1966 (11) TMI 93 - HC - Income Tax

Summary

Issues Involved:
1. Extent of property attracting estate duty on the death of a sthanamdar.
2. Relationship between the sthanam property and the Hindu Succession Act, 1956.
3. Interpretation and application of Section 7(3) of the Hindu Succession Act, 1956.
4. The validity and implications of the Explanation to Section 7(4) of the Estate Duty Act, 1953.

Issue-wise Detailed Analysis:

1. Extent of Property Attracting Estate Duty on the Death of a Sthanamdar:
The primary issue in these appeals concerns the extent of property that attracts estate duty upon the death of a sthanamdar. The department contended that estate duty is payable on the entire property of the sthanam, a position accepted in Writ Appeal No. 276 of 1965 but rejected in Writ Appeals Nos. 119, 174, 179, and 338 of 1965. Section 5 of the Estate Duty Act, 1953, which is the charging section, mandates that estate duty is levied on the principal value of all property passing on the death of a person. The court, referencing the legal incidents of sthanams as summarized by the Supreme Court in Kochunni v. States of Madras and Kerala, concluded that the whole of the sthanam property passes on the death of a sthanamdar and thus attracts estate duty.

2. Relationship Between Sthanam Property and the Hindu Succession Act, 1956:
The contention arose whether the Hindu Succession Act, 1956, affects the liability of sthanam property to estate duty. Section 7(3) of the Hindu Succession Act, 1956, provides that upon the death of a sthanamdar, the sthanam property devolves upon the members of the family and the heirs of the sthanamdar as if it had been divided per capita immediately before the death. The court held that this notional partition is a legal fiction intended solely for ascertaining the shares of the family members and heirs, and does not alter the extent of the property that passes on the death of a sthanamdar.

3. Interpretation and Application of Section 7(3) of the Hindu Succession Act, 1956:
The court examined the legal fiction created by Section 7(3) of the Hindu Succession Act, 1956, which postulates a partition of sthanam property immediately before the death of a sthanamdar. The court emphasized that legal fictions should be confined to their intended purpose and should not be extended beyond that. The first portion of Section 7(3) indicates that the entire sthanam property passes on the death of a sthanamdar, while the second portion deals with the distribution of that property among the family members and heirs. The court concluded that the whole of the sthanam property attracts estate duty.

4. Validity and Implications of the Explanation to Section 7(4) of the Estate Duty Act, 1953:
The Explanation to Section 7(4) of the Estate Duty Act, 1953, clarifies that the holder of a sthanam is neither the holder of an office nor a corporation sole. This Explanation was upheld by the High Court of Madras in Manavikraman Raja v. Controller of Estate Duty, which concluded that the Explanation merely expresses what is already the law and does not offend Article 14 of the Constitution. The court in the present case agreed with this interpretation, affirming that the entire sthanam property is liable to estate duty.

Conclusion:
The court concluded that the entire sthanam property passes on the death of a sthanamdar and attracts estate duty. The appeals in Writ Appeals Nos. 119, 174, 179, and 338 of 1965 were allowed, and Writ Appeal No. 276 of 1965 was dismissed. The court emphasized that legal fictions should be limited to their intended purpose and should not alter the extent of property passing on death for estate duty purposes.