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The Controller of Estate Duty, Delhi Vs. Suresh Chandra - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtDelhi High Court
Decided On
Case NumberEstate duty Reference No. 1 of 1970
Judge
Reported inILR1972Delhi475B; [1973]91ITR42(Delhi)
ActsEstate Duty Act, 1953 - Sections 5
AppellantThe Controller of Estate Duty, Delhi
RespondentSuresh Chandra
Advocates: G.L. Sharma,; V. Kumaria,; Randhir Chawla,;
Cases ReferredGoli Eswariah v. Commissioner of Gift Tax
Excerpt:
(i) estate duty act (1953) - section 5--scope of--karta of a hindu joint family making gifts to minors by crediting his account with a limited company where sufficient balance not available--whether dutiable--partial partition--when amounts to--hindu law.; a karta of a joint hindu family transferred by git certain amounts to his minor sons in equal shares by debiting his personal account with a private limited company and crediting the accounts of the respective recipients therein. as on the relevant date of gifts the said company to be invalid gifts and thus included in the dutiable estate. it was contended by the accountable persons that the gift amounted to a partial partition within the family and were not dutiable.; that it is open to the members of a joint family to sever in..........on principles of hindu law (13th edition, para. 323, page 372) has stated that the father of a joint family has the power to divide the family property at any moment during his life. the deceased thereforee had the right to divide the family property but the rule is subject to the condition that he should give to his sons equal shares with himself and if he does so, the effect in law is not only a separation of the father from the son but a separation of the sons inter-se. (13) this rule need not, however, apply to a case of a partial partition. it is open to members of a joint family to make a division and severance of interest in respect of a part of a joint estate while retaining their status as a joint family and holding the rest as the properties of a joint and un-divided.....
Judgment:

Hardayal Hardy, J.

(1) Late Lala Thakurdas was the karta of a Hindu un-divided family consisting of himself, his wife Smt. Jawala Devi and his two minor sons, Suresh Chandra and Arnrit Rai. The deceased also had a daughter named Kamla Devi. He died on 22-11-1957. At that time his daughter was already married.

(2) During the course of assessment proceedings in respect of- the estate of Lala Thakurdas, who will hereafter be referred to as the deceased, the Assistant Controller of Estate Duty noticed from the personal accounts of the deceased with various concerns that he had transferred by way of gifts the following amounts to his two sons and daughter on the dates noticed against each :-

Date Name of recipient Amount transferred 28-12-1954 Suresh Chandra Rs. 75.000.00 Arnrit Rai Rs. 75.000.00 Kamla Devi Rs. 25,000.00 1-11-1956 Suresh Chandra Rs.35,000.00 Arnrit Rai Rs. 35.000.00 31-7-1957 Suresh Chandra Rs. 61,000.00 Arnrit Rai Rs. 61.000.00

(3) The accounts showed that the deceased as karta of the Hindu undivided family effected the dispositions of Rs. 75,000 each to his sons and Rs. 25.000.00 to his married daughter, Kamla Devi by debiting his personal account with Messrs. Indraprastha Corporation Private Limited and crediting the accounts of the respective recipients therein. On 28-12-1954 when the above dispositions were effected the opening balance with Messrs. Indraprastha Corporation Private Limited was Rs. 5,455/15/3 and the closing balaace was Rs. 2,454/9/3. As there was no sufficient cash balance with the said company on the material date and inasmuch as Suresh Chandra and Arnrit Rai the sons of the deceased were minors at the relevant time, the Assistant Controller held that there were no valid gifts in favor of the sons nor in favor of the married daughter. The Assistant Controller held that the sums of Rs. 75,0001- sought to be given to each of the two. sons. and Rs. 25,000.00 to Smt. Kamla Devi, fell under Section 5 of the Estate Duty Act, 1953 in the absence of a complete gift. He thereforee included those amounts in the dutiable estate. On 1-11-1956 the deceased made further dispositions of Rs. 35.000.00 to each of his sons and on 31-7-1957- he made another disposition of Rs. 61.000.00 to eaqh of his sons. The Assistant Controller observed that the last mentioned two gifts of Rs. 35.000.00 and Rs. 61,000.00 were made within two years of the death of the deceased and they had already been declared in the return. The Assistant Controller thereforee included these amounts also, totalling Rs. 1,92,000 / - in the dutiable estate.

(4) In appeal the Appellate Controller of Estate Duty excluded all the impugned amounts from duty. With regard to the sums of Rs. 75.000.00 and Rs. 25.000.00 given by the deceased to his sons and daughter on 28-12-1954, the Appellate Controller held that these were valid gifts, although the cash balance in the accounts of Messrs. Indraprastha Corporation Private Limited was not sufficient on the material date. With regard to the gifts. made to the sons on the remaining two dates, the Appellate Controller held that they had beeh made by the Hindu un-divided family and not by the deceased in his individual capacity. The Appellate Controller was thereforee of tile opinion that these amounts could not be deemed to have been passed on the death of the deceased under Section 9 of the Estate Duty Act, 1953.

(5) Being dissatisfied with the decision of the Appellate Controller, the Assistant Controller preferred an appeal before the Appellate Tribunal. Before the Tribunal, counsel for the accountable persons took an entirely new legal stand and contended that barring a sum of Rs. 25.000.00 given to the daughter, none of the other dispositions of money, made by the deceased on various dates amounted to gifts, valid or invalid. He urged that the dispositions of money made by the deceased on the said three dates amounted to a partial partition of the family assets so that these amounts passed out of the funds of the-family and vested in the respective co-parceners with effect from the respective dates. He referred to the fact that the amounts given to each of the two sons were equal on each of the three dates and this, he suggested, also supported the plea of partial partition.

(6) It was admitted that this plea was not taken by the accountable persons at the earlier stages, but it was urged that what is the legal effect of a transaction is entirely a question of law and that the counsel was entitled to argue that the transaction which 'had taken place on the three dates represented partial partition of the family property and did not amount to gifts of money by the father to his two sons. The Tribunal considered this fresh plea and held that there had been partial partition of the assets made by the deceased as the karta of the family, on the three dates severally and consequently, the sum of Rs. 1,50,000.00, 70.000.00, and l,22,000.00 passed out of the assets of 'the family on the three relevant dates and these amounts did not constitute the joint assets of the co-parcenary on 22-11-1957 when the deceased died. It was accordingly held that the sums should be excluded from the dutiable estate. Thus the Tribunal confirmed the order of the Appellate Controller, though on different grounds and dismissed the department's appeal.

(7) The Tribunal also rejected the department's application to submit a statement of case to the High Court but pursuant to a direction issued by the High Court under Section 64(3) of the Estate Duty Act, 1953 a statement of case was drawn up and submitted to this Court with the following question of law for the opinion of the Court:-

'WHETHERon the facts and in the circumstances there was any evidence for the Tribunal to hold that the amounts of Rs. 75.000.00, 35.000.00 and Rs. 61.000.00 paid on 28-12-1954, MI-1956 and 31-7-1957 respectively to each of S/Shri Suresh Chandra and Arnrit Rai were paid as a result of a partial division of the assets of the family.'

(8) A practice appears to have developed in this Court which indeed is based on the practice that prevailed in the High Court of Punjab and the Circuit Bench of that High. Court at Delhi that a reference under Section 64 of the Estate Duty Act should be heard by a Bench of three Judges. Clause (10) of Section 64 of the Estate Duty Act lays down that when a case has been stated to the High Court under Section 64, it shall be heard by a Bench of not less than two judges of the High Court and shall l)e decided in accordance with the opinion of such Judges or of the majority (if any) of such Judges. The rules framed by the Punjab High Court in Chapter 7-1, Volume V of the Punjab High Court Rules and Orders, as applied to Delhi, also make a similar provision. It is apparent that such cases should be heard by a Bench of two judges and it is only in exceptional cases where the Chief Justice of the High Court so directs or the Judges constituting the Bench want that the case should be heard by a larger Bench, It is not at all necessary that the time of three. Judges of this Court should be taken up by dealing with a case which does not present any special difficulty.

(9) In the present case, however, since at the request of the registry of this Court a Full Bench has already been constituted by the Chief Justice and the counsel for the parties are ready with the case, we have decided to hear this case.

(10) The question as framed clearly shows that the only ground on which the Tribunal came to the conclusion that there was partial partition between the members of the Hindu un-divided family is that the amounts given to each of the two minor sons were equal on each of the three dates; but does that result follow from the premises The assessed himself did not set up that case. His case on the other hand was that the deceased had made gifts to two of his sons on various dates between 28-12-1954 and 31-74957 in addition to a sum of Rs. 25,000.00 given to a married daughter. It was thereforee not his case that a partial partition had taken place between members of the family, and the disposition of .money was in accordance with that partition. It was only at the stage of the second appeal before the Appellate Tribunal that the question of partial partition was raised by the counsel for the accountable persons.

(11) Shri G. C. Sharroa, appearing for the Controller of Estate Duty, contended that according to the Appellate Tribunal the family was possessed of total assets worth Rs. 12,ll,602.00 as assessed by the Assistant Controller of Estate Duty and that the total sum of Rs. l,75,000.00 given on 28-12-1954 and Rs. l,92,000.00 given on 1-11-1956 and 31-7-1957 came up to a figure of Rs. 3,67,000.00. The joint Hindu family consisted at that time of the deceased, his wife Smt. Jawala Devi and his two minor sons Suresh Chandra and Arnrit Rai. Leaving aside the sum of Rs. 25,000.00 paid to Smt. Kamla Devi the total amount deposited came down to Rs. 3,42,000.00 and the disposition was in favor of two minor sons of the deceased.

(12) The question thereforee is whether there was a partial partition among the members of the family. A partition between coparceners may be partial either in respect of the property or in respect of the persons making it. Mulla in his treatise on Principles of Hindu Law (13th Edition, para. 323, page 372) has stated that the father of a joint family has the power to divide the family property at any moment during his life. The deceased thereforee had the right to divide the family property but the rule is subject to the condition that he should give to his sons equal shares with himself and if he does so, the effect in law is not only a separation of the father from the son but a separation of the sons inter-se.

(13) This rule need not, however, apply to a case of a partial partition. It is open to members of a joint family to make a division and severance of interest in respect of a part of a joint estate while retaining their status as a joint family and holding the rest as the properties of a joint and un-divided family. But where there is evidence to show that the parties intended to sever, then the joint family status is put an end to and with regard to any portion of the property which remained undivided the presumption would be that the members of the family would hold it as tenants-in-common unless and until a special agreement to hold as joint tenants is proved.

(14) Any one co-parcener may separate from the other but no co-parcener except the father can compel the others to become separate among themselves.

(15) In Mayane's treatise on Hindu Law and Usage (11th Edition) there is an interesting discussion at page 559, Article 458 on the question of partial partition. A partition may be partial either as regards the persons malking it or the property divided. According to the learned author, the view taken in some early cases, that where one brother separates from the others and the latter continue to live as a joint family it must be presumed that there , has been a complete separation of all the brothers,but that those who continue joint have re-united cannot be regarded as good law. So the view in many cases was that the separation of one amounted to a virtual separation of all. In Balkrishna v. Ramkrishna (58 Indian Appeals 220) (1) followed in Bhagwati Prasad v. Dulhin Rameshwari Juar : [1951]2SCR603 Sir George Bowndes, delivering a judgment of the Board, adopted the statement by Sir John Edge in Palani Ammal v. Mutha Venkatachala (52 Indian Appeals 83) (3) 'It is now beyond doubt that a member of a joint family can separate himself from the other members of the joint family and is, on separation, entitled to have his share in the property of the joint family ascertained and partitioned off for him and that the remaining co-parceners, without any special agreement amongst themselves, may continue to be co-parceners and to enjoy as members of a joint family what remained after such a partition of the family property. That the remaining members continued to be joint may, if disputed, be inferred from the way in which their family business was carried on after their previous co-parcener has separated from them.'

(16) In the light of the principles laid down in that decision, it was necessary to show that the share of the two sons had been ascertained and partitioned off while the deceased and his wife remained joint with respect to the remaining property. In the present case, there is nothing to indicate that out of an estate of the value of Rs. 12,11,602 the interest of the two minor sons was ascertained and partitioned off while the deceased and his wife Smt. Jawala Devi remained joint with respect to the remaining property. This would apply to a case of partial partition as to persons. But when we turn to partial partition of the properties the principle is that it is open to the members of a joint family to sever in interest in respect of a part of a joint estate while retaining their status of a joint family and holding the rest as the properties of an un-divided family.

(17) It was contended by the counsel for the accountable persons that this was a case of partial partition as to properties where only a part of the joint estate had been partitioned while the family still retained its status of joint family. Our attention was invited to a Privy Council decision in K. Ramalingam and another v. Narayan Annavi and another AIR 1922 PC. 201 = 45 Mad 489 , where only three specific items of the outstanding, were divided in 1895 and the family remained injoint possessession and enjoyment of the ancestral immovable property. The decision is based on an earlier decision of the Board in Appovier alias Sitarama lyery V. Rama Subha Lyer 11 Moo I.A 75 Where Lord Westbury stated 'When the members of an un-divided family agree among themselves with regard to particular property, that it shall thenceforth be the subject of ownership, in certain defined shares then the character of un-divided property and joint enjoyment is taken away from the subject matter so agreed to be dealt with; and in the estate each member has thenceforth a definite and certain share, which he may claim the right to receive and to enjoy in severally although the property itself has not been actually severed and divided.

(18) Elaborating this passage Shri Ameer Ali who wrote the judgment of the Board observed:-

'ITwill be thus seen that, under the Hindu Law, it is open to the members of a joint family to make a division and severance of interest in respect of a part of the joint estate while retaining their status as a joint family and holding the rest as the property of a joint un-divided family.'

(19) It is thus a question of fact to be determined in each case, upon the evidence relating to the intention of the parties whether there was a separation among the co-parceners. The intention to remain joint may be inferred from the way in which the rest of the property was held by the co-parceners or it may be inferred from other conduct indicating such an intention. Beyond the counsel's argument raised at the stage Of the appeal before the Tribunal, nothing has been brought on record to show that intention. The deceased himself was not there at that time nor was there any evidence with regard to the attitude of Smt. Jawala Devi. No other material was placed on record to show that the family continued to be joint with respect to the remaining property. The accountable persons themselves were minors at that time and nothing was brought on record to show what their own attitude was at the material time. On the other hand the deceased himself had claimed these dispositions to be amounting to gifts. In these circumstances, the mere fact that the amounts were given to the two minor sons in equal shares did not furnish any indication of a partial partition having taken place among the members of the family at the instance of the deceased.

(20) Shri A. R. Aggarwal, counsel for the accountable persons, drew our attention to a decision of Allahabad High Court in Brij Mohan Lal Rameskwar Lal v. Commissioner of Income-tax, U.P. : [1971]82ITR173(All) . That was a case relating to the passing of a certain asset which was divided among the co-parceners and the only question befare the Tribunal was whether the attempted partial partition was effective or not. No body disputes that there can be partial partition of an asset among the co-parceners constituting the Hindu un-divided family.

(21) Mr. Aggarwal' also drew our attention to a decision of the Supreme Court in Goli Eswariah v. Commissioner of Gift Tax, Andhra Pradesh : [1970]76ITR675(SC) . The case relates to a Hindu co-parcener throwing his self-acquired property into the common stock of the joint property. It has nothing to do with the case before us.

(22) The result is that the question is-answered in favor of the Revenue. The respondent will also pay costs. Counsel's fee Rs. 50O.00.


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