1. This tax reference comes to us from the Income-tax Appellate Tribunal by way of case stated under the E.D. Act, 1953.
2. One Ramaswami Chettiar (hereinafter called 'the deceased') was an undivided member of a Hindu Joint family governed by the Mitakshara law. The family consisted of two coparceners, the deceased and his only son. The family was possessed of a number of properties, both movable and immovable. One of the items was a residential house in a small village. In that house the deceased lived and died. The deceased had no separate properties of his own. An undivided half share in the family properties was the only property he could call his own when he breathed his last.
3. On the deceased's death, his son filed an estate duty account as the accountable person. In the proceedings that followed, there was little or no dispute on question of valuation. The principle value of all the joint family properties was determined at Rs. 1,06,854. In particular the value of the village dwelling house was also fixed at an agreed figure of Rs. 20,000. The family had certain outstandings to clear : these were estimated to be Rs. 15,000. The funeral expenses of the deceased was also determined at an agreed estimate of Rs. 1,000. On these figures, the estate duty liability had to be worked out.
4. Under the E.D. Act, the duty is arrived at by applying the rates prescribed in the Second Schedule. The rates are to be applied to the principle value of the estate. For rate purposes, all properties passing or deemed to pass on the deceased's death must be aggregated so as to form 'one estate', vide s. 34(1). The Act names certain properties as exempted properties; but these properties also are to be aggregated. The aggregation, however, is for rate purposes only. The actual impact of the estate duty will not cover these exempted properties-vide s. 34(2). One way of describing this process of calculation of duty is to say that the unexempted estate is charged to duty at a rate (or more precisely, at the average rate) pertaining to the aggregated estate comprising of the unexempted estate plus the exempted estate. The legislative draftsman has however, adopted the mathematical language of 'ratio and proportion' to lay down the method of quantification of duty in such cases where the estate comprises both exempted and unexempted properties. The formula is stated in the following terms in s. 34(2) :
'Where any such estate as is referred to in sub-section (1) includes any property exempt from estate duty, the estate duty leviable on the property not so exempt shall be an amount bearing to the total amount of duty which would have been payable on the whole estate had no part of it been so exempt, the same proportion as the value of the property not so exempt bears to the value of the whole estate.'
5. As we mentioned earlier, however, this is easily applied in practice by ascertaining the average rate of duty on the aggregate estate as a whole, comprising non-exempted plus exempted estate, and by applying that average rate to the non-exempted estate alone. There is another way, too, of working out the formula. That is by ascertaining the duty on the aggregate estate by applying the average rate pertaining to it, and deducting therefrom the duty calculated at the said average rate on the exempted estate. This will yield the duty on the unexempted estate. This method is the one usually followed in estate duty assessments. It involves the granting of 'rebate' of duty to the exempted estate. Although s. 34(2) does not speak of any 'rebate' of duty, this is the way the estate duty authorities find it convenient to work out the formula in s. 34(2). There can be no objection on principle to this method of working out s. 34(2), for it is only another way of doing the arithmetic of the provision.
6. The controversy between the parties before us is how to work out s. 34(2) in the context of the two aspects of aggregation and exemption in the present case. One of the aspects has to do with the deceased being the owner of an undivided half share of the joint family properties with his son having the other half share. Section 34(1), as we have briefly mentioned earlier, lays down the principle of aggregation of all properties passing on a deceased's death. As a principle relevant for rate purposes, this section contains an additional, special, rule of aggregation in the case of a Mitakshara coparcener who has an undivided share and who dies leaving a lineal descendant. The provision enacts that the deceased's share also for purposes of aggregation. This provision, as applied to the present case, would mean that the half share of the son and the half share of the deceased must be clubbed together for rate purposes.
7. Although s 34(1) enjoins that the deceased's undivided share in the coparcenary property must be clubbed along with the share of the lineal descendant, the lineal descendant's share will not be actually subjected to the impact of the estate duty, and will fall within the formula of s. 34(2) to which we have earlier adverted. Explanation (iii) to s. 34(2) lays down that for purposes of actual calculation of duty, the share of the lineal descendant included in the aggregated share must be regarded as exempted property. The position thus is that the rate pertaining to the aggregate family estate (which consists of the deceased's undivided half share plus the son's half share) must be applied to the deceased's estate.
8. The accountable person, in the present case, does not contest these propositions. The dispute is in working out the impact of another exemption available in this case under s. 33(1)(n) of the Act. We have earlier mentioned that amongst the joint family properties, there is a village house worth Rs. 20,000. The house was used exclusively owned by the deceased, being the property of the joint family. The problem, therefore, was how to work out this exemption in the scheme of the aggregation of the lineal descendant's share.
9. The Asst. Controller, who did the assessment in this case, apparently thought that the question of exempting the principal value of one residential house arises only as respects the dutiable share of the deceased, and it has no relevance in ascertaining the lineal descendant's share in joint family property is dutiable and, therefore, exemption will have to be given effect to in ascertaining the deceaseds undivided share, such cannot be the case with the ascertainment of the lineal descendant's undivided share which comes into the reckoning only for rate purposes and is not itself subject to estate duty. It was apparently on this basis that the Asst. Controller worked out his calculation of duty in this case. The following abstract of the computation of duty is taken from his order of assessment.
Principal value of all joint family properties 1,06,854.00
Less family debts 15,000.00
Net family estate 91,854.00
Deceased's half share Rs. 45,927.00
Less funeral expenses 1,000
half share in dwelling house 10,000 11,000.00
Deceased's net dutiable estate 34,927.00
Add share of lineal descendant (son) 45,927.00
10. The Asst. Controller worked out the average rate of duty on Rs. 80,854 and then gave a rebate on the share of the lineal descendant (that is to say, on the share of the son) which he worked out at Rs. 45,927 by applying the average rate applicable to Rs. 80,854.
11. The accountable person objected to the above method of arriving at the quantum of liability. According to him, the proper method to apply in this case was to exempt the value of the house in its entirety (namely, Rs. 20,000) while arriving at the principal value of the joint family properties and then work out the share of the deceased and the share of the son as the lineal descendant, respectively. According to the accountable person, the calculation would have to be as under :
Rs.Principal value of the jont family properties 1,06,854.00Less value of residential house 20,000.00-----------86,854.00Less family debts 15,000.00----------71,854.00---------Deceased's half share 35,927.00Less funeral expenses 1,000.00----------Deceased's net dutiable estate 34,927.00Add lineal descendant's half share 35,927.00---------70,854.00---------
12. Even under this method, the deceased's estate gets reckoned only at Rs. 34,927, which is the identical figure adopted by the Asst. Controller in his assessment order. But the difference in the rest of the calculation lies in the fact that, under the latter method, the lineal descendant's (half) share is taken to be only Rs. 35,927 for rate purposes and not at Rs. 45927 as adopted by the Asst. Controller. This makes for a difference in the ultimate liability for duty, because the rate is worked out on a smaller sum, smaller by Rs. 10,000.
13. The Tribunal accepted the accountable person's contention aforesaid in a brief observation in their order as follows :
'We are of opinion that the value of the present house (to the extent permissible under section 33(1)(n) should be deducted from the value of the joint family property, and the shares of the deceased as well as of the lineal descendants should be determined only after such deduction.'
14. This view of the Tribunal is challenged by the Estate Duty Officer in the following question of law :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the exemption provided in section 33(1)(n) of the Estate Duty Act, 1953, should be allowed in respect of the dwelling house of the Hindu undivided family from the value of the joint family properties before determining the share of the deceased and also that of the lineal descendants, the former for assessment and the latter for aggregation ?'
15. On a strict statutory construction, the question of applying s. 33(1)(n) of the E.D. Act to the present case would pose a problem, even to start with. Section 33(1) speaks of exemption of property of various different kinds belonging to the deceased. Clause (n) of the section speaks of a house qualifying for exemption as a house being exclusively used by the deceased for his residence. These words are inapt to apply to a family dwelling house because the house is not the property of the deceased, but the property of the family. Besides, it is a family dwelling house and not the exclusive home of any coparcener, much less the exclusive home of any one coparcener. The problem, therefore, is to fit s. 33(1)(n) of the E D Act to the peculiar situation of the death of an undivided member in a Mitakshara coparcenary. But the problem is not a new problem in the field of taxation in our country. Our taxation laws apply to all and sundry people. But they seldom lose sight of the peculiar incidents of the law relating to Mitakshara coparcenaries, which accounts for a good part of our legal system. While taxation laws, for the most part, respect the peculiarities of the Mitakshara system, they at the same time, do not hesitate to bend its principles, wherever necessary, for the service of the exchequer. The E.D. Act, as we earlier mentioned, concentrates on the death of a human being and makes the passing of property on the occasion of his death as a taxable, or a dutiable, event. The textual Hindu law governed by the Mitakshara lays down certain rules for the devolution of property on intestacy. The rules of devolution differ according as the property in question in which the deceased had an interest, was his separate property or coparcenary property. In the case of selfacquired or separate property, the Hindu law, as subsequently altered by statute, provided for certain rules of. But the important point to be noted is that the deceased's separate property passes, as such, to his heirs. The position, however, is different where coparcenary property is concerned. On the death of undivided coparcener, the rule of devolution is not inheritance, but succession by undivided coparcener, the rule of devolution is not inheritance but succession by survivorship. Shortly put, on the persons who would jointly be entitled to the coparcenary properties.
16. Estate duty, as a fiscal measure, was originally mooted in this country even before 1939. This proposal, however, was shelved after the Government of India consulted the Federal Court. The opinion of the court was not unanimous, but difficulties were expressed by almost all the members of that court as to how the Mitakshara conception could be fitted in with an estate duty levy which was proposed to be based on the English experience. Subsequently, in 1952, when the question was again proposed, Parliament went ahead with the measures. The basis adopted for the incidence of estate duty, as aforesaid, was property passing on death, that is to say, property changing hands on death. Those who introduced this from of death duty in this country did not, however, finch from applying, somehow, the doctrine of passing of property on death to the particular operation of the esoteric Mitakshara doctrine on death to the particular operation of the esoteric Mitakshara doctrine of survivorship. Under the English estate duty legislation, which was taken as the model for our country, there were a number of deeming provision or statutory fictions. Some of them went to the very core of the charge to estate duty. Among the deeming provisions found in the English law, there were one or two which went to the extent of deeming property to pass on death. Our Parliament took a decision and adopted most of the English deeming devices in our E.D. Act. In a Mitakshara coparcenary the doctrine of survivorship operated on the death of an undivided coparcener, but it was apparently thought that even that doctrine could be pushed into one of the deeming provisions which parliament had found it expedient to adopt from the English statutory provisions. Under the English legal system, there is nothing comparable to a Mitakshara coparcenary, although 'coparcenary' itself was an expression borrowed form English real property law. In the nineteenth century, if not earlier, Anglo-Hindu lawyers and judges borrowed this expression 'coparcenary' and misapplied it to the Mitakshara undivided family, with its quite different incidents. When the E.D. Act came to be enacted, Parliament decided to deem, as a taxable event, the death of a Mitakshara coparcener who dies possessed of an undivided interest in the coparcenary property. For effectuating the charge on this peculiar taxable event. Parliament adopted some of the provisions of the English Act. Chief among such provisions is s. 7 of our E.D. Act. The section was fashioned to catch coparcenary interests within the tax net. It was largely modelled on s. 2(1)(b) of the United Kingdom Finance Act, 1894. That provision, in short, dealt with a case where the deceased had an interest in property, which ceased on his death. A simple example of such interest is life annuity charged on property. With the death of the annuitant, his interest in the charged property ceases. Such an interest is of a kind which does not pass, and is not capable of passing, on the death of the annuitant. It merely comes to an end. But, the cesser of this interest always. has beneficial repercussions on the property charged with the annuity. For with the annuitant, is death, the charged property is rid of the charge. Under the English statute, therefore, this situation was thought to be an eminently fit subject for estate duty levy. Section 2(1)(b) of the United Kingdom Finance Act, 1894, therefore, laid down that where a person dying had an interest in property and that interest ceased on his death and on the cesser of that interest, a benefit accrued, then, for purposes of estate duty, property shall be deemed to pass on the deceased's death to the extent of the benefit. Provision was made in the statue to compute the benefit in terms of money by what is known as the application of the 'slice principle'. If the deceased's interest could be related to the property extended only to a part of the income, then a proportionate part of the corpus would be the measure of the benefit for purposes of reckoning what part of the corpus could be deemed to pass on death.
17. This English scheme of cesser of interest and benefit to property, as factors which are determinative of the measure of the property deemed to pass, has been bodily lifted form the English statute and incorporated in the first part of s. 7 of our Act. Thus, all cases which under the comparable provisions of the English Act could be brought within the scope of the charge in England would also be part of the charge under s. 7 of our E.D. Act. But, our Parliament apparently thought that this deeming provision is of such a kind that it might very well give room also to the Mitakshara devolution of coparcenary interest on the death of an undivided coparcener. Parliament accordingly laid down in the latter part of s. 7 of the E.D. Act that the interest which, on its cesser, made property deemed to pass to the extent of any benefit which accrued, must also be deemed to coparcenary interest in joint family property of a Hindu family governed by the Mitakshara law. Having thus laid down that a coparcenary interest is a kind of interest which ceases with the coparcener's death and produces a benefit, Parliament had to make other appropriate provision for measuring the benefit. For, under s. 7 of the E.D. Act, what is deemed to pass is not the interest ceasing on the deceased's death, but the benefit which accrues on the cesser of the said interest. Parliament accordingly fashioned ss. 39(1) and 39(2), as the machinery provisions for s. 7. Under those sections the benefit accruing on the cesser of a coparcener's interest must be taken to be the share of the deceased coparcener in the family property. This share has to be ascertained under s. 39 on the basis of a notional partition of the entire joint family estate a moment before the coparcener dies.
18. The E.D. Act was passed in 1953. Two years afterwards. the Hindu succession Act. 1956, came into the statute book. Section 6 of the Hindu Succession Act declares that subject to the exception in the proviso to that section, the rule of inheritance in that Act will not apply where a coparcener dies possessed of an undivided interest in a Mitakshara coparcenary. The enacting part of s. 6 of the Hindu Succession Act avowedly contains a restatement of the interest shall devolve by survivorship on the surviving members of the family. This restatement shows that the undivided interest of the coparcener is itself taken as a stock for devolution. It is not, therefore surprising that under s. 30 of the Hindu succession Act, the undivided coparcener has a testamentary properties. The enacting part of s. 6 of the Hindu Succession Act declares that the undivided interest, as such, would devolve, that is to say pass into the hands of the surviving coparceners and not to the deceased's heirs (alone). This way of understanding what happens when a coparcener dies makes the position easy for estate duty to operate upon without any effort at bending the Mitakshara law. The language of s. 6 of the Hindu Succession Act may be even regarded, in some respects, as an echo of the language of s. 7 of the E.D. Act. Parliament's strategy in s 7 of the E. D. Act, which was enacted before the passing of the Hindu Succession Act, was to push the Mitakshara situation into the cesser doctrine of English law. But, in view of the subsequent re-enunciation of the doctrine of coparcenary interest being an interest which actually devolves to the surviving, s. 7 of the E.D. Act was not only unnecessary as a means of bringing about a charge, but also inappropriate. For, under the restatement of the Mitakshara law contained in the enacting part of s. 6 of the Hindu succession Act, the interest of the coparcener does not cease on his death, but it devolves on his death to the surviving coparceners. The proviso to s. 6 of the Hindu Succession Act only makes for a difference in the devolution were to deceased leaves Class I female heirs, or other descendants though Class I female heirs, wherein the undivided coparcener's interest would be the stock of descent and will pass by inheritance to those heirs. In either case, there is a passing of the undivided coparcenary interest on the death of a coparcener.
19. If the charge to estate duty is based on property passing or changing hands, it would not matter, in the strict sense of the charge, to whom the property goes on the deceased;s death, excepting to find out who would be the proper persons accountable for the payment of the estate duty. Since the charge to estate duty is on the estate as such, passing on the deceased's death, it is in that sense not strictly an inheritance tax, but only a mutation tax, or, in other words, a tax on property changing hands. If the present understanding of the nature of the devolution of coparcenary interest on the death of a coparcener is that it is itself, per se, an interest in property and that it passes to the surviving coparceners on his death, then the coparcenary interest may be regarded as property straightaway passing on his death to some one or other either under the enacting part of s. 6 or under the proviso to s. 6 of the Hindu Succession Act, 1956. This is precisely the situation for which the charge to estate duty directly attaches under the opening words of s. 5 of the E.D. Act which is usually regarded as the charging section. In that sense, there is no need whatever for deeming, no need for fictions of any kind, to bring the coparcenary interest to charge for estate.
20. The one-time judicial view of the deeming provisions of the estate duty law in England was that when once an item of property is deemed to pass on the death, it would not be appropriate to bring it to charge as though it actually passed on the deceased's death. The courts held that the two sets of provisions were mutually exclusive. See Earl Cowley v. IRC  AC 198 (HL). The latest learning on the subject, even in England, is that the change based on property actually passing on the deceased's death, and the charge based on properly deemed to pass on his death are not provisions which can be regarded as mutually exclusive. It is now a settled doctrine of English courts that the two kinds of provisions only give the estate duty authorities an alternative basis for charge to duty. See Public Trustee v. IRC  AC 398 (HL). In our E.D. Act, the matter is made clear still than in England, both on the words of the charging s. 5 and on the basis of the rule of interpretation laid down in s. 3 of our Act. Thus. it is a matter of indifference whether any property is brought to charge as actually passing on the deceased's death or is only deemed to pass on the deceased's death.
21. The position is that whether we in invoke s. 7 or s. 5, the undivided coparcenary interest of a deceased Mitakshara coparcener must be reckoned as part of the dutiable property. The question, then, is how to reckon the principal value of this dutiable property, viz. the undivided coparcenary interest. For the principal value of each and every one of the items of property of the deceased person must be reckoned separately, and then aggregated in order that the charge to duty may be properly laid under the Act. It is in this the charge to duty may be properly laid under the Act. It is in this context that s. 39(3) of the E.D. Act comes to play. Section 39(3) is in the following terms :
'For the purpose of estimating the principal value of the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law in order to arrive at the share which would have been allotted to the deceased had a partition taken place immediately before his death, the provisions of this Act, so far as may be, shall apply as they would have applied if the whole of the joint family property had belonged to the deceased.'
22. The whole purpose of the present discussion depends on our under standing of the precise language used in the sector as expressive of the legislative intent. The idea is that in order to arrive at the principal value of the deceased's undivided share or the deceased's undivided interest in the coparcenary properties, it is necessary to take stock of the value of all the said properties as a whole, then arrive at the precise value of the deceased's interest in the coparcenary by dividing the value of the entire joint family property by his fractional share therein. Although the idea is simple to understand, the actual wordings in the section employs the familiar drifting mechanism of a statutory fiction. The fiction is used in this manner. The entire joint family property will have to be evaluated as though the joint family property had belonged to the deceased. This fiction is necessary because almost in every section. elsewhere in the text, the statute has addressed itself only to the principal value of the property belonging to the deceased. By this method of deeming the whole of the joint family property as if it had belonged to the deceased, the implication of the statutre is that all that provision which have to do with the evaluation of the principal value of a deceased's property must be applied mutatis mutandis to the evaluation of the joint family property as a whole. For instance, under s. 36(1) of the E.D. Act, the principal value of any property of the deceased shall be estimated to be the price which, in the opinion of the Controller, it would fetch if sold in the open market at the time of the deceased's death. The principle of this section will have to be applied for purposes of s. 39(3) of the Act where the properties to be evaluated are not the properties of the deceased, but the properties of the joint family on which the deceased was but a member. The method which is enjoined by the statutory fiction in s. 39(3) is that whatever might be the computation and whatever might be the section which would be appropriate for the purpose of arriving at the market value of non-joint family property must be applied to arrive at the principal value of the joint family property also, as a necessary first step for deriving the principal value of the share of the deceased in the joint family property.
23. It is in the context of the provisions of s. 39(3) that the exemption provisions of s. 33(1)(n) will have to be worked out, for there is no other provision which is found in the Act for linking the two.
24. Mr. J. Jayaraman, the learned standing counsel for the Department, urged that s. 33(1)(n) of the Act cannot come into the reckoning in the context of the computation of the principal value of the properties of the joint family. According to his submission, s. 33(1)(n), in terms, speaks of a dwelling house, and the dwelling house goes out of the charge precisely because it is property belonging to the deceased and it is a hose exclusively used by the deceased himself. He pointed out that all that s. 39(3) says is that we must proceed on the basis that the joint family estate as a whole is the property of the deceased and on that basis apply all the valuation provisions of the Act for evaluating the principal value. However, according to the learned counsel for the Department, the only thing that we must assume for the purpose of computation of the principal value of the joint family properties is that the properties entierly belonged to the deceased. Section 39(3), according to Mr. Jayaraman, does not go farther. It does not warrant our proceeding to assume yet another fiction, namely, the effect, that what is really a joint family residence is the individual residence of the individual coparcener. As a matter of construct made as if all the provisions in the E.D. Act applied but only such cording to him, are cautionary words which have been purposely introuduced in s. 39(3) to work the statutory fiction within legislative limits. Learned counsel further submitted that the provisions in the statute dealing with computation of the value of properties cannot by the own force be held to incorporate or adpot the different sets of provisions in the Act governing the grant of absolute or qualified exemption of properties from the ambit of the charge.
25. The last argument advanced by the learned counsel for the Department an be met on the very language of the statue. For the property which is exempt under s. 33(1)(n) is also property which must be excluded from aggregation under s. 34(1)(n) of the Act. Hence, a necessary and dispensable part of the process of computing the principal value of the concerned property is that the exemption provisions also will have to be taken into consideration. Since the charge to duty is laid on the basis of aggregation of properties into a single estate, and since properties exempted under s. 33(1)(n) are exclude from the ambit of the aggregation and since the principal value of property passing is on the basis only of those properties also, per force, come into the process of computation of the principal value of the estate. In the sense, therefore, although s. 39(3) states by saying 'For the purpose of estimation the principal value of the joint family property the provisions of this Act, so far as may be, shall apply as they would have applied if the whole of the joint family property had belonged to the deceased', the exemption provisions enacted. In our view, the question of exemption of the total value of the property. In a case where the exemption under the Act does not cover the inter value of the property, but only a part of it, or subject to a ceiling or upper limit, the position is clear still, since what is exempt is not the property as a whole item. But only part of its value. This necessarily involves the process of evaluation and computation not merely for liability, but also for exemption.
26. The contention of learned counsel for the Department that s. 33(1)(n) cannot at all come into the reckoning for the purpose of applying s. 39(3) is also opposed to the very pattern of assessment which has been followed in this case and on which there was always a general agreement between the Department and the accountable person. We have earlier set out, in tabular form, the computation made by the Asst. Controller in his order of assessment. The order shows that he computed the principal value of all the properties of the joint family at Rs. 1,06,854 and allowing for the estimated liabilities of the family in the sum of Rs. 15,000 he derived the net principal value of the joint family estate at Rs. 91,854. From that computation, he deducted Rs. 10,000 which is one-half of the value of the dwelling house. These steps in the computation show that there never was any idea in the mind of the Department or its eassessing officer that s. 39(3) cannot permit taking note of the exemption under s. 33(1)(n) of the Act. The Department's approach to the question, in our judgment, is quite in keeping with the scheme, the purpose, and even the language of s. 39(3) of the Act. The principal aim of s. 39(3) is to derive the prices value of the deceased coparcener's undivided interest. Since this item of dutiable property is a mere fractional interest, and it is also undivided, it was necessary for Parliament to devise a working formula to ascertain its principal value. This could only be done by reference to the totality of the properties of the joint family and by ascertaining the principal value of the entire joint family estate and deriving therefrom the share of the deceased coparcener. In this scheme of computation provisions, therefore, it would be illogical and incorrect, and it would also lead to inequalities of tax burdens, if any, of the exemption provisions, which are precisely relatable to the computation of the principal value, were either completely, or to any extent, left out of account. In the strict theory of Mitakshara coparcenary, no coparcener, while remaining undivided, can point to any particular asset of the family and say that it is his. He cannot even say that he is the owner of any definite share in any given asset or even say that he is the owner of any definite share in any given asset or even on the entirety of the assets of the joint family put together. This is because the joint family is a fluctuation unit of an ambulatory character having the effect of increasing the quantum of a member's coparcenary interest on the death of a member, or adoption away from the family of a member, and of lessening the quantum of that coparcenary interest by births and by adoption into the family. In another sense, however, a coparcener's interest pervades all the properties of the joint family. He cannot, for instance, be excluded from the residence of any family dwelling-house. Although the karta or manger of the joint family is not strictly account able to the other coparceners, the other coparceners are entitled to maintenance and also to a reasonable appropriation out of the joint family income for their personal expenses. In this sense, therefore, each of the undivided coparceners might be regarded as having an undivided interest in each and every one of the properties of the joint family. It is only in this sense that s. 33(1), read with s. 39(3) of the Act, is being invoked by the Department in all appropriate cases all these years. We are, therefore unable to accept the learned counsel for the Department putting forward the extreme argument based on a too literal reading of s 33(1)(n) and consequent misunderstanding of its scope to the effect that since it only refer to a house belonging to the deceased the being used as his residence, the provisions for exemption cannot be stretched and applied for the purposes s. 39(3) of the Act.
27. This position which we have arrived at an our view of the sections is not without authority. In CED v. Estate of Late R Krishnamachari : 113ITR200(Mad) , s. 33(1)(n) came in for construction and application in the context of the computation of the undivided interest of a deceased coparcener in a Mitakshara family, under s. 39(3) of the same Act. The following passage may be quoted as representing the decision of the Bench on the function of s. 34(1)(c) and its relation to s. 39(3)(p. 205) :
'In the light of the above, for the purpose of determining the value of the share of member of the joint Hindu family and for the purpose of imposing estate duty on his estate after his death, first of all, the total value of all the properties, valuing each of them separately, must be determined under section 39(3). After having determined that, such of those properties to the extent to which exemption has been given under the various clauses in section 33(1) will be taken out to that extent. The aggregate of the remaining must be divided as if at the time of death there was a partition and the share due to the deceased determined. The share so determined will be the share on which duty can be imposed under the Act and on no other'.
28. Earlier in the judgment, the learned judges specifically addressed themselves to the question whether in determining the value of the joint family properties, the exemption granted under s. 33(1)(n) can be brought into the rocking. The following are the observations of the learned judges (p. 205) :
'The question is then whether in determining the value of the joint Hindu family properties, the properties mentioned in section 33(1) which are exempt form the change should be omitted and then the share of the deceased member determined. A reading of section 33 makes it clear that subject to the limitations introduced by the various clauses regarding the quantum to the exemption, properties of the kinds mentioned in the various clauses of sub-section (1) of section 33 will not come into the picture at all in reckoning the value of the property that passing on the death of their exclusive right as well as in the case of members of a joint Hindu family who by virtue of the fictions introduced by section 7 and 39(1) are token to have passed on properties on their death for the propose of the Estate Duty Act. Naturally, it follows that in determining the total value of the properties of the Hindu family, those properties that are left out of account by the clear provisions under section 33(1) must also be left out for the purpose of determining the total value of the properties of the joint family'.
29. With respect, we adopt these observations as a correct enunciation of the scheme of the E.D. Act under s. 39(3) read with s. 33(1)(n). In the passage above-quoted, the learned judges had proceeded on the supposition t hat the main charge of the charge of the deceased coparcener in that case was made, not under s. 5, but under s. 7 of the Act. Hence it is, that the learned judges had referred to the provisions of s. 39(1) of the Act. The passage from the learned judge's judgment would equally apply if the charge had been brought under s. 5 and the provisions of s. 39(3) had been adopted without any recourse to s. 39(1) or s. 39(2) of the Act. This may be explained by observing that where the share of a deceased coparcener in a Mitakshara joint family is brought to charge by invoking s. 7 of the Act, it would be necessary for the Department to make the computation of the value of that share only by having recourse to s. 39(1) or s. 39(2) of the Act, as the case may be, read with s. 39(3); but where the Estate Duty Officer directly brings to charge the undivided interest of a deceased coparcener straightaway under the charging section in s. 5 without recourse to s. 7 then the computation provisions can and must be made under s. 39(3) of the Act. In either event, the provision under s. 33(1)(n), as of any other exemption provision under s. 33, will have to be applied for the purpose of evaluating the total principal value of the entire joint family property and derive therefrom the aliquot share of the deceased in that property.
30. In the present case, there is no indication in the order of assessment whether the Asst. CED had particularly invoked the provisions of s. 7 of the Act. On the other hand, a reading of the order would show that he had gone into the making of the assessment by regarding the share of the deceased coparcener as dutiable as such, that is to say, under s. 5 of the Act. Even while adopting this approach to the assessment, the Asst. Controller had applied the provisions of s. 33(1)(n) of the Act by deducting one half of the value of the house, viz., Rs. 10,000 out of Rs. 20,000 as a deduction legitimately to be granted under s. 33(1)(n) of the Act. The only mistake in the different steps taken by the Asst. Controller in the working out of the principal value is that, according to the Division Bench ruling, which we have earlier referred to, the entire value of the exempted house must be deducted from the principal value of all the properties of the joint family and from the net principal value of the properties of the joint family, the share of the deceased must be worked out. In his assessment order what the Asst. Controller did was first to work out the principal value of the estate and then divide it into two halves so as to arrive at the gross value of the half share of the estate relating to the deceased, and thereafter deduct therefrom one half of the value of the exempted house, viz., Rs. 10,000, as going towards his share. Strictly speaking, this is not in accordance with the method of working enjoined by the provisions of s. 39(3) of the Act as clarified in the Division Bench ruling roof this court.
31. The learned counsel for the Department, however, referred to the latter portion of the Division Bench ruling and doubted whether what the learned judges had observed in that part had not introduced an opening for a double deducting under s. 33(1)(n) of the Act. According to him, on a reading of that part of the judgment, it looks as though the learned judges had laid down that after arriving at the net principal value of the joint family estate, allowing for the exemptions under s. 33(1)(n) or other related provisions and arriving at the share of the deceased in the joint family property, the deceased would entitled to another deduction in respect of his share in the exempted property. We gave thought to this element of doubt raised by the learned counsel. In our opinion, a reading of the judgment of the Division Bench as a whole does not lead to the impression that the learned judges granted or even countenanced any double deduction in respect of s. 33(1)(n) in a case where what is to be computed was the share of an undivided coparcener in the joint family property wherein the joint family itself had a dwelling house falling within the frame work of s. 33(1)(n) of the Act. It may be quite a different matter where, apart from a coparcener's undivided coparcener in the joint family property wherein the joint family property, he has got his own separate assets, which might be entitled to exemption under one or the other of the provisions of s. 33(1) of the Act, But, there is no doubt in our minds that the Division Bench did not interpret s. 39(3) read with s. 33(1)(n) of the Act as sanctioning a double deduction. There may be observations in their judgment which, in terms of the figures set out therein, might lead to a difficulty in understanding, but we are quite clear that the reasoning of the judgment is to be found in the two passages we have extracted and reproduced in this judgment earlier. The subsequent part of the judgment of the Division Bench relating to the arithmetical calculation which they handed down for that particular case cannot be regarded as inconsistent with their enunciation of the law in the earlier part of the judgment. After all, if there are arithmetical mistakes, they can and must be rectified suitably in order to accord with the enunciation of the law, The decision in CED v. Estate of Late R. Krishnamachari : 113ITR200(Mad) , may well be regarded as falling into two parts, the one containing an enunciation of the law under s. 39 read with s. 33(1)(n) of the Act, and the other carrying the actual directions to the Tribunal, in the particular case on hand, to compute the principal value of the share of the deceased coparcener on the basis of the enunciation of the general law. As we observed, it is in the latter part of the judgment that there is a likelihood of some That the latter part of the judgment was prone to be misunderstood was an apprehension expressed by the learned counsel for the Department particularly on the basis of a subsequent judgment of this court, to which as it happens, one of us was a party. In T.Sundaresa Mehta v. CED : 127ITR107(Mad) , while purporting to follow the earlier decision in CED v. Estate of Late R. Krishnamachari : 113ITR200(Mad) , the Division Bench apparently mistook the latter part of the judgment in : 113ITR200(Mad) , as containing the ratio decided in that case. However, it would appear that even the Bench deciding the later case did not express themselves finally on the subject, since they gave a direction to the Tribunal to make a computation in accordance with the rule laid down in : 113ITR200(Mad) .
32. In T. Sundaresa Mehta v.CED : 127ITR107(Mad) , this is what is observed by the learned judges after referring to the latter part of Krishnamachari's case : 113ITR200(Mad) :
'In the other words, the direction in the said case is to value the property as a whole and then ascertain the share of the deceased. If the value of the share of the deceased exceeded rupees one lakh, then rupees one lakh would be eligible for exemption under s. 33(1)(n). If the value of the share of the deceased was less than rupees one lakh, then the entire value would be exempted from the estate duty assessment under s. 33(1)(n). It is this formula that will have to be applied in the present case... The exemption provided in s. 33(1)(n) should be computed after the value of the share of the deceased is determined and in the light of the decision in CED v. Estate of late R. Krishnamachari : 113ITR200(Mad) .'
33. This passage too is likely to cause a misunderstanding in the mind of the Tribunal when it proposes to carry out and pass an order conformable to the judgment in that case, for, if the basis of the decision in Krishnamachari's case : 113ITR200(Mad) , is, as we have earlier explained, then the particular direction, which this court had given to the Tribunal in the subsequent case of Sundaresa Mehta : 127ITR107(Mad) , cannot be consistent with the earlier decision. But, since the later Bench had completely adhered to the principles laid down by the earlier Bench decision, we do not think that any of the passages in the latter decision also can be regarded as striking a discordant note.
34. A subsequent unreported judgment of this court in T.C. No. 199 of 1976 also was brought to our notice, but in that judgment what had been done by this court was to direct the Tribunal to pass the order in accordance with the terms of the Judgments in Krishnamachari's case : 113ITR200(Mad) and Sundaresa Mehta's case : 127ITR107(Mad) . This is another indication to show that there was really to inconsistency in the line of decisions.
35. Mr. J. Jayaraman, learned counsel for the Department, brought to our notice a decision of the Karnataka High Court in CED v. K. Nataraja : 119ITR769(KAR) . The question there was precisely that which had been considered and determined in Krishnamachari's case : 113ITR200(Mad) . The learned judges of the Karnataka High Court, after quoting the two passages which we have ourselves extracted earlier in our judgment, proceeded to observe that those passages were not quite consistent with the other portions of the judgment of this court in CED v. Estate of Late R. Krishnamachari : 113ITR200(Mad) , a doubt which we have already expressed earlier in our own judgment. But, what is to be taken note of in this judgment of the Karnataka High Court is the enunciation by the learned judges and what, according to them is the inter relation between ss. 39 and 33(1) of the Act. They laid down three propositions as summing up that inter relation in the course of their judgment. It is enough to set down the first of the points which they lad derived from their study of the two sections (p. 774) :
'Section 39 which is in Part V and which has been there since the commencement of the Act deals with valuation of the coparcenary interest of the deceased, like ss. 36, 37, 38 and 40. Sections 36 to 40 have nothing to do with the exemptions from payment of estate duty, which are dealt with in Part III of the Act. The fiction under s. 39(3) should be limited for the purpose of valuation only and cannot be extended for determining exemptions. It has also to be observed here that s. 39(1)(n) was introduced in 1964 with effect from September 23, 1963.'
36. With great respect, we do not agree with the presentation of the law contained in the above passage. As for the last observation in that passage, our view is that in a matter of statutory construction, we will have to deal with the statute as of one piece and not give different parts of the statute different meanings to accord with the chronology of the introduction of different sections in the Act, unless they have any particular reference either to prospective or retrospective operation. In a case where both ss. 39(1) and 33(1)(n) are on the statute book, with respect to a particular assessment, the fact that the one or the other of the sections was earlier or later introduced into the Act can have no significance in the matter of construction. Even otherwise, we do not subscribe to the views of the learned judges that the fiction under s. 39(3) should be limited only for the purpose of valuation and cannot be extended for determining the exemptions. In our view, which we have earlier elaborated, question of valuation. We have earlier referred to the provisions of s. 34, which says that for the purpose of determining the rate of estate duty to be computed on any property passing on the death of the deceased, the property so passing shall be aggregated so as to form one estate excepting property exempted from estate duty under clauses (c), (d), (i), (j), (l), (m), (mm), (n), (o) and (p) of sub-s.(1) of s. 33. This provision, therefore, is a clear aggregation and also exemption, are all tied up together for the purpose of effectuating the charge. Even on the terms of s. 33(1)(n), as we have earlier pointed out, it is difficult to separate exemption from aggregation and valuation in a case where the dwelling house is situate in a place having a population of less than 10,000, then the entire property as such is not exempt, but the value of the property up to a limit of Rs. 1,00,000 alone will have to be exempted. The exemption under s. 33(1)(n), therefore, would depend necessarily and inevitably on the process of ascertaining the principal value. This is one illustration to show that there cannot be a clear cut distinction between a valuation provision and an exemption provision. Even otherwise, when s. 39(3) provides that for the purpose of estimating the principal value of the joint family property, the whole of the joint family property shall be valued as if it had belonged to the deceased, the section imports a statutory fiction and while doing so, the section enjoy on us to have regard to 'the provisions of this Act, so far as may be'. This is a caution that, while applying the fiction of s. 39(3), we should not allow our minds to boggle.
37. The learned judges of the Karnataka High Court have also observed in CED v. K. Nataraja : 119ITR769(KAR) , at page 774 that only properties which are referred to in ss. 21 to 24 of the Act are items of properties which are not to be treated as part of the estate passing on the death of the deceased. This observation seems to be quite inconsistent with the provisions contained in s. 34(1)(a) of the Act, to which we have earlier referred. We are, therefore, persuaded not to accept the construction placed by the learned judges of the Karnataka High Court upon s. 39(3) of the Act in relation to the exemption under s. 33(1)(n) of the Act.
38. We find another element of illogicality in the reasoning and conclusion of the learned judges of the Karnataka High Court in the concluding portion of their judgment in Nataraja's case : 119ITR769(KAR) , in which they observed thus (p. 781) :
'Section 33(1)(n) of the Act has no relevance to the computation of the value of the interest of the deceased in the coparcenary property unders s. 39. Where the residential house belongs to a HUF governed by Mitakshara, only the share of the deceased in such house is exempt from estate duty under s. 33(1)(n). For purpose of rate of estate duty, the value of the share of the deceased in such house has to be excluded from the value of the property passing on his death under s. 34(1)(a), but the value of the shares of all the lineal descendants of the deceased in the coparcenary property including the residential house has to be aggregated under s. 34(1)(c) without any reference to any exemption under s. 33(1)(n) of the Act.'
39. We may observe that if s. 33(1)(n) has no relevance to the computation of the interest of the deceased under s. 39(3) of the Act, we fail to understand by what other process s. 33(1)(n) can be invoked for the purpose of exempting a portion of the value of the house to which the share of the deceased coparcener relates. A more acceptable basis for the understanding of the inter relation between s. 39(3) and s. 33(1)(n) is that which we have laid down in this judgment, following the general principles enunciated in CED v. Estate of late R. Krishnamachari : 113ITR200(Mad) .
40. We have earlier stated that the net principal value of the joint family estate was arrived at by the Asst. Controller in the sum of Rs. 91,854 and the half share of the deceased therein being Rs. 45,927. From this figure were deducted the funeral expenses of Rs. 1,000; and the half share of the deceased in the family dwelling house in the sum of Rs. 10,000; and the net value of the deceased's share in the joint family property was arrived at in the sum of Rs. 34,927. But, this amount was subjected to estate duty at a rate which took note of the aggregation of the lineal descendant's share was computed in this case at Rs. 45,927 which, as we pointed out, was before the deduction of his half share in the dwelling house, viz., Rs. 10,000. The effect, therefore, of this computation was that whereas the deceased's share in the joint family property was arrived at in the sum of Rs. 34,927, the share of the lineal descendant was taken to be Rs. 45,927, although there was no dispute that the father and son possessed exactly equal shares in the joint family properties. The illogicality of this manner of ascertaining the lineal descendant's share for rate purposes has been brought out very well in the order of the Appellate Controller thus :
'Section 39(3) prescribes that the principal value of the joint family property shall be first ascertained after application thereto of the relevant provisions of the Estate Duty Act and the deceased's share therein only thereafter should be considered for his estate duty assessment. This subsection as it were imports a legal fiction into the proceedings that for the purposes of evaluating the interest of a deceased coparcener, the whole of the joint family property is to be treated as belongings to him and all the relevant provisions of the Act applied thereto. In the context of such a legal fiction the exemption admissible under section 33(1)(n) in respect of the dwelling house cannot be denied in the computation of the principal value of the joint family property. In this view of the matter, it is quite clear that the exemption of a dwelling house to the extent of a lakh of rupees under section 33(1)(n) should be definitely taken into consideration while computing the principal value of the joint family property under section 39(3). Following the same logic, no separate exemption would once again be admissible in respect of the dwelling house in the computation of the principal value of the estate of the deceased. Viewed in the above light, I think that appellant's contention for the exclusion of the dwelling house from the principal value of the joint family property is quite justified. I would, therefore, direct the Assistant Controller to ascertain the principal value of the joint family property after allowing the exemption in respect of the dwelling house and determine the share of the deceased as also that of the lineal descendants therein, the former for assessment and the latter for aggregation.'
41. Similar views were expressed by the Tribunal in an order which was adopted subsequently by the Tribunal in the present case. In their earlier order, the Tribunal first addressed themselves to the question as to how the principal value of the joint family properties will have to be ascertained. That, according to the Tribunal, was the first stage of the computation. They then laid down the second stage of the computation in the following terms :
'The second stage is the extent of the joint family property of which the share is to be taken. Here, the plea of the accountable persons is that the share should be taken of the Hindu undivided family properties as ascertained after excluding the exempt items like section 33(1)(n), while the Department wants the share to be ascertained without such exclusion. We are of opinion that the plea of the accountable persons is correct and has to be upheld. In the first place, though there is no statutory definition of the shares of the lineal descendants, logic and analogy require that it should be done on the same basis as for the interest of the deceased. For example, in EDA No. 44/MDS/ of 72-73, the family consists of the father and son having equal shares and, when the share of the deceased was taken under section 39(1) and (3) to be Rs. 1,50,737, it is difficult to see how the equal share of the son could be taken at a different (higher or lower, in this case the higher) figure of Rs. 2,20,737. Secondly, the plea that the principal value of the joint family property for this purpose shall be taken without reference to the exemptions and inclusions, would lead to absurd results. Not merely the residential house property, but several other assets are exempt from duty. For example, suppose the family possesses foreign immovable property to extent of rupees four lakhs and property in India to the extent of rupees two lakhs, the share of the deceased would be taken only at rupees one lakh, whereas, on the Department's argument, the share of the son would be taken at rupees three lakhs. It would not have been the intention of the legislature to levy duty on property passing by reference to value of properties which were not contemplated at all as liable to estate duty and which even on principles of international law, are not taxed. Equally, suppose an item of the property of the Hindu undivided family has gone out in circumstances which attract sections 9 to 17 of the Act, these properties would be included in ascertaining the share of the deceased but the Department's argument would leave them out of account. There is no statutory or other warrant for any differentiation as to the basis of ascertainment of the shares of the deceased, who is a member of the family and the other members.'
42. We regard this enunciation of the impact of the provisions of s. 33(1)(n) or s. 34(1)(c) of the Act as, by and large, correct. We do not deem it necessary, therefore, to labour the point further, excepting to observe that the provisions of s. 34(1)(c) of the Act have been declared ultra varies and incosistent with art. 14 of the Constitution by a decision of the Division Bench of this court in V. Devaki Ammal v. Asst. CED : 91ITR24(Mad) . Subject to the invalidity of the provisions of s. 34(1)(c) of the Act, we would, therefore, hold that the share of the lineal descendants of a deceased coparcener must be computed in precisely the same manner as the share of the deceased himself in the joint family properties.
43. The question of law, which has been referred to us for our opinion, is in the following terms :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the exemption provided in section 33(1)(n) of the Estate Duty Act, 1953, should be allowed in respect of the dwelling house of the Hindu undivided family from the value of the joint family properties before determining the share of the deceased and also that of the lineal descendants, the former for assessment and the latter for aggregation ?'
44. In view of the discussion in the foregoing paragraphs, our answer to the question is in the affirmative and against the Department. The accountable person in this case has not been represented. The learned counsel for the Department has placed before us all the considerations that are relevant for a decision in this case including those which might have been thought to assist the case of the accountable persons. There will be no order as to costs.