1996 (5) TMI 15 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 6 of the Estate Duty Act, 1953.
2. Determination of the cesser of interest in the smaller Hindu undivided family (HUF).
3. Determination of the share of the deceased in the larger HUF.

Detailed Analysis:

Issue 1: Applicability of Section 6 of the Estate Duty Act, 1953
The Tribunal held that Section 6 of the Estate Duty Act, 1953, was not applicable to the interest of the deceased in the properties of the bigger Hindu undivided family (HUF). However, the court concluded that Section 6 was indeed applicable to the passing of the interest of the deceased in the properties of the smaller HUF. This section comes into play when the deceased was competent to dispose of the property at the time of death. Since the deceased was the sole coparcener in the smaller HUF, he had the competence to dispose of the entire property, thus making Section 6 applicable.

Issue 2: Determination of the Cesser of Interest in the Smaller HUF
The Tribunal incorrectly held that the cesser of interest deemed to pass on the death of the deceased in respect of property held by the smaller HUF was to be one-half. The court clarified that the entire property of the smaller HUF passed on the death of the deceased under Section 6 of the Act, making it liable for estate duty. The deceased was the sole surviving coparcener and had the power to dispose of the property as if it were his own separate property.

Issue 3: Determination of the Share of the Deceased in the Larger HUF
The Tribunal was not justified in holding that the share of the deceased in the larger HUF was one-sixth. The court held that the share of the deceased in the properties of the bigger HUF was one-third, which is liable to pay duty under the Estate Duty Act. The deceased was the only coparcener in the smaller HUF and had a one-third share in the bigger HUF. Upon his death, this one-third share would be deemed to pass on to his widow, making it subject to estate duty.

Conclusion:
The court answered all three questions in the negative, for the Revenue and against the accountable persons. The interest of the deceased in both the smaller and bigger HUFs passed upon his death, and their respective values are includible in his estate for the purpose of paying duty under the Estate Duty Act. The Tribunal's findings were corrected to reflect the proper application of Sections 6 and 7 of the Estate Duty Act, ensuring the correct valuation and duty imposition on the estate of the deceased.