was interpreted by the Supreme Court in Munnalal v. Rajkumar : AIR1962SC1493 . In that case, it was held that a share allotted to a Hindu female in a preliminary decree passed before the commencement of the Act was property possessed by her although there was no division by metes and bounds and that this property vested in her absolutely after the commencement of the Act. The Supreme Court expressly laid down that the rule of law applied by the Privy Council in Pratapmull's case , that till actual division of the share declared in her favour by a preliminary decree a Hindu wife or mother was not recognised as owner could not be applied after the enactment of Hindu Succession Act.

6. In that context the court observed (p. 1500) :

' It cannot be assumed that in enacting Section 14 of the Hindu Succession Act, the Legislature merely intended to declare the rule enunciated by the Privy Council in Pratapmull's case ......Manifestly, theLegislature intended to supersede the rules of Hindu law on all matters in respect of which there was an express provision made in the Act. Normally, a right declared in an estate by a preliminary decree would be regarded as property and there is nothing in the context in which Section 14 occurs or in the phraseology used by the Legislature to warrant the view that such a right declared in relation to the estate of a joint family in favour of a Hindu widow is not property within the meaning of Section 14.'

7. The principle enunciated in Munnalal's case : AIR1962SC1493 , was applied by one of us (Singh C.J.) in Bhawarsingk v. Pilabai : AIR1972MP204 . In that case, the wife was not impleaded in a suit for partition and the preliminary decree was passed without declaring her share. Still it was held that on the passing of the preliminary decree the wife got a right to obtain her due share by instituting a suit for partition and that this right was property which vested in her absolutely and passed on her death, which took place before the passing of the final decree, to her heirs in accordance with Section 15(1) of the Act. In holding so, it was said (p. 205) :

' Simply because parties to a partition do not assign any share to a woman, who on partition is entitled to a share, she cannot be deprived of her rightful share and she can sue for it. [Radhabai v. Pandharinath AIR 1941 Nag 135.]

Thus, her right to share must be taken to a:crue immediately a partition is made, although in that partition she is not assigned any share. Now, as decided in Munnalal's case : AIR1962SC1493 , this right to share has not to wait for its accrual till the property is actually divided, but arises even at the stage when shares in the property are declared by a preliminary decree. Therefore, the moment the preliminary decree for partition was passed in the suit the right to share in the property accrued.'

8. As already noticed, in Bhawar Singh's case : AIR1972MP204 , the wife was not impleaded in the suit and the preliminary decree did not mention her at all. Even so, it was held that this did not make any distinction and the principle enunciated in Munnalal's case : AIR1962SC1493 , applied. The same principle, in our opinion, must be applied when the partition effected is not through the agency of the court, but by the act of parties. The partition in the instant case was effected by a deed of surrender executed on November 11, 1950. The wife was entitled to 1/6th share in the joint family property that was divided by the said partition between the deceased and his sons and a grandson of a predeceased son. The surrender deed did not mention her at all and no share was allotted to her. This fact, however, did not deprive the wife in getting the right to her share which she could have enforced by instituting a suit for reopening the partition. The right to get 1/6th share in the joint family estate which accrued to her at this stage was property within the meaning of Section 14 of the Hindu Succession Act and vested in her absolutely from the date of commencement of the Act. This right to get 1/6th share was in the entire property which, after the partition, came separately in the hands of the deceased and the three sons and a grandson.

9. The wife did not sue for partition. She lived as a member of the joint Hindu family with her husband, the deceased. She was not a coparcener. The deceased was the sole coparcener in this family but still in view of the change in the law, brought about by the Hindu Succession Act, she had a right to share 1/6th in the property which the deceased obtained in partition. The property that passed on the death of the deceased within the meaning of Section 5 of the E.D. Act was only his 5/6ths share in the estate that he got on partition and which he held at the time of his death, the reason being that 1/6th of this estate was held by the deceased's wife, the accountable person, The estate duty could not be charged on the whole of the estate but only on 5/6ths which passed on the death of the deceased under Section 5. Even applying Section 7 and Section 39, the same result follows. The coparcenary interest held by the deceased could not include the interest which was held by the wife and had there been a partition between the deceased and his wife immediately before his death.the wife would have got 1/6th share. The Tribunal was, however, wrong in holding that the interest of the wife was one-half in the estate which came to the deceased on partition and that only half of the property would be deemed to have passed on the death of the deceased.

10. The learned standing counsel for the Department submitted to us that the deceased was the sole coparcener and the entire property that he got in the partition although joint family property, was in effect his separate property which could be disposed of by him and which on his death passed to his successors. The learned counsel relied upon the case of C. Krishna Prasad v. CIT : [1974]97ITR493(SC) . There is no doubt that this would have been the position had the old Hindu law continued to apply, but in the instant case, the death took place after the commencement of the Hindu Succession Act which enlarged the rights of the wife and had the effect of vesting in her 3/6th share to which she was not entitled under the old Hindu law before actual division by metes and bounds. The learned standing counsel also relied upon the following cases : CED v. Smt. Kalawati Devi : [1980]125ITR762(All) , Vithal Das v. CED : [1972]85ITR432(All) , Manohar Vithal Velankiwar v. CED : [1967]63ITR379(Bom) and Parsholam Dass v. CED . These cases are not applicable to the facts of the instant case. In Kalawati Devi's case the separation of the deceased was from a bigger HUF. It was not a case, of a division between the deceased and his sons where the deceased's wife was not allotted any share. In the other three cases, the persons whose estates were subjected to estate duty had died before the commencement of the Hindu Succession Act and, therefore, the question of application of Section 14 of the Act could not arise. Indeed, in the Bombay case of Manohar Vithal Velankiwar, Section 14 was sought to be applied by the accountable person but its application was negatived on the ground that the death of the owner of the estate had taken place before the commencement of the Act,

11. The learned standing counsel also referred to the circumstances that the wife did not claim any share or sue for partition during the lifetime of the deceased. This fact, in our opinion, would not make any difference. There was no case of relinquishment advanced by the Department in the courts below. Merely by standing by or by not raising any objection, a woman does not lose her right to get a share and such a conduct does not amount to acquiescence or relinquishment. It was so held by the Privy Council in Ganesh Dutt Thakoor v. Jewach Thakoorain ILR [1904] Cal 262. This case was followed by our court in Radhabai's case AIR 1941 Nag 135. Very often in such cases no one has the knowledge that the woman has any right to a share. In the absence of such a knowledge itis difficult to make out a case of acquiescence or relinquishment. It is true that the wife did not sue for partition even though nearly 17 years had passed after the partition but from that also no inference against her can be raised. One does not know whether the deceased or the sons were denying the right of the wife. May be that they were willing, had the wife claimed her share, to part with the share to which she was rightfully entitled. We cannot give any finding on mere guesswork and if the Department wanted to rely upon acquiescence or relinquishment or cesser of right by lapse of limitation, specific pleas to that effect should have been taken during the course of assessment and findings obtained on those questions. The Department cannot be allowed before us to argue the case of acquiescence, relinquishment or cesser of right by lapse of limitation.

12. The learned counsel for the accountable person relied upon a decision of a Division Bench of this court in Smt. Ramkunwar Bai v. CED, MCC No. 137 of 1976, dated 3-8-1977 (see p. 852 infra) in support of the Tribunal's finding that the wife's interest in the property was half. The learned judges in that case referred to a passage in Krishna Prasad's case : [1974]97ITR493(SC) , where it is stated that the plea that there must be at least two male members to form an HUF as a taxable entity has no force and that a joint family may consist of a single male member and a female member but the same passage makes a distinction between a joint Hindu family and a Hindu coparcenary which is a much narrower body than the joint family and which includes only those persons who acquire by birth an interest in the coparcenary property. The decision in Krishna Prasad's case : [1974]97ITR493(SC) , does not support the conclusion that in a family consisting of the deceased and his wife, where the deceased was the only coparcener and owner of the entire coparcenary interest, the property passing on his death is only half the property and not the entire property. It appears to us that in Ramkunwar Bai's case : [1983]142ITR852(MP) (infra) it was admitted or conceded probably under some mistake that the wife of the deceased had half interest in the joint family property and the conclusion could be supported on that admission. The learned judges towards the end of para. 8 of the judgment in Ramkunwar Bai's case said (p. 856 ) :

'It is only the deceased's share in the joint Hindu family which, admittedly half, will be the property which passed on his death.'

13. These observations give rise to the inference that the deceased's share was admitted to be half and it was not contended that he owned the entire joint family property.

14. The learned counsel for the accountable person also relied upon the decisions of the Supreme Court in Gowli Buddanna v. CIT : [1966]60ITR293(SC) and N.V. Narendranath v. CWT : [1969]74ITR190(SC) . These decisions relate to the question of status. In Gowli Buddanna's case. A, his wife, his two unmarried daughters and B, his adopted son, constituted an HUF. On A's death, the question arose whether the property ceased to be the joint family property and whether, when B was the only male member in the family, the family could be assessed as an HUF under the I.T. Act. The Supreme Court held that under the Hindu law it is not necessary for constituting an HUF that there must be more than one male member and such a family may consist of a male member and his wife and daughters. It was also held that the joint family property did not lose that character even though B became the sole surviving coparcener and possessed rights of an owner. A perusal of this case would show that the question in this case was only of status.

15. The case cannot be said to decide that female members of such a family share the ownership of the property. Narendranath's case : [1969]74ITR190(SC) , is also a similar case of status under the W.T. Act. Reliance was also placed on the case of Attorney-General of Ceylon v. Arunachalam Chettiar [1958] 34 ITR 42. In this case it was held that the property of a family consisting of a sole surviving coparcener and some female members was joint property of the HUF within the meaning of Section 37 of the E.D. Act of Ceylon. Here also it was not held that the females who were entitled to maintenance only were owners or that on the death of the sole surviving coparcener the entire property did not pass on his death. The case is, therefore, not helpful to the accountable person.

16. Coming to question No. 3, the facts are that on March 2, 1957, the deceased made gifts of Rs. 88,000 to his four grandsons. The donees deposited the amounts gifted to them with the firm of Babulal Dulichand in which the deceased was not a partner. The firm was later on reconstituted in Oct., 1961, when the deceased was taken as a partner. The deceased continued to be a partner of this firm till his death. On October 22, 1965, the donees withdrew their amounts deposited with this firm and reinvested them in new firms of which presumably the deceased was not a partner.

17. It is clear from the facts stated above that when the gifts were made in March, 1957, the possession and enjoyment of the property gifted was immediately assumed by the donees and the amounts received were invested in a firm of which the deceased was not a partner. It was only in 1961 that this firm was reconstituted bringing the deceased as a partner but by the reconstitution of the firm which made the deceased a partner, it cannot be said that the possession and enjoyment of the property gifted was not retained by the donees to the entire exclusion of the donor or of any benefit to him by contract or otherwise within the meaning of Section 10. The benefit that the deceased received from this firm was under the contract of partnershipwhich reconstituted the firm. It was wholly unconnected with the gifts made to the donees. Section 10 of the E.D. Act which was sought to be applied by the Department has no application here. In CED v. CM. Ramachandra Gounder : [1973]88ITR448(SC) , the deceased was a partner in a firm. He transferred a sum of Rs. 20,000 each to the credit of his five sons in the firm's books. He also wrote to the five sons informing them of the transfer. The sons did not withdraw their amounts from the firm. The amounts continued to be invested in the firm for which interest was paid to them.

18. On these facts it was held that there was unequivocal transfer of Rs. 20,000 to each of the sons and the donees bad retained possession and enjoyment of the amounts transferred to them to the entire exclusion of the possession and enjoyment of the donor. This case and similar other cases were approved in CED v. R. V. Viswanathan : [1976]105ITR653(SC) . Reference may also be made here to a decision of a Division Bench of this court in Smt. Pannabai v. CED, MCC No. 531 of 1973, dt. 19-11-79 (see : [1983]142ITR856(MP) (Appx. II) infra), which followed these cases. It is clear to us that Section 10 was not applicable here and the amounts gifted to the grandsons could not be deemed to be property passing on the death of the deceased.

19. For the reasons given above, we answer the questions as follows:

(1) The Tribunal was not justified in accepting that only half the property passed on the death of Chhotelal. 5/6ths of the property passed on his death.

(2) The Tribunal did not correctly apply Section 39(1). The wife was entitled to 1/6th share and 5/6ths of the property passed on the death of Chhotelal.

(3) The Tribunal was justified in holding that Section 10 of the E.D. Act was not applicable.

20. There will be no order as to costs of this reference.


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