1997 (4) TMI 116 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of section 6 of the Hindu Succession Act, 1956.
2. Interpretation of coparcenary rights and shares in Hindu Undivided Family (HUF).
3. Applicability of sections 7 and 34(1)(c) of the Estate Duty Act.
4. Inclusion of lineal descendants' shares for rate purposes under section 34(1)(c) of the Estate Duty Act.

Detailed Analysis:

1. Applicability of section 6 of the Hindu Succession Act, 1956:
The Tribunal examined whether section 6 of the Hindu Succession Act, 1956, which deals with the devolution of interest in coparcenary property, was applicable in determining the share of Smt. Kanchanbai in the HUF property. The Tribunal noted that upon the death of Shri Lakhmichand, a notional partition was required to ascertain his share in the HUF property. According to section 6 and its Explanation 1, the share of a deceased coparcener should be deemed to be the share that would have been allotted to him if a partition had taken place immediately before his death. The Tribunal concluded that Smt. Kanchanbai inherited only 1/6th share of the HUF property, as she did not claim partition during her lifetime, and this share should pass on her death.

2. Interpretation of coparcenary rights and shares in Hindu Undivided Family (HUF):
The Tribunal discussed the nature of coparcenary rights and shares within an HUF. It was argued that Smt. Kanchanbai, as a female member, was not a coparcener and thus could not claim a partition. The Tribunal referred to various judgments, including the Supreme Court's decisions in Gurupad Khandappa Magdum and Narayan Rao Sham Rao Deshmukh, to clarify that a female member who inherits an interest in the joint family property does not automatically become separated from the family unless she explicitly claims partition. The Tribunal held that Smt. Kanchanbai's share in the HUF property was limited to 1/6th, which she acquired upon the death of her husband, and no further coparcenary interest could be claimed by her.

3. Applicability of sections 7 and 34(1)(c) of the Estate Duty Act:
The Tribunal examined whether sections 7 and 34(1)(c) of the Estate Duty Act, which pertain to the inclusion of coparcenary interest and the shares of lineal descendants for rate purposes, were applicable to the case. It was argued that these sections should not apply to a female member of the HUF. The Tribunal agreed, stating that since Smt. Kanchanbai was not a coparcener, sections 7 and 34(1)(c) were not applicable. The Tribunal referred to the Rajasthan High Court's decision in Smt. Basanti Bai, which held that a widow's interest in HUF property was limited to maintenance and did not constitute a coparcenary interest.

4. Inclusion of lineal descendants' shares for rate purposes under section 34(1)(c) of the Estate Duty Act:
The Tribunal addressed the issue of whether the shares of lineal descendants should be included for rate purposes under section 34(1)(c) of the Estate Duty Act. The Tribunal concluded that the revenue authorities had wrongly included these shares, as section 34(1)(c) applies only to the death of a coparcener and not to a female member of the HUF. The Tribunal emphasized that the provisions of section 34(1)(c) should not be extended to cases involving female members, as this would lead to incorrect assessments.

Conclusion:
The Tribunal set aside the order of the Appellate Controller of Estate Duty and upheld the view of the Accountable Person that only 1/6th share of the HUF would pass on the death of Smt. Kanchanbai. The matter was restored to the file of the Assistant Controller of Estate Duty for fresh assessment in light of the Tribunal's observations. The appeal was allowed for statistical purposes.