1969 (2) TMI 45 - HC - Income Tax

Summary

Issues Involved:
1. Liability for estate duty after the death of Gummanna Shetty.
2. Applicability of sections 6 and 7(1) of the Estate Duty Act.
3. Impact of the Hindu Succession Act on the Aliyasantana law.
4. Competence of the Assistant Controller's assessment.

Detailed Analysis:

1. Liability for Estate Duty After the Death of Gummanna Shetty:

The petitioner, Ratnamala, contended that estate duty should be payable only on the sixth share of the property that passed to Gummanna Shetty's wife and children after his death. The Assistant Controller disagreed, asserting that there was also a cesser of interest in respect of a third share in the property, which Gummanna Shetty would have received if a partition had been made before his death. This view was based on section 7(1) of the Estate Duty Act, read in conjunction with section 39.

2. Applicability of Sections 6 and 7(1) of the Estate Duty Act:

Section 5 of the Estate Duty Act is the charging section, which mandates estate duty on property passing on death. Section 6 specifies that property the deceased was competent to dispose of is deemed to pass on death. Section 7(1) deems property in which the deceased had an interest that ceases on death to pass on death, including a coparcenary interest in joint family property governed by the Aliyasantana law. Section 39(2) states that the value of the benefit accruing from the cesser of an interest in such property is the principal value of the share that would have been allotted to the deceased had a partition occurred immediately before death.

3. Impact of the Hindu Succession Act on the Aliyasantana Law:

The Hindu Succession Act, which commenced on June 17, 1956, abrogated inconsistent provisions of the Aliyasantana Act. Section 7(2) of the Hindu Succession Act provides that the interest of a Hindu in the property of a kutumba or kavaru devolves by testamentary or intestate succession, not by survivorship. The Explanation to section 7(2) clarifies that the interest is the share that would have been allotted at a partition immediately before death. This provision effectively eliminated the right of survivorship under the Aliyasantana Act.

4. Competence of the Assistant Controller's Assessment:

The Assistant Controller's assessment was challenged for being based on an incorrect interpretation of sections 6 and 7(1) of the Estate Duty Act. The court held that section 7(1) did not apply because the interest of Gummanna Shetty in the property did not cease on his death after the Hindu Succession Act came into force. Instead, the interest devolved under section 7(2) of the Hindu Succession Act. Consequently, the relevant statutory provision was section 6, which only made the wife and children of Gummanna Shetty liable for estate duty, not Ratnamala.

The court concluded that the Assistant Controller's order was fundamentally defective and set it aside, allowing for a fresh assessment in accordance with the law and the court's observations. The assessment was deemed indivisible, creating joint and several liabilities, and could only be made with respect to a sixth share, the value of which needed independent determination.

Conclusion:

The court set aside the Assistant Controller's order, reserving liberty for a fresh assessment in line with the legal framework and the court's observations. No costs were directed in this case.