1972 (4) TMI 36 - SC - Indian Laws

Whether on the facts and in the circumstances of the case the entire property held by the deceased valued at 12, 23, 794 was chargeable to estate duty? Held that - If the parties as aforesaid were governed in matters of property succession and inheritance by the rules of Hindu law including the rules as to joint family property its distribution according to the rule of survivorship and the right of a son in it by birth the High Court would be right in its view that the accountable persons having been born long before 1948 had already acquired a right by birth in the property held by their father a right expressly saved by section 3 of the Act. There was therefore no question of that interest passing to them on the death of their father as envisaged by section 5 of the Estate Duty Act. In this view the judgment of the High Court under challenge has to be upheld. The appeal therefore fails and is dismissed

Issues Involved:
1. Applicability of Hindu law to Cutchi Memons in matters of property, succession, and inheritance.
2. Effect of the Cutchi Memons Act, 1938, and other subsequent legislation on the customary law applicable to Cutchi Memons.
3. Determination of whether the entire property held by the deceased was chargeable to estate duty.

Issue-Wise Detailed Analysis:

1. Applicability of Hindu Law to Cutchi Memons:
The primary issue was whether the Cutchi Memons, despite their conversion to Islam, continued to be governed by Hindu law in matters of property, succession, and inheritance. The respondents argued that Cutchi Memons retained Hindu law as their customary law, including concepts of joint family property, the right of a son by birth, and devolution by survivorship. They supported their claim with historical evidence and past judgments, particularly from the High Court of Madras, which consistently applied Hindu law to Cutchi Memons in Madras. The High Court of Madras had held that the Cutchi Memons, due to their historical and social context, retained Hindu law not only in matters of succession and inheritance but also in property devolution by survivorship.

2. Effect of the Cutchi Memons Act, 1938, and Other Subsequent Legislation:
The Cutchi Memons Act, 1938, mandated that Cutchi Memons be governed by Mahomedan law in matters of succession and inheritance. However, the Act included a saving clause (Section 3) that preserved any rights or liabilities acquired before its commencement. The respondents argued that since they had acquired rights by birth in the property before the Act's commencement, these rights were preserved and not affected by the Act. The court agreed, noting that the accountable persons had acquired their rights before 1948, and these rights were expressly saved by the Act's provisions.

3. Determination of Estate Duty:
The core question was whether the entire property held by the deceased was chargeable to estate duty. The respondents contended that only one-third of the property, representing their father's undivided share, passed to them on his death and was assessable under the Estate Duty Act. The court upheld this view, concluding that the respondents' rights in the property were acquired by birth and not by inheritance upon their father's death. Therefore, the property did not pass to them as envisaged by Section 5 of the Estate Duty Act, and only the deceased's undivided share was chargeable to estate duty.

Conclusion:
The Supreme Court upheld the judgment of the High Court of Mysore, concluding that the respondents were governed by Hindu law in matters of property, succession, and inheritance. The court determined that the Cutchi Memons Act, 1938, did not affect the respondents' pre-existing rights acquired by birth. Consequently, only the deceased's undivided share of the property was chargeable to estate duty, and the appeal was dismissed with costs.

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