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TMI Blog1968 (9) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... irms, namely, Messrs. Manilal Premchand and Messrs. Chimanlal Premchand, came to the share of the deceased and Kantilal. These movable and immovable properties continued to be held by the deceased and Kantilal as members of a joint and undivided Hindu family until 16th November, 1953, when an instrument styled " release deed " was executed by and between the deceased and Kantilal. Considerable controversy between the parties turns on the interpretation of this instrument and it will therefore be necessary for us to refer to its terms in some detail and we shall do so when we deal with the arguments advanced on behalf of the parties. Suffice it to state for the present that, under this instrument, a sum of rupees one lakh out of the joint family properties was taken by the deceased in lieu of his share in the joint family properties and he relinquished his interest in the remaining properties of the joint family which were declared to belong to Kantilal as his sole and absolute properties and Kantilal also, in his turn, relinquished his interest in the amount of rupees one lakh given to the deceased and declared that the deceased was the sole and absolute owner of the said amount. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the benefit which accrued to Kantilal as a result of such extinguishment and the charge to estate duty was accordingly attracted under section 9, sub-section (1), read with section 27, sub-section (1). The accountable person, being aggrieved by the decision of the Central Board of Revenue, thereupon applied for a reference of the question of law arising out of its order and on the application of the accountable person, the Central Board of Revenue referred the following question for the decision of this court : " Whether, on the facts and in the circumstances of the case, the release deed executed by the deceased on the 16th November, 1953, was correctly held to constitute a disposition in favour of a relative, within the meaning of section 27(1) read with Explanation 2 to section 2(15) of the Estate Duty Act, 1953 ? " The question, though arising under the Estate Duty Act does not depend solely on the interpretation of the provisions of that Act, but also involves consideration of the provisions of Hindu law and the impact of the Estate Duty Act on those provisions. Before we examine the arguments advanced on behalf of the parties, it would be convenient at this stage to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey's worth paid to him for his own use or benefit, the value of the consideration shall be allowed as a deduction from the value of the property for the purpose of estate duty. " These are the only relevant provisions of the Act having a bearing on the determination of the question referred for our opinion. The broad line of argument advanced on behalf of the accountable person was that the instrument dated 16th November, 1953, though styled as release deed, was in effect and substance an instrument of partition under which the joint family properties were partitioned between the deceased and Kantilal : the deceased took a sum of rupees one lakh in lieu of his share in the joint family properties while the remaining joint family properties went to the share of Kantilal, each of them relinquishing his right, title and interest in the properties which went to the share of the other. It was urged that we should not place undue weight on the label given by the parties to the transaction nor should we allow ourselves to be influenced unduly by one expression or the other used by the parties in the instrument but we should look at the instrument as a whole and ascertain the true natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it was not open to the court, under the guise of ascertaining the substance of the transaction, to make out a different legal relationship between the parties than what was disclosed by the instrument. The instrument, according to its apparent tenor, said the revenue, was one by which the deceased renounced his interest in the joint family properties in favour of Kantilal and it was not possible to infer from the fact of renunciation severance of status which would necessarily be involved in partition of joint family properties. It was urged on behalf of the revenue that renunciation by a coparcener of his interest in coparcenary property was " disposition " within the meaning of the term as used in section 27, sub-section (1), and clearly, therefore, there was a disposition by the deceased of his interest in the joint family properties in favour of Kantilal within the meaning of section 27, sub-section (1). The revenue, in the alternative, contended that even if the instrument was construed is partition of joint family properties between the deceased and Kantilal, it was still within the mischief of section 27, sub-section (1), for the word "disposition" in section 27, sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the instrument dated 16th November, 1953, in the light of this approach, it would be convenient at this stage to notice the distinction between renunciation by a coparcener of his interest in joint family properties and partition of joint family properties amongst the coparceners. Where a coparcener renounces his interest in the joint family properties, renunciation operates to extinguish his interest in the joint family properties and he goes out of the coparcenary but the status of the remaining members quoad the joint family properties is not affected and they continue to be coparceners as before. The effect of renunciation by a coparcener of his interest in the joint family properties was stated by the Judicial Committee of the Privy Council in Alluri Venkatapathi Raju v. Dantuluri Venkatanarasimha Raju in these terms : " What is the effect of this renunciation upon the status of the other members of the family ? ..... no definement of shares need take place, when the separating member does not receive any share in the estate but renounces his interest therein. His renunciation merely extinguishes his interest in the estate, but does not affect the status of the remaining m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intention of the parties whether there was a separation amongst the other coparceners or that they remained united. " It will therefore be seen that there is a material distinction between renunciation and partition, conceptual as well as in terms of legal consequences. The distinction lies in two points. The first point of distinction is that where a coparcener renounces his interest in the joint family properties, his interest in the joint family properties is extinguished. There is no division of the joint family properties and he does not receive anything in respect of his share in the joint family properties, while in case of partition, there is division of the joint family properties : the separating coparcener does not renounce his interest in the joint family properties but takes his share of the joint family properties and goes out of the coparcenary. Basically, renunciation is in antithesis to partition. This point of distinction is clearly brought out in the passage from the judgment of the Judicial Committee of the Privy Council in Alluri Venkatapathi Raju v. Dantuluri Venkatanarasimha Raju, which we have quoted above. We may repeat a sentence from it which reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immovable properties and henceforward if anybody on behalf of the party of the second part claims any right, title or interest or creates any obstruction in respect of the aforesaid properties, the party of the second part would be answerable to the party of the first part. Henceforward let the party of the first part, his heirs, sons, grandsons, etc., enjoy the aforesaid properties till the sun and moon endure : they may enjoy the said properties, live therein, add to them or they may do whatever they like with those properties. Whatever may come out of the said properties would belong to the party of the first part, Hereafter we have no claims against each other in respect of the joint family properties and that is why we have executed in favour of each other this release deed giving up his right, title and interest in respect of the properties belonging to the joint family ....... " Though the instrument is styled as release deed and it is also referred to as release deed, it is not a release deed simpliciter by which the deceased renounced his interest in the joint family properties but is an instrument partitioning the joint family properties between the deceased and Kantila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y) properties ; that is to say, each co-sharer renounces his rights in the other common properties in consideration of his getting exclusive right to and possession of specific properties in which the other co-owners renounced their rights. It is thus a renunciation of mutual rights . . . " It is impossible to imagine how this transaction could possibly be construed as renunciation by the deceased of his interest in the joint family properties particularly when the deceased took a portion consisting of a sum of rupees one lakh in respect of his share in the joint family properties. Moreover, the closing part of the first and the opening part of the second of the two paragraphs of the instrument above quoted clearly negative a case of renunciation by the deceased of his interest in favour of the coparcenary. These paragraphs in so many terms declare that the remaining joint family properties shall be of the sole and absolute ownership of Kantilal and that Kantilal, his heirs, sons, grandsons, etc., shall be entitled to enjoy the same in such manner as they think fit. We are therefore of the view that the instrument in question was not an instrument of renunciation by the deceased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntecedent title and, therefore, no conveyance is involved in the process, as a conferment of a new title is not necessary'. The Madras High Court again examined the question in M. K. Stremann v. Commissioner of Income-tax, with reference to section 16(3)(a)(iv). It observed that 'obviously no question of transfer of assets can arise when all that happens is separation in status, though the result of such severance in status is that the property hitherto held by the coparcenary is held thereafter by the separated members as tenants-in-common. Subsequent partition between the divided members of the family does not amount either to a transfer of assets from that body of the tenants-in-common to each of such tenants-in-common'... . Agreeing with these authorities, we hold that when the joint Hindu family property was partitioned, there was no transfer of assets within section 16(3)(a)(iii) and (iv) to the wife or the minor son. " It can therefore now no longer be disputed that partition is merely a process in and by which joint enjoyment is transformed into enjoyment in severalty and since each one of the coparceners had an antecedent title which extended to the whole of the joint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understood in the law of transfer would always be, the legislature proceeded to bring within the charge of estate duty under section 27, sub-section (1), dispositions made for partial consideration provided they were made by the deceased in favour of a relative. The legislature said that a disposition made by the deceased in favour of a relative shall be treated for the purpose of section 9, sub-section (1), as a gift unless it was made for full consideration in money or money's worth, that is, if it was made for partial consideration. Section 9, sub-section (1), and section 27, sub-section (1), thus formed part of a single scheme under which dispositions made by the deceased in favour of another without consideration and dispositions made by the deceased in favour of a relative for partial consideration were both sought to be treated on the same footing and the properties taken under such dispositions were deemed to pass on the death of the deceased. The word " disposition " must therefore possess the element of transfer of an interest in property from one person to another, an element which is possessed in common by the concept of " transfer, delivery, declaration of trust, settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt to Kantilal. But that is not what the deceased did in the present case and the revenue cannot fasten liability on the estate of the deceased by treating as if that is what the deceased had done. This is a taxing statute and its terms are not to be enlarged by reasoning that the same final result is achieved as by the deceased taking his full one-half share in the joint family properties and then giving away a part of it in favour of Kantilal. The deceased and Kantilal partitioned the joint family properties and it may be that, on the basis of an ex post facto determination made by the revenue, the deceased received less than what he sought to have received in respect of his share in the joint family properties but merely because on partition a coparcener gets an unequal share it does not cease to be a partition. Even in the case of unequal partition, the process which ultimately results in the receipt of specific properties in severalty by the coparceners is the same as in the case of equal partition and if there is no transfer of interest in the property from one coparcener to another in the latter case, equally there is none in the former. We cannot therefore construe the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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