1981 (8) TMI 16 - HC - Income Tax

Effect Of S. 14 Of Hindu Succession Act, Estate Duty, Exclusion Of Deceased From Benefit Of Gift, Gift, Right Of Wife Of Karta

Issues Involved:
1. Whether the Tribunal was justified in accepting that only half the property will be deemed to have passed on the death of Chhotelal.
2. Whether the Tribunal has correctly interpreted s. 39(1) of the E.D. Act and held that on the death of a sole coparcener it must be deemed that there was a partition of a HUF and that the wife was entitled to have a share equal to that of her son.
3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that s. 10 of the E.D Act is not applicable to the facts of the case and whether it was justified in deleting the amount of Rs 88,000.

Detailed Analysis:

Issue 1: Property Passing on Death
The Tribunal held that only half the property passed on the death of Chhotelal, considering him as the sole coparcener in a joint Hindu family with his wife. However, the court found that the Tribunal erred in this interpretation. According to the Hindu Succession Act, 1956, the wife had a right to 1/6th share in the joint family property, which vested in her absolutely from the date of the Act's commencement. Therefore, only 5/6ths of the property passed on Chhotelal's death, not half as determined by the Tribunal.

Issue 2: Interpretation of s. 39(1) of the E.D. Act
The Tribunal incorrectly applied s. 39(1) of the E.D. Act by assuming that the wife's interest was equal to that of her son. The court clarified that the wife was entitled to a 1/6th share in the joint family property due to the changes brought about by the Hindu Succession Act. This right existed even though she was not a coparcener and did not actively claim her share during her husband's lifetime. Consequently, 5/6ths of the property passed on Chhotelal's death, and the Tribunal's interpretation was incorrect.

Issue 3: Applicability of s. 10 of the E.D. Act
The Tribunal was justified in holding that s. 10 of the E.D. Act was not applicable in this case. The deceased had made gifts of Rs. 88,000 to his grandsons, who deposited these amounts in a firm where the deceased was not a partner at the time of the gift. Although the deceased later became a partner in the reconstituted firm, this did not affect the possession and enjoyment of the gifted property by the donees. The court referenced CED v. C.R. Ramachandra Gounder, where it was held that the donees retained possession and enjoyment of the gifted amounts to the exclusion of the donor. Therefore, the Tribunal correctly deleted the amount of Rs. 88,000 from the estate.

Conclusion:
1. The Tribunal was not justified in accepting that only half the property passed on the death of Chhotelal. 5/6ths of the property passed on his death.
2. The Tribunal did not correctly apply sec. 39(1). The wife was entitled to 1/6th share and 5/6ths of the property passed on the death of Chhotelal.
3. The Tribunal was justified in holding that s. 10 of the E.D. Act was not applicable.

There will be no order as to costs of this reference.

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