1. By this application under Section 64(1) of the E.D. Act, 1953 (hereinafter referred to as 'the Act'), the following question of law has been referred to this court for its opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that only 39.51% of the value of the assets of the HUF is liable to be added under Section 34(1)(c) of the Estate Duty Act instead of 3/5ths, i.e., 60% adopted by the A.C.E.D. '
2. The material facts giving rise to this reference briefly are as follows:
3. The deceased was survived by his wife and three sons named Gokulchand, Prakashchandra and Mansukhlal. These three sons were married and Gokulchand had five sons out of whom three were married. The Asst. Controller of Estate Duty added 3/5ths share of the lineal descendants of the deceased in the HUF property as provided by Section 34(1)(c) of the Act. Before the Appellate Controller of Estate Duty it was contended on behalf of the accountable person that the provisions of Section 34(1)(c) of the Act were ultra vires. That contention was overruled by the Appellate Controller. On further appeal it was urged before the Tribunal on behalf of the accountable person that the computation of the lineal descendant's share for the purpose of applying the rate was not in accordance with the provisions of Section 34(1) of the Act. It was contended that in a notional partition of the entire family the wives of the sons of the deceased were also entitled to a share equivalent to the sons and that instead of adding 3/5ths, that is to say, 60% of the value of the HUF property, only 39.51% would be liable to be added. This contention was upheld by the Tribunal. Hence at the instance of the Department, the Tribunal has referred the aforesaid question of law to this court for its opinion.
4. Having heard learned counsel for the parties we have come to the conclusion that this reference must be answered in favour of the Department and against the assessee. Section 34(1)(c) of the Act reads as under :
'34. (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, Mammakkattayam 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.'
5. As provided by Section 39 of the Act there would be 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 HUF property as provided by Section 34(1)(c) of the Act would be 3/5ths and not 39.51%,as computed by the Tribunal. The Tribunal has relied on the decision reported in Satyanarayan Saraf v. Asst. Controller : 111ITR432(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 HUF 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 HUF 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.
6. For all these reasons our answer to the question referred to this court is in the negative and against the assessee. Parties shall bear their own costs of this reference.