1985 (12) TMI 118 - AT - Income Tax

Issues Involved:
1. Validity and effect of the will dated 23-7-1949.
2. Rights of the adopted son and the doctrine of relation back.
3. Applicability of the Hindu Women's Rights to Property Act, 1937, and the Hindu Succession Act, 1956.
4. Determination of estate duty liability under sections 5, 6, and 7 of the Estate Duty Act, 1953.

Detailed Analysis:

1. Validity and Effect of the Will Dated 23-7-1949:
The Assistant Controller held that Rajah Manyam Kanakayya, as the sole surviving coparcener, had full power to dispose of the joint family properties through a will. The will dated 23-7-1949 was executed when Rajah Manyam Kanakayya was the sole surviving coparcener, granting his wife, Smt. Meenakshamma, absolute ownership of the properties with the right of sale or gift until her death. The Assistant Controller concluded that the will was valid under Hindu law and binding on the adopted son, who could not challenge alienations made before his adoption.

The Appellate Controller, however, followed the Andhra Pradesh High Court's decision in the Estate of Late Smt. K. Narasamma, which held that the adoption related back to the date of the adoptive father's death, making the adopted son the successor to the properties by survivorship, thus rendering the will ineffective.

Upon review, it was determined that the will dated 23-7-1949 was fully valid and enforceable. The doctrine of relation back does not invalidate the will, as the adopted son must take the family hotchpot as he finds it. The will speaks as at the death of the testator, and the property is carried away before the adoption takes place.

2. Rights of the Adopted Son and the Doctrine of Relation Back:
The Assistant Controller held that the rights of the adopted son commenced from the date of adoption (20-8-1951) and that he was bound by alienations made by the adoptive father before his adoption. The doctrine of relation back does not extend to defeating the will of the adoptive father.

The Appellate Controller, relying on the Andhra Pradesh High Court's decision in the Estate of Late Smt. K. Narasamma, held that the adopted son must be deemed to have succeeded to the properties by survivorship from the date of the adoptive father's death, thus invalidating the will.

However, it was concluded that the doctrine of relation back operates only to continue the lineage and does not invalidate alienations made by the last male holder as the sole surviving coparcener. The adopted son takes the family hotchpot as he finds it and cannot challenge alienations made before his adoption.

3. Applicability of the Hindu Women's Rights to Property Act, 1937, and the Hindu Succession Act, 1956:
The Assistant Controller held that the will dated 23-7-1949 was in conformity with Hindu law and that the adopted son was bound by the terms of the will. The Appellate Controller, relying on the Andhra Pradesh High Court's decision, held that the adoption related back to the date of death of the adoptive father, making the will ineffective.

It was determined that the Hindu Women's Rights to Property Act, 1937, and the Hindu Succession Act, 1956, did not affect the validity of the will. Smt. Meenakshamma's limited rights were enlarged into absolute rights under section 14(1) of the Hindu Succession Act, 1956. The adopted son could not divest the vested rights of Smt. Meenakshamma derived under the will.

4. Determination of Estate Duty Liability under Sections 5, 6, and 7 of the Estate Duty Act, 1953:
The Assistant Controller valued the estate at Rs. 7,42,487 and held it liable to estate duty. The Appellate Controller excluded the entire property from estate duty, relying on the Andhra Pradesh High Court's decision.

It was concluded that the properties bequeathed under the will dated 23-7-1949 were subject to estate duty under section 7(1) of the Estate Duty Act, 1953. The life interest of Smt. Meenakshamma ceased on her death, and the benefit accrued to the adopted son. The value of the estate should be determined based on the actuarial valuation of the cesser of life interest in income-yielding properties.

Conclusion:
The appeal of the department was partly allowed. The will dated 23-7-1949 was held valid and enforceable. The doctrine of relation back does not invalidate the will. The properties bequeathed under the will are subject to estate duty under section 7(1) of the Estate Duty Act, 1953, and the value of the estate should be determined based on the actuarial valuation of the cesser of life interest in income-yielding properties.

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