1968 (11) TMI 33 - HC - Income Tax

Estate Duty Act, 1953 - inclusion of value of the properties in the estate of the deceased u/s. 10 of the Estate Duty Act

Issues Involved:

1. Whether the value of the properties mentioned in the deed dated July 15, 1951, had been correctly included in the estate of the deceased under section 10 of the Estate Duty Act.
2. Whether the value of the money lending business was rightly charged to estate duty under section 9 of the Estate Duty Act.

Detailed Analysis:

Issue 1: Inclusion of Property Value Under Section 10 of the Estate Duty Act

The primary question here is whether the properties mentioned in the partition deed dated July 15, 1951, were self-acquired properties of the deceased or joint family properties. The interpretation of the partition deed and the subsequent conduct of the parties are crucial in this determination. The deed stated, "all our family property was the self-acquisition of party No. 1 amongst us," indicating that the deceased intended to treat his self-acquired property as family property. This intention was further supported by the fact that the partition was consensual among all family members, including the minor son represented by the father.

Under Hindu law, a person can convert self-acquired property into joint family property by merely declaring an unequivocal intention to do so, without any formalities (refer to Commissioner of Income-tax v. Stremann and Sadasiva Vittal v. Rattalu). The subsequent conduct of the parties, such as the separate accounts opened in the money-lending business for each son, and the income from agricultural lands credited to these accounts, supports the implementation of the partition.

The Assistant Controller and the Central Board did not consider certain critical documents, such as the exchange deed dated May 13, 1955, which confirmed the separate possession and enjoyment of the properties by the sons. This document, coupled with the fact that the income from the properties was credited to the sons' accounts, indicates that the deceased did not retain control over the properties post-partition.

The contention that the act of converting self-acquired property into joint family property constitutes a gift involving a transfer of property was addressed. The court held that the partition deed and subsequent conduct demonstrated that the properties became joint family properties, and the partition did not constitute a gift. The court also noted that a partition of joint family property does not amount to a transfer of property (see Commissioner of Income-tax v. Keshavlal Lallubhai Patel).

Even if the conversion were considered a transfer, the deceased did not retain possession or enjoyment of the properties, thereby not attracting section 10 of the Act. The properties were partitioned, and the sons assumed bona fide possession and enjoyment, excluding the donor. Thus, the values of the properties under the partition deed dated July 15, 1951, were not includible in the estate of the deceased under section 10 of the Act.

Issue 2: Inclusion of Money-Lending Business Value Under Section 9 of the Estate Duty Act

The money-lending business was acknowledged as the individual business of the deceased, with the income being utilized by him until his death. The division of the money-lending business on October 4, 1957, was treated as a gift to his sons, as evidenced by the deceased describing the property as his self-acquired property in the division document.

There was no evidence to suggest that the money-lending business was treated as joint family property before October 4, 1957, nor was there any unequivocal declaration by the deceased to that effect. The Assistant Controller and the Board found that the income from the money-lending business was utilized by the deceased, and since the shares were gifted within two years prior to his death, section 9 of the Act applied. Consequently, the value of the money-lending business was rightly charged to estate duty.

Conclusion:

The court answered the first question in the negative, concluding that the properties mentioned in the partition deed dated July 15, 1951, were not includible in the estate of the deceased under section 10 of the Estate Duty Act. The second question was answered in the affirmative, confirming that the value of the money-lending business was rightly charged to estate duty under section 9 of the Act. No order as to costs was made.

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