1. By this reference under Section 64(1) of the E.D. Act, 1953 (hereinafter referred to as ' the Act'), the Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following questions of law for the opinion of this court:
' 1. Whether, on the facts and circumstances of the case, the Tribunal was in law justified in holding that 1/2 of the property passed on the death of Mohanlal.
2. Whether, on the facts and circumstances of this case, the Tribunal was in law justified to hold that Smt. Kessarbai was entitled to share at the moment of the death of Mohanlal '
2. The facts giving rise to this reference as set out in the statement of the case are as follows : The deceased Mohanlal Ladha died on February 19, 1966. The accountable person, Kanhaiyalal, was the son of the deceased. Kanhaiyalal died during the pendency of this reference and the present respondents have been substituted as his legal representatives. The accountable person filed an account of the estate of the deceased disclosing the net principal value of the estate at Rs. 86,980. The deceased, Mohanlal, formed an HUF along with his son, Kanhaiyalal, and his wife, Smt. Kessarbai. The movable property of this HUF was partitioned on October 30, 1951, by entries in the books. On February 13, 1952, partition of the immovable properties was effected by a registered deed. There was a complete partition of all the assets which hitherto belonged to the HUF and the claim of partition filed on behalf of the erstwhile HUF was accepted in the income-tax assessment by the ITO. In the partition the business carried on by the HUF under the name and style of M/s. Mohanlal Kanhaiyalal was allotted to the deceased, Mohanlal. Mohanlal also received in the partition two houses and shares and other securities including cash worth over Rs. 6,30,000. Kanhaiyalal, the accountable person, as the son of the deceased, received a sum .of Rs. 5,50,000 in addition to a house. In the partition nothing was given to Kessarbai, wife of the deceased. Mohanlal thereafter filed the returns under the I.T. Act and also under the W.T. Act in the status as an individual and he was assessed as such up to the year 1964. In the assessment year 1966-67 covering the accounting period 1965, Mohanlal filed his returns claiming the status of an HUF, The Department accepted the change in the status both under the I.T. Act and also under the W.T. Act. The accountable person claimed before the EDO that on the death of Mohanlal only 1/2 share in the property held by the deceased passed and not the entire estate which fell to the share of Mohanlal in the partition between himself and the accountable person because the other half share of the property vested in and belonged to Kessarbai, wife of the deceased, Mohanlal. The Asst. Controller negatived the contention of the accountable person and held that the entire estate passed on the death of Mohanlal. On appeal by the accountable person the Zonal Appellate Controller held that Smt, Kessarbai did not claim her share from her husband in the partition and she waived the right to claim her share, and, therefore, the entire estate held by the deceased, Mohanlal, shall be deemed to have passed on his death. Consequently, the appeal of the accountable person was dismissed. On further appeal by the accountable person, the Tribunal accepted the contention of the accountable person and held that Smt. Kessarbai was entitled to a share equal to that of her son at the time of the death of Mohanlal and in that event only 1/2 share of the property shall be deemed to have passed on the death of Mohanlal. To this extent the Tribunal allowed the appeal of the accountable person. At the instance of the Revenue, the Tribunal has referred the aforesaid questions of law for the opinion of this court.
3. The crucial point involved in the questions referred to us has been concluded by the decision of a Full Bench of this court in CED v. Smt. Rani Bahu : 142ITR843(MP) . In that case the deceased Chhotelal died on 2nd March, 1967. Chhotelal, his wife. Rani Bahu, and his four sons constituted a joint Hindu family. There was a partition by a surrender deed executed between the deceased and his three sons and the son of his pre-deceased son. In the partition no share whatsoever was allotted to the wife of the deceased. The deceased and his wife continued as members of the joint Hindu family after the partition. The Tribunal held that although the deceased was the sole coparcener in the joint Hindu family consisting of himself and his wife, 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. On these facts the Full Bench of this court, after considering the case law, held that the wife of the deceased was entitled to 1/6th share in the joint family estate which accrued to her at the time of partition and 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. It was further held as follows (p. 848):
' The right to get 1/6th was in the entire property which after the partition came separately in the hands of the deceased and the three sons and a grandson. 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 on 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 3/6ths 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 parson. 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 iaterest 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.'
4. In the present case Kessarbai, wife of the deceased, had 1/3rd share in the entire joint family estate, which she was entitled to at the time of the partition, because the deceased, his son, Kanhaiyalal, and Kessarbai constituted a joint Hindu family. Therefore, in the estate held by the deceased, Kessarbai had an 1/3rd share which did not pass on the death of the deceased. What passed on the death of the deceased is the 2/3rds share which the deceased had in the property held by him. The Tribunal, was, therefore, not justified in holding that only half of the property possessed by the deceased passed on his death. 2/3rds of the property held by the deceased passed on his death.
5. The learned counsel for the accountable person had nothing to say regarding the applicability of the ratio of the aforesaid Full Bench decision to the present case. However, he contended that in the present case at the time of partition the deceased gave 1/3rd share to the accountable person and kept 2/3rds share with himself. The deceased thus kept the share of his wife with him and, therefore, on his death only his 1/2 share in the property passed and the other 1/2 which belonged to his wife did not pass. The contention cannot be upheld because before the taxing authorities it was not the case of the accountable person that at the time of the partition the deceased kept with him his wife's share also. The Tribunal has also not based its decision on the said fact. The Tribunal held that having regard to the provision of Section 39(1) of the Act the share of the deceased in the joint family property consisting of himself and his wife would be one-half. This view of the Tribunal is not in conformity with the ratio of the aforesaid Full Bench decision.
6. As a result of the discussion aforesaid, our answer to the questions referred to us is as follows :
1. On the facts and in the circumstances of the case, the Tribunal was in law not justified in holding that one-half share of the property passed on the death of Mohanlal. Two-thirds of the property held by the deceased, Mohanlal, passed on his death.
2. On the facts and in the circumstances of the case, the Tribunal was in law not justified to hold that Smt. Kessarbai was entitled to 1/2 share at the moment of the death of Mohanlal. She had one-third share at the moment of the death of Mohanlal.
7. In the circumstances, the parties shall bear their own costs of this reference.