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1971 (10) TMI 30 - SC - Income TaxWhether the provisions of the Succession Act can affect and are relevant for the levy of estate duty under the Act ? What is the true effect of the provisions of section 7(3) of the Succession Act ? Whether the estate duty would be leviable on the entire property which belonged to the sthanamdar or it can be levied only on 1/114th share in the sthanam properties to which alone the deceased, Thampan, would have been entitled if a partition had taken place under section 7(3) of the Succession Act immediately before his death ? Held that - We have no doubt that the High Court was right in saying that the word devolve as used in the first part has the meaning given to it of passing from a person dying to a person living. Thus, the sthanam property held by the sthanamdar has to pass from the sthanamdar to the members of the family to which he belonged and his heirs. Legal fiction, in the words which have been set out, do not cut down the sthanam property that passes on the death of the sthanamdar to a per capita share, the fiction having been introduced only for determining the respective share for the purpose of distribution to the members of the family and the heirs of sthanamdar - we affirm the decision of the High Court and dismiss this appeal
Issues Involved:
1. Relevance of the Hindu Succession Act, 1956 in the levy of estate duty under the Estate Duty Act, 1953. 2. Interpretation of section 7(3) of the Hindu Succession Act, 1956. 3. Determination of whether estate duty is leviable on the entire sthanam property or only on the deceased's per capita share. Detailed Analysis: 1. Relevance of the Hindu Succession Act, 1956 in the Levy of Estate Duty under the Estate Duty Act, 1953: The primary issue was whether the provisions of the Hindu Succession Act, 1956 (Succession Act) are relevant for determining the levy of estate duty under the Estate Duty Act, 1953 (the Act). The appellant contended that the interest in the property which ceases on the death of the deceased and is deemed to pass on his death must be ascertained by referring to the law governing the deceased, which is the Succession Act. This position was not disputed by the respondent, narrowing the controversy to the interpretation of section 7(3) of the Succession Act. 2. Interpretation of Section 7(3) of the Hindu Succession Act, 1956: The appellant argued that section 7(3) of the Succession Act creates a legal fiction of partition or division immediately before the death of the sthanamdar, thereby limiting the estate duty to the deceased's per capita share. The respondent, however, maintained that the legal fiction is solely for the purpose of distributing the sthanam properties among the family members and heirs after the sthanamdar's death, not for creating an actual division during his lifetime. The court examined the incidents of sthanam and sthanamdar, noting that the sthanam property belonged to the sthanamdar during his lifetime, with certain restrictions on alienation. The cesser of his interest would be of the entire property. The court held that section 7(3) of the Succession Act should not be interpreted to imply a partition during the sthanamdar's lifetime, as this would raise constitutional issues under Article 19(1)(f) of the Constitution, as discussed in Kavalappara Kottarthil Kochuni v. State of Madras. The legal fiction in section 7(3) is intended solely for distributing the sthanam property upon the sthanamdar's death without infringing constitutional provisions. 3. Determination of Whether Estate Duty is Leviable on the Entire Sthanam Property or Only on the Deceased's Per Capita Share: The court concluded that the entire sthanam property passes on the death of the sthanamdar and is subject to estate duty. The legal fiction in section 7(3) of the Succession Act is for the purpose of distribution among the family members and heirs, not for limiting the estate duty to a per capita share. The court affirmed the High Court's decision that the whole sthanam property passes on the death of the sthanamdar and is liable for estate duty. Conclusion: The Supreme Court affirmed the decision of the Kerala High Court, holding that the entire sthanam property passes on the death of the sthanamdar and is subject to estate duty. The legal fiction in section 7(3) of the Hindu Succession Act, 1956 is intended for the distribution of the sthanam property among the family members and heirs, not for limiting the estate duty to a per capita share. Consequently, the appeal was dismissed.
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