Controller
of Estate Duty, Madras Vs. N. Shankaran [1991] INSC 285 (1 November 1991)
Rangnathan,
S. Rangnathan, S. Fathima Beevi, M. (J) Ojha, N.D.
(J)
CITATION:
1991 SCR Supl. (2) 167 1992 SCC Supl. (1) 447 1991 SCALE (2)958
ACT:
Estate
Duty Act, 1953--Sections 21(5), 9, 27--'Blend- ing'-'Partition '--Whether
'disposition '.
HEAD NOTE:
A
common question of law that arises for determination in these appeals by
special leave is whether the act of a member of a joint family by which he
impresses his individu- al property with the character of joint family property
or "throws" it into the hotch potch of the joint family or
"blends" it with the joint family property is a 'disposi- tion'
within the meaning of the Estate Duty Act, 1953. In Civil Appeal No. 1204 of
1979 the facts are: One Natesan Chetty who died on 1.3.1972, was the Karta of a
Hindu Undi- vided Family, consisting of himself and his four sons. He owned
five house properties in Madras, On 18.6.70 and 16.9.1970, he made
declarations by which he impressed the properties with the character of joint
family properties and further declared that they would thereafter belong to HUF
of which he was the Karta. Thereafter a partition was effected in the family in
March 1971 in which two of the properties came to his share. Sri Chetty had
also borrowed Rs. 46,800 from HUF out of the rental income from the properties
for his business purposes. These borrowings were duly repaid in April, 1971.
In
completing the assessment to estate duty of the estate passing on the death of Natesan
Chetty, the Assistant Controller of Estate Duty held that the declarations made
by the deceased on 18.6.70 and 16.9.70 were "dispositions" within the
meaning of the said expression as defined in the second explanation to section
2(15) of the Estate Duty Act.
He
further held that since the declarations were made with- out consideration,
they amounted to gift which had been made within two years of the date of death
and hence liable to be assessed as part of the estate passing on death under
sec- tion 9 of the Act. The two properties which had fallen to the share of the
deceased passed on the death of the de- ceased. He accordingly included Rs. 1,22,500
the value of the other three properties also in 168 the principal value of the
estate. The Asstt. Controller further held that a sum of Rs. 46,800 being the
loan taken and discharged by the deceased should also be added back in
computing the principal value of the estate by virtue of section 46(2) of the
Act.
Dissatisfied
with the conclusion of the Asstt. Control- ler, the accountable person
preferred an appeal to the Appellate Controller of Estate Duty which was
successful.
Thereupon
the Department preferred an appeal to the Tribunal which, following the
decision of the Madras High Court in Rajamani Ammal v. Controller of Estate
Duty, (1972) 84 I.T.R. 790 held that the sum of Rs. 1,22,500 could not be
included in the value of the estate passing on the death and consequently, that
the add back of Rs. 46,800 was also not justified. Thereupon the Controller of
Estate Duty applied under Section 64 (1) of the Act for a reference to the
Madras High Court for its opinion on the two questions. The Madras High Court
was of the opinion that the basic question at issue was covered by the earlier
decisions of the Court in Rajamani Ammal v. Controller of Estate Duty and
Control- ler of Estate Duty v. Smt. Mookammal, (1978) 110 I.T.R. 581.
The
High Court declined to call for a reference and dis- missed the application for
reference. Hence the appeals by the Department.
Dismissing
the appeals, this Court,
HELD:
"Blending" or "partition" will not be a 'disposi- tion'
within the ordinary connotation of the expression but will be one if either of
the Explanations to Section 2(15) are attracted. [179 G] Unlike an unequal
partition, the act of blending will not amount to a 'disposition' attracting
Ss. 9 and 27 of the Act. [179 H - 180 A] The High Court was right in holding
that the acts of blending did not result in the 'gift' of immovable proper-
ties within the meaning of the statute. [180 C] Though a declaration of
blending does not amount to a 'gift' where the act of blending is followed up
by a subse- quent partition, the two transactions taken together do result in
the extinguishment, at the expense of the de- ceased, of his rights in the
properties which go to the share of other coparceners at the subsequent
partition and, if the two can be treated as parts of the same transaction the
Explanation to Section 2 (15) may be attracted. [180 D- E] 169 Rajamani Ammal
v. Controller of Estate Duty, (1972) 84 ITR 790; Controller of Estate Duty v. Smt.
Mookammal, (1978) 110 ITR 581; Rangabayaki Ammal v. CED, (1973) 88 ITR 96; CED
v. Kantilal Trikamlal, (1978) 105 ITR 92; Stremann v. CIT, (1965) 66 ITR 62 SC;
Goli Eswariah v. CGT, (1970) 76 ITR 675; C.G.T.v. Getti Chettiar, (1971) 82 ITR
599; Cherukuru Eswaramma v.C.E.D, (1968) 69 ITR 109; CED v. Jai Gopal Mehta,
(1972) 85 ITR 175FB; C.E.D., v. Laxmi Bai, (1980) 126 ITR 73; C.E.D.v. Babubhai
T. Panchal, (1982) 133 ITR 455; and C.E.D.v. Satyanaravan Babulal Chaurasia,
(1983) 140 ITR 158, referred to.
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 1204 (NT) of 1979.
From
the Judgment and Order dated 3.2.1978 of the Madras High Court in Tax Case
Petition No. 271 of 1977.
WITH Civil
Appeal No. 4371 (NIT) of 1991.
Ms. A.
Subhashini for the Appellant.
Ms. Janaki
Ramchandran and A.T.M. Sampath for the Respondents.
The
Judgment of the Court was delivered by RANGANATHAN, J. Both these matters raise
the same ques- tion viz. whether the act of a member of a joint family by which
he impresses his individual property with the charac- ter of joint family
property or "throws" it into the hotch potch of the joint family or
"blends" it with the joint family property is a "disposition"
within the meaning of the Estate Duty Act, 1953 ('the Act', for short).
Civil
Appeal no. 1204/79 is an appeal from an order of the High Court declining to
call upon the Income-tax Appel- late Tribunal to refer the above question for
the decision of the High Court in view of certain earlier decisions of the
Court. The Madras High Court also declined to direct a reference on the above
issue in T.C.P. No. 478 of 1977 and that is the subject matter of SLP (C) No.
335 of 1979. In view of the pendency of Civil Appeal No. 1204/79, we grant
special leave in SLP (C) No. 335/79 also.
Before
discussing the correctness of the above conclu- sion, it may be convenient to
set out the background of facts in Civil Appeal No. 1204/79.
170
That appeal arises out of the estate duty assessment conse- quent on the death
of one Natesan Chetty, who died on 1.3.72. He was the Karta of a Hindu
Undivided Family (HUF) consisting of himself and his four sons. He was also the
owner, in his individual capacity, of five house properties in Madras. On 18.6.1970 and 16.9.1970 he made
declarations by which he impressed the above mentioned properties with the
character of joint family properties and declared that they would thereafter
belong to HUF of which he was the karta. Subsequently, a partition was effected
in the family in March 1971 in which two of the above mentioned properties came
to the share of the deceased. Sri Natesan Chetty had also borrowed a sum of Rs.
46,800 from the HUF out of the rental income from the above mentioned
properties for being invested in the business earned on by him. These
borrowings were made between March 1970 and April 1971 and they were repaid in
April 1971.
In
completing the assessment to estate duty of the estate passing on the death of Natesan
Chetty, the Assistant Controller of Estate Duty held that the declarations made
by the deceased on 18.6.1970 and 16.9.1970 were "dispositions" within
the meaning of the said expression as defined in the second explanation to
section 2(15) of the Act. These dispo- sitions having been made for no
consideration within the meaning of s. 27 (1), amounted, according to him, to
gifts and since the gift had been made within two years of the date of death,
the subject matter of the gift was liable to be assessed as pan of the estate
passing on death under section 9 of the Act.
As
already mentioned, two of the properties had been allotted to the share of the
deceased in the partition of 1971 and it is common ground that they passed on
the death of the deceased as they belonged to him on the date of his death. The
question, however, was whether the other three properties which went to the
other members of the family as a result of the declarations and partition were
also liable to be included as pan of the estate deemed to pass on the death of
the deceased by the application of section 9 read with S.27 (1) and section
2(15) of the Act. The Assistant Controller answered this question in the
affirmative and included their value, taken at Rs. 1,22,500, in the princi- pal
value of the estate. As a consequence of his conclusion that the properties
were liable to be included in the es- tate, the officer ,,I so took the view
that the sum of Rs. 46,800 being the loan taken by the deceased from the HUF
and discharged within two years prior to the death should be added hack in
computing the principal value of the estate by reason of the provisions of
section 46 (2) of the Act. It is not in dispute before us that though two
points were thus involved in the assessment--one regarding the inclusion of the
value of 171 three items of property as part of the estate of the de- ceased
passing on his death and the other regarding the addition or disallowance of
the debt of Rs. 46,800 -- they are inter-connected and that, if the first
question is answered in favour of the assessees, the second question will also
stand answered likewise.
Dissatisfied
with the conclusion of the Assistant Con- troller, the accountable person
preferred an appeal to the Appellate Controller of Estate Duty which was successful.
Thereupon
the Department preferred an appeal to the Tribunal which, following a decision
of the Madras High Court in Rajamani Ammal v. Controller of Estate Duty. (1972)
84 I.T.R. 790 held that the sum of Rs. 1,22,500 could not be included in the
value of the estate passing on the death and, consequentially, that the add
back of Rs. 46,800 was also not justified. Thereupon the Controller of Estate
Duty applied, under S. 64 (1) of the Act, for a reference to the Madras High
Court, for its decision, of the following two questions:
"1
Whether, on the facts and in the circumstances of the case, the Appellate
Tribunal was right in holding that the trans- action by which a Hindu impressed
his separate properties [as] with joint family character could not be
considered as a disposition under the second explanation to section 2(15) and
section 27 of the Estate Duty Act ?
2.
Whether, on the facts and in the circumstances of the case, the Tribunal was
right in holding that the addition of Rs. 1,22,500 made under section 9 and Rs.
46,800 made under section 46(2) could not be sus- tained in the case of the
deceased ?" The Madras High Court was of the opinion that the basic
question at issue was covered by the earlier decisions of the Court in Rajamani
Ammal v. Controller of Estate Duty, (1972) 84 ITR 790 as well as a subsequent
decision in Con- troller of Estate Duty v. Smt. Mookammal, (1978) 110 ITR 581.
The Court found no substance in the attempt, on behalf of the Revenue, to
distinguish the above decisions on the strength of a decision of the Court in Ranganayaki
Ammal v. CED, (1973) 88 I.T.R 96 which had been confirmed by the Supreme Court
in CED v. Kantilal Trikamlal, (1978) 105 I.T.R. 92. In this view of the matter
the High Court de- clined to call for a reference on the two questions above
mentioned and dismissed the application for reference. Hence the present Civil
Appeal. It is not necessary to set out the facts in SLP No. 335 of 1979 where
the question involved is the same except that there was no subsequent partition
after the blending and that no question regarding the deductibili- ty of debts
also arose in this case.
172 It
will be seen that both these appeals are directed against the orders of the
High Court declining to call for a reference. It is fairly clear that the
questions whether Rajamani Ammal was rightly decided and whether, if so, it
needed reconsideration in the light of Kantilal Trikamlal are questions of law.
But, in view of the long lapse of time, we have considered the issues on merits
and since we are satisfied that the High Court's conclusion was correct, we
dispose of the appeals straightaway without going through the formality of
asking the Tribunal to make a reference to the High Court and then awaiting the
High Court's decision on the question of law referred.
The
Estate Duty Act 1953 has ceased to be enforceable since 16.3.1985. In the
circumstances we need not elaborate- ly set out the provisions of the Act and
the principles behind them. An outline of the provisions necessary for the
determination of the issue before us will suffice. The Act levies a duty on the
aggregate market value of the proper- ties passing on the death of any person
(statutorily termed the 'principle value of the estate'). It is manifest that
the statute could be easily circumvented if duty-were re- stricted only to
properties which actually pass on a death, for, various of devices could be
thought of by which the property of such person could ostensibly be transferred
to others sometime before the death, although it continues to be really under
the domain and control of the deceased till the time of his death. The statute
therefore contains elabo- rate provisions deeming certain properties to pass on
death even though their beneficial enjoyment may not actually change hands at
the time of his death. One such item of properties which are deemed to pass on
the death of a person are those which formed the subject matter of a gift made
by him within a specified period preceding his death. S.9 of the Act, which
contains this deeming provision reads thus:
"9.Gifts
within a certain period before death--(1) Property taken under a disposition
made by the deceased purporting to operate as an immediate gift inter vivos
whether by way of transfer, delivery, declaration of trust, settlement upon
persons in succession, or otherwise, which shall not have been bona fide made
two years or more before the death of the deceased shall be deemed to pass on
the death".
In
short, the provision enabled the Revenue to ignore any gift of property made by
the deceased within two years of his death by creating a statutory fiction that
properties so gifted passed on the death of the deceased, 173 although, in fact
and in law, they ceased to be his a short time before his death. This is the
first fiction.
The
legislature next proceeded to enact a second fic- tion. This was in order to
bring into the net of taxation transactions which may not be comprehended
within the legal concept of a gift because they are ostensibly made for some consideration.
It provided in section 27 that:
"27.
(1) Dispositions in favour of relatives--Any disposition made by the de- ceased
in favour of a relative of his shall be treated for the purposes of this Act as
a gift unless--- (a) the disposition was made on the part of the deceased for
full consideration in money or money's worth paid to him for his own use or
benefit; or (b) .......... ; and references to a gift in this Act shall be
construed accordingly: .......... " Resort to this provision in the present
case is needed for a purpose. Admittedly, the deceased received no
consideration for impressing the property with the character of joint family
property. If this amounted to a transfer, then S.9 alone would be sufficient to
bring the properties within the net of taxation. But it could be argued that a
gift involves a 'transfer' without consideration but the act of blending does
not constitute a 'transfer' [vide: Stremann v. CI.T., (1965) 56 I.T.R. 62
(S.C.) and a host of other cases under the Income-tax Act]. Section 27 helps
the Department in the present case only in that it uses a much wider word, 'dispo-
sition', and treats dispositions in favour of relatives as gifts.
The
statute had to make provision for a third fiction as well as it could still be
contended that the word 'disposi- tion' would not be sufficient to comprehend
certain types of transactions. To be on the safe side, therefore, the statute
proceeded to enact a special definition of the word 'dispo- sition' in section
2(15) of the Act wide enough to rope in various kinds of acts in respect of
property. This provi- sion, insofar as it is material for our present purposes,
reads as follows:
"2(15)
'Property' includes any interest in property, movable or immovable, the
proceeds of sale thereof and any money or investment for the time being
representing the proceeds of sale and also includes any property con- verted
from one species into another by any method;
Explanation
I--The creation by a person or with his consent 174 of a debt or other right
enforceable against him personally or against property which he was or might
become competent to dispose of, or to charge burden for his own benefit, shall
be deemed to have been a disposition made by that person, and in rela- tion to
such a disposition expression 'proper- ty' shall include the debt or right
created.
Explanation
2--The extinguishment at the expense of the deceased of a debt or other right
shall be deemed to have been a disposi- tion made by the deceased in favour of
the person for whose benefit the debt or right was extinguished, and in
relation to such a dispo- sition the expression 'property' shall include the
benefit conferred by the extinguishment of the debt or right;
The
short case of the department now is this; the de- ceased in these cases was the
full and exclusive owner of the immovable properties in question. By the act of
blending he has convened them into HUF propertieS. The properties no longer
belong to him as an individual; they belong to the family thereafter with certain
rights qua them in the other members of the HUF. In other words, there 'has
been an extinguishment, at the expense of the deceased, of a part, at least, of
his rights in the properties with a correspond- ing benefit to the others.
There has also been the creation, by the deceased, of a right in the others
enforceable against the deceased and the properties e.g. the right to demand a
partition. The deceased, therefore, has made a disposition in favour of his
relatives for no consideration within two years of his death. The value of the
properties, in respect of which he made the disposition in favour of the
family, are, therefore, liable to be included in the principal value of the
estate passing on his death under section 9 read with section 27 read with the
Explanations to section 2(15). This is quite apart from the fact that the value
of the two properties, which subse- quently fell to the share of the deceased
at the partition in March 1971, are liable to be included as his own property
actually passing on his death. The question that we have to consider is,
therefore, whether the legal incidence of the act of blending an be brought
within the four corners of the two Explanations to section (15) of the Act.
It was
precisely this question which had been considered by the Madras High Court
earlier in Rajamani Ammal v. Controller of Estate Duty (1972) 84 I.T.R. 790. in
deciding the issue, The High Court had the benefit of two earlier decisions of
this Court in Goli Eswariah v. C G.T., (1970) 76 I.T.R. 675 and CG.T, v. Getti Chettiar.,
(1971) 82 I.T.R. 5991, 175 where this Court had held, in the context of the
Gift Tax Act, that the act of blending and the act of a coparcener receiving,
on partition of a HUF, less than the share he was entitled to receive would not
constitute gifts. The details of this decision need to be set out at some
length.
Three
contentions had been urged in Rajamani: (a) The first was that the act of
blending constituted a 'disposi- tion' within the general meaning of that word.
Repelling this contention, the Court observed:
"The
learned counsel for the revenue placed strong reliance on the word
"disposition" in section 27 (1) of the Act and contended that even an
act of throwing of the self-acquired property into the common stock of a joint
Hindu family is included in that expression.
In a
case arising under the Gift-tax Act, the word "disposition" came up
for consideration in the decision in Goli Eswariah v. Commis- sioner of
Gift-tax, (1970) 70 I.T.R 675 (S.C.). The Supreme Court held that the word
"disposition" refers to a bilateral or a multilateral act and it does
not refer to a unilateral act. This decision of the Supreme Court approves the
decision of this court in Commissioner of Gift-tax v.P. RangasamiNaidu, (1970)
76 I.T.R. 315 (Mad) (F.B). It is true that these decisions are under the
Gift-tax Act. It is also true that the word "disposi- tion" was
considered in these decisions, with particular reference to the definition of
"transfer of property" under that Act. We are of the view that the
word "disposition" in section 27(1) of the Estate Duty Act also
refers to a bilateral or multilateral act. The section refers to a disposition
by the de- ceased in favour of a relative and also speaks of partial failure of
consideration. Section 9 also refers to property "taken under a dispo- sition".
Therefore, in our opinion the word "disposition" in section 27(1),
however wide its ambit may be, would not include the uni- lateral act of a
person by which he throws his self-acquired property into the common stock of
the joint family." (b) It had been next contended, on behalf of the
Revenue that, by throwing the self-acquired properties into the common stock of
the joint family, the deceased had created a right enforceable against him in favour
of the sons or the other coparceners viz. the right to demand partition of the
properties in question which they could not have exercised earlier. This
contention was rejected by the learned judges by applying the principle
enunciated in an earlier Full Bench decision of the Court in CIT v. Rangasami Naidu,
(1970) 76 I.T.R. 675, where a similar contention had been repelled in the
context of the Gift Tax Act. The Court had there observed:
176
"With the father having absolute power of disposition inter vivos or
testamentary in respect of his self-acquisition and with no power in the son to
interdict any alienation or disposition or call for partition, the son's
interest is next to nothing. But the right is real. It lies dormant. It is this
dormant right which the undivided sons have in their father's property that
entitles them to take the self-acquired property of the father as coparceners
to the exclusion of a divided son. Juridically, it must be this dormant
birth-right that enables the father at his pleasure, without formalities, to
deny to himself his independent power or predominant interest and look upon the
property as the property of the family.
In our
view, it is this birth-right imperfect and subordinate to the special power and
predominant interest of the father that comes into play and makes the interest
of the son real and an interest in praesenti, when the father chooses to waive
his rights. At his pleasure and without reference to his son, if the father
abandons or determines once for all not to exercise his independent power over
the property, the son's interest therein becomes a real and full-fledged coparcenary
right. There is no vesting of rights here by the father on the son, but what is
dormant springs to life but irrevocably at the pleasue of the father." (c)
A third contention raised on behalf of the Revenue was that throwing the
self-acquired property into the common stock of the joint family would amount
to "extinguishment at the expense of the deceased of a debt or other right"
within the meaning of Explanation 2 to section 2 (15). This conten- tion was
also repelled by the learned Judges. They observe:
"We
are also of the opinion that throwing the self-acquired property into the
common stock of the joint family will not amount to "extin- guishment at
the expense of the deceased of a debt or other right" within the meaning
of Explanation 2 to section 2 (15). As seen from the judgments cited above,
after the act of throwing into the common stock, it is the joint family or the coparcenary
that owns the property. The person who converted his indi- vidual property into
joint family property is a member of the Hindu joint family or the coparcenary
and contines to be a member of the joint family. His interest in 177 the
erstwhile separate property would extend to the whole of the property even as
of the other coparceners, for the interest of every coparceners extends over
the whole of the joint family property. There is community of interest and
unity of possession between all the coparceners. On the death of any one of the
coparceners the others take the proper- ty by survivorship.It may be, the
ultimate survivor is the person who threw the self- acquired property into the
common stock. It, therefore, follows that there was no extinguishment of the
right of the deceased and creation of a right in favour of another, in these of
throw- ing the self-acquired properties into the common stock. The decision in Valliammal
Achi v. Controller of Estate Duty, (1969) 73 I.T.R. 806 (Mad) relied on by the
learned counsel for the revenue, and the decision in Kantilal Trikamlalv.
Controller of Estate Duty, (1969) 74 I.T.R. 353 (Guj.), relied on by the
learned counsel for the accountable person,related to what we may term as
"unequal partitions". They do not deal with cases of throwing the
self-acquired properties into the common stock. We are not concerned with the
case as to whether an unequal partition would amount to an extinguishment of a
right and creation of a benefit within the meaning- of Explanation 2 to section
2(15), which was the point that was considered in those cases." The above
decision is clearly against the Revenue. The Revenue, however, strongly relies
upon a later decision of the same High Court in Ranganayaki Ammal & Ors. v.
Controller of Estate Duty, (1972) 88 I.T.R. 96. It is sub- mitted that Ranganayaki
Ammal has been af- firmed by this Court in CED v. Kantilal Tri- kamlal, (1976)
105 ITR 92 - a common judgment reversing Kantilal Trikamlal v. CE.D., (1969) 74
I.T.R. 353 (Guj) and affirming Ranganayaki Ammal (Mad) - and, therefore, Rajmani
is no longer good law. It is therefore, necessary to refer to these cases
though the question involved there was somewhat different.
In Ranganayaki
Ammal, the deceased Bheema Naidu and his widow and children constituted a Hindu
undivided family. A little within the period of two years prior to the death of
the deceased, a partition was effected of the joint family properties and in
that partition he took a smaller share instead of his legal half benefiting the
other to the extent of the difference. The same thing had happened in the case
of Kantilal Trikamlal also. Trikamlal Vadilal and his son Kantilal constituted
a Hindu undivided family. On 16th November, 1953, and instrument styled a
"release deed" was executed between the two persons. Under this
instrument, a sum of rupees one lakh out of the joint family properties was
taken by 178 the deceased m lieu of his share in the joint family properties
and he relinquished his interest in the remaining properties of the joint
family which were declared to belong to Kantilal as his sole and absolute
properties and Kantilal also relinquished his interest in the amount of rupees
one lakh given to the deceased and declared that the deceased was the sole and
absolute owner of the said amount. Trikamlal Vadilal died on 3rd June, 1955,
that is within two years of the release deed. The Assistant Controller found
that, as on November
16, 1953, the deceased
was enti- tled to a one-half share in the joint family properties, the value of
which was Rs. 3,44,058, but had relinquished his interest in the joint family
properties by receiving only a sum of rupees one lakh. The officer, there-
fore, held that the difference between Rs.3,44,058 and Rs, 1,06,724 (being the
amount received by the deceased together with inter- est) was includible in the
principal value of the estate of the deceased, being the value of a disposition
by the deceased in favour of a relative for partial consideration. This
assessment was upheld eventually by the Su- preme Court. Both these decisions,
thus, raised the question whether there was "gift" within the meaning
of S.9 read with S.27 read with the Explanations to S.2(15) of the Estate Duty
Act where a coparcener in a HUF, at the family parti-tion, voluntarily agrees
to accept properties of a value less than what he is entitled to claim, as a
matter of right, at such partition. This Court--as did the Madras High Court in
Ranganayaki Ammal, the Andhra Pradesh decision in Cherukuru Eswaramma v. C.ED.,
(1968) 69 I.T.R. 109 and the Punjab & Haryana High Court judgment in C.E.D.v.
Jai Gopal Mehra, (1972) 85 I.T.R. 175 (F.B.) - answered the question in the
affirmative. This Court distinguished Go[i Eswariah, (1970) 76 I.TR. 675, S.C.
and Getti Chettiar, (1971) 82 I.T.R. 599, S.C. on the ground that the defi- nition
of 'disposition' in Explanation 2 Sec- tion 2(15) of the Estate Duty Act is
much wider than the scope of that expression used in the Gift Tax Act.We do not
consider it necessary to set out here the full and de- tailed reasoning of this
Court in Kantilal Trikamlal's case.
Before
proceeding further, we may refer to a few later decisions of High Court
relevant to the issue before ns. The Allahabad High Court, in C.E.D.v. Laxmi Bai,
(1980) 1.26, I.T.R. 73, a decision rendered after Kantilal Trikamlal, thought
that the act of blending would not be a 'disposition' within fie mean- ing of:the
Estate Duty Act. In C.E.D v. Babub- hai T. Panchal, (1982) 133 I.T.R.455, the
Gujarat High Court had occasion to consider the question whether a transaction
of release by a member of a Hindu Undivided family, within a period of two
years of his death, of his interest in the family properties would amount to a
'disposition' within the' meaning of Explanation 2 to Section 2(15) of the
Estate Duty Act. The 179 question was answered in the negative. In CE.D v. Satyanarayan
Babulal Chaurasia, (1983) 140 I.T.R. 158, the Bombay High Court, without
touching the issue in detail, merely held, applying Goli Eswarian v. C G.T., (1970)76
I.T.R. 675 S.C, that the act of blending does not involve a transfer.
The
question that falls for our considera- tion now is whether, despite the
extended definition in S.2(15) of the Act, as explained in Kantilal Trikamlal,
the act of blending, unlike the voluntary acceptance of an unequal partition,
fails outside the purview of the deeming part of the definition contained in
the explanations. We think the answer to this question has to be in the
affirmative, Revert- ing once again to the contentions of the Revenue in Rajamani
(which are also the con- tentions reiterated before us for the Revenue), it
will be remembered that Rajamani specifically dealt with the language of the
two explanations 10 S.2(15) and that its decision rested on three grounds:
(i) a
'disposition', as held on Goli Eswariah, (1970) 76 I.T.R. 675 S.C., has to be a
'bilateral' or 'multilateral' act or trans- action, not a unilateral act;
(ii)
the act of blending does not create any right enforceable against the blender
or his property but only brings to the surface rights already latent and
inherent in the others; and (iii) the act of blending does not result in the
extinguishment of any right of the blender with a correlative conferral of
benefit on others.
our
view. Kantilal Trikamlal does not affect the validity of any of the three
grounds set out above. So far as the first ground is concerned, it does not
touch upon the reasoning of Goli Eswariah, not to say doubt or dissent from it.
It refers to C.E.D. v. Kancherla Kesava Rao, (1973) 89 I.T.R. 261,
S.C.---hinting at possible distinction--and to Getti Chettiar (but without any
hint of dis- sent) and points out that the conventional construction of
disposition' has to submit to the larger sweep of hypothetical extension by definition"
and that, unlike under the Gift Tax Act, "there is no limitation, environmen-
tal or by the society of words, warranting the whittling down of the unusually
wide range of Explanation 2 to S.2 (15)". In other words, the cumulative
effect of Goli Eswariah, Getti Chettiar and Kantilal Trikamlal is that
'blending' or 'partition' will not be a 'disposition' within the ordinary
connotation of the expression but will be one if either of the Explanations to
S.2(15) are attracted.
This
takes us to the other two contentions dealt with in Rajamani as to the scope of
the two explanations. On this aspect, Rajamani has held that, unlike an 180
equal partition, the act of blending will not amount to a 'disposition'
attracting Ss.9 and 27 of the Act. It distinguishes cases of unequal partition dealt'with
in Valliammal Achi, v.C.E.D., (1969) 73 I.T.R, 806 (Mad) and the High Court's
decision in Kantilal Trikam- lal (1969) 74 I.T.R. 353 (Guj.) cited before it
which have now received the imprimatur of this Court in Kantilal Trikamlal. We
are inclined to think that the distinction has been made on sound lines. We do
not consider it necessary to repeat or elaborate the rea- soning in Rajamani on
these two points as it succinctly epitomises well-settled principles of Hindu
Law. Suffice it to say that we en- dorse this reasoning and think that the High
Court was right in holding, in the present cases, that the acts of blending did
not result in the 'gift' of immovable properties within the meaning of the
statute and that Rajamani required no reconsideration because of Ranganayaki Ammal/Trikamlal.
This
disposes of the question sought to be referred in these cases. We should
however like to advert to another aspect which may arise for consideration at
some future date.
It may,
perhaps, be possible to contend that, though a declaration of blending does not
amount to a 'gift', where the act of blending is followed up by a subsequent
partition, the two transactions taken together do result in the extinguishment,
at the expense of the deceased, of his rights in the properties which go to the
share of other coparceners at the subsequent partition and that, if the two can
be treated as parts of the same transac- tion, Explanation 2 to S.2(15) may be
attract- ed. But this, apart from being a totally new question of law not
raised at any stage and not debated before us, would also require not only a
closer look from the legal angle but also investigation into facts,
particularly as to whether the act of blending and the subse- quent partition
can be treated, in law and on facts, as parts of a single transaction. We,
therefore, express no opinion on this issue.
For
the reasons discussed above, these appeals fail and are dismissed. But we make
no order regarding costs.
Y.L.
Appeals dismissed.
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