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TMI Blog1957 (7) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... death, first, of one Rm. Ar. Ar. Rm. Arunachalam Chettiar and, second, of his father, one Rm. Ar. Ar. Arunachalam Chettiar. These gentleman will be called the son and the father. The father and the son were members of a Hindu community known as Nattukottai Chettiars who inhabit certain districts of Southern India and were governed by the Mitakshara system of Hindu law in matters relating to inheritance, succession, adoption, marriage and other mattes. They were also coparcenary members of a joint Hindu family which had extensive trading and other interests in India, Ceylon, and other far Eastern countries. Immediately before July 9, 1934, when the son died, he and the father were the only living coparceners. The father then became the sole surviving coparcener of the family. But there were females also who, though they had not the rights of coparceners, yet had rights of residence in, and maintenance out of, the joint family property and were in all respects members of the Hindu undivided family of which the father and son were coparceners. Moreover, it was competent for the surviving widow of the son to adopt a son who would thus become a coparcener with the father, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requires, the term-- 'Estate duty' means the duty imposed under the provisions of this Ordinance in case of the death of any person dying on or after the commencement* of is the Ordinance. 'Deceased' means any person dying on or after the commencement of this Ordinance........ 'Property' includes movable and immovable property of any kind situate or being in the Colony and the proceeds of sale thereof respectively and any money or investment for the time being representing the proceeds of sale........ 'Property passing on the death' includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation; and the expression' on the death' includes 'at a time ascertainable only by reference to the 'death.' (2) For the purpose of this Ordinate--(a) A person shall be deemed competent to dispose of property if he has such an estate or interest therein or such general power as would, if he were sui juris, enable him to dispose of the property; and the expression 'general power' includes every power or authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty situate in Ceylon, property governed by the lexloci reisitae, that is, Ceylon, passes under section 7 of the Ceylon Wills Ordinance or, alternatively, passes because of the provisions of section 18 of the Partition Ordinance to the son's heirs, (2) Are the respondents the proper persons to be assessed in respect of duty due on his estate? It is submitted that they are. In the father's case (appeal No. 17 of 1995) the main question will be whether by virtue of section 73 of the Estate Duty Ordinance, 1938, which replaced the Ordinance of 1919, there was an exemption in the case of the properly in his hands. The appellant contends that it passed as not being joint property of an undivided Hindu family. It may be that it had been such property, but it was certainly not joint property of an undivided Hindu family, for at that time he was the sole surviving coparcener. The case in toto raises a question as to what is the nature of the property rights of a coparcener member of an undivided Hindu family This family was governed by the Mitakshara school of Hindu law as recognized in Madras. In Mitakshara law in no sense does the undivided family own property; one has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n undivided family is managed by the Karta, who is usually the senior coparcener, e.g., the father. (8) A coparcener may at any time by any definite and unequivocal indication of his intention to separate from the other members of the family effect a partition of his joint status, and thereupon the joint status will be severed and his right to obtain and possess his share will be absolute whether or not the others agree to the separation. The right to partition may be enforced by an action in court or given effect to by agreement or arbitration. (9) The effect of a partition is to dissolve the coparcenary, with the result that the separating members thenceforth hold their respective shares as their separate property, and the share of each will pass on his death to his heirs. (10) According to the Mitakshara as administered in Madras a coparcener in an undivided family may sell, mortgage or otherwise alienate for value his undivided interest in coparacenary property without the consent of the other coparceners, and on such alienation the alienee acquires an equity to stand in the shoes of the vendor and to work out his rights by means of a partition. (11) A coparcener ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a's Principles of Hindu Law, 8th ed., paras. 212-215, 217, 220, 221, 223, 235-238, 303, 307, 368; and in Mayne's Hindu Law and Usage, 11th ed., paras. 263-266, 269, 298, 299, 301, 303, 321, 379, 381, 382, 386, 388-390, 393, 418, 447-450, 681, 684, 685, 695, 705, 832. The questions and the appellant's answers in regard, first, to the sons' s case, are: (1) Did property pass under section 7? Yes, because on death there was a change in the beneficial interest affecting the property as a whole. It is sufficient to point to the fact (apart from other considerations) that before the son's death the coparceners could not in any way (without partition) alienate the property except for family necessities, religious purposes, etc., whereas after death the father alone could dispose of the whole of the beneficial interest in the whole of the property by will. See Hanson's Death Duties, 10th ed., p. 189, para. 528, the effect of which is that, for a passing to take place, the whole right of enjoyment must shift from beneficiaries entitled thereto before the death to different beneficiaries after death (even though some beneficiaries before and after the death may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use the property was the father's property. Although there was a Hindu undivided family, it was not property of that family. In any event it was not joint property of that family, (2) Were the Mysore bonds assessable as part of the Ceylon estate? Yes; there is a finding of the District Court in the appellant's favour; the Supreme Court did not deal with this point. The next step is to examine the Indian authorities. In Katama Natchier v. Rajah of Shivagunga([1864] 9 Moo I.A. 539. 607, 610) it is said that there is community of interest and unity of possession between the coparceners. Appovier v. Rama Subba Aiyan([1866] 11 Moo. I.A. 75, 80, 89) shows that no individual member of that [undivided] family whilst it remains undivided can predicate of the joint and undivided property that he.......has a certain definite share. Rajah Ram Narain Singh v. Pertum Singh([1873] 20 Suth. W.R. 189. 191) refers to the character of the family as a corporation, and to the distinction between joint and separate property of a Hindu undivided family. The acid test is what rights a coparcener has: Debi Parshad v. Thakur Dial([1875] I.L.R. 1 All 105). Deendayal Lal v. Jugdeep Narain Singh([ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes a division of interest as at the moment of intimation. Sankaralinga v. Official Receiver of Tinnevelly(A.I.R. 1926 Mad 72) deals with the rights of an execution creditor--he can ask for a partition as the coparcener himself could have done. Protap Chandra Deo v. Jagadish Chandra Deo([1927] L.R. 54 I.A. 289. 295) is a case in which, in relation to a coparcener, the Board used the expression his present ownership. The next case, Veeranna v. Sayamma[1929] I.L.R. 52 Mad. 398, 420.), relates again to the position of the last surviving coparcener, and is relied on as emphasizing his sole and absolute interest in the coparcenary property--and what he does with it cannot be challenged even by a son subsequently born. That case goes a long way to establishing the appellant's submissions on section 73. Narayana Sah v. Sankar Sah([1929] I.L.R. 53 Mad. 1, 12) is cited on the question of a coparcener having something to sell, some real and definite interest in the property. See also Shankar v. Daooji Misir([1931] L.R. 58 I.A. 206). The next two case are important from the appellant's point of view Kalyanji Vithaldas v. Commissioner of Income-tax, Bengal([1937] L.R. 64 I.A. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent to dispose. That concludes the Indian cases. The actual decision in the Ceylon case of Peria Karuppam Chettiar v. Commissioner of Stamps([1936] 38 C.N.L.R. 201) can be distinguished from the present case; see also N. Ramaswamy Chettiar Attorney- General([1937] 38 C.N.L.R. 313). English cases support the view that there was a passing under section 7 of the Ordinance which would have been a passing under section 1 of the Finance Act, 1894. Section 1 and 2 of the Act of 1894 are to all intents and purposes the same as sections 7 and 8 of the Ceylon Ordinance. The first cases is Earl Cowely v. Inland Revenue Commissioners()[1899] A.C. 198; 15 T.L.R. 270). As to what is and what is not a passing, Hanson's Death duties, p. 176, para. 508, summarizes the principles and cites Dunderdale's Trustees v. Inland Revenue(1935 S.C. 169) which shows that the property was looked at and taken as at the moment of death, notwithstanding that there was a possibility of its being altered or reduced in amount at a later stage when a particular person died. The court said that what may happen afterwards must be disregard ed. And in the present case one must disregard the fact that on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of that which on a partition would become his: In re Penrose([1933] Ch. 793; 49 T.L.R. 285); In re Parsons([1943] Ch. 12, 15; 59 T.L.R. 19; [1942] 2 All E.R. 496). The courts in Ceylon can only look at the Ceylon estate. Inasmuch as he can sell or mortgage it to anyone he pleases he can, within the meaning of the language in Attorney-General v. Astor([1923] 2 K.B. 157; 160; 39 T.L.R. 256), dispose of it at his own will. [Reference was also made to Dymond's Death Duties, 12th ed., 191, Green's Death Duties, 3rd ed., p. 49, and Hanson's Death Duties, 10th ed., 43.] A joint coparcener--the phrase in the books is joint tenants --is person who is, within the meaning of section 8(1)(a), competent to dispose. It is submitted next that there was a passing under section 8(1)(b)-- an interest that ceased on death. The portion of the income which passed on the cesser of the interest was on half; after the son's death the income was solely owned by the father, subject to incumbrances. The valuation provisions of section 17(6) of the Ordinance of 1919 can be applied, and the appellant is entitled to rely on section 8(1)(b). If one consider that portion of the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fications. Words which, it is submitted, more correctly state the true position are: and thereupon he will have a right to receive a share which, when it is finally allotted to him, will be then something movable or immovable, situate somewhere, which he will then own and possess as his separate property, unless, as very often happens, it immediately becomes joint family property of a new Hindu undivided family. The latter part of proposition (9) is wrong without qualification. Proposition (10) puts things much too broadly. The point should be stated historically, that is to say, that, according to the Mitakshara as administered in Madras, in cases of execution, mortgages or sales the courts, when someone has given value in any of these ways, have reimbursed him by a somewhat complicated method of using the coparcener's right to claim possession. Proposition (11) is broadly accepted, with two glosses--it should not be called his own undivided interest, and the true reason why he cannot devise it by will is because it does not survive him. The comments on proposition (12) are the same as those on proposition. (10). Broadly, proposition(13) is agreed, but it does not matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te with the slightest certitude what arithmetically he will ultimately get. There is an element of something notional about it; there was no question of his wanting partition. The claim of the appellant is that the coparcener must be thought of for the purpose of tax as a person who is able to partition and is therefore competent to dispose. The textbooks and the authorities say that what is or had been Hindu family property is not, when it comes into the hands of the sole surviving coparcener, his separate property. A consideration of the substantial restrictions on his power to deal with the property shows that it cannot be separate property and must be joint. There is implied in that that for any purpose with which this litigation is concerned properly is either separate or joint family property; there is nothing in between. [Reference was made to Mulla's Principles of Hindu Law. paras. 257, 368, 230 and to Commissioner of Income-tax v. Dewan Bahadur Dewan Krishna Kishore L.R. 68 I.A. 155, 167; 9 I.T.R. 695, which had to be applied remembering that there it was an impartible estate.] The sole surviving coparcener, although he has the right to do a great many things with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e family. The appellant says that it was not established that the property was the joint property of a Hindu undivided family within section 73. On that question of fact there is evidence from the appellant's witnesses which puts him out of court because it goes a long way to destroy the proposition that there can be any kind of family property in a Hindu undivided family except coparcenary property, which can also be called joint family property. The first submission is that the appellant should not be allowed to argue this section of the case on section 73 at all, because it is a question of fact with no evidence to support it. This is in truth family property, and it is wholly wrong to say that the owners are the coparceners and that therefore where there is only one coparcener it is the non-joint property of the family. [Reference was made to Umayalk Achi v. Lakshmi Achi(A.I.R. 1945 Fed. Ct. 25, 32).] [Counsel was not required for the moment to deal with the Mysore bonds point.] On the son's case three are three main points: (1) Does it pass under section 7? (2) Is it deemed to pass under section 8(1)(a) because of competency to dispose? (3) Is it deemed to pass a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad a right to be maintained by the karta out of the common fund to an extent which was at the Karta's absolute discretion..........I find it impossible to conceive of a basis of valuation which, in relation to such an 'interest',. would conceive to the scheme prescribed by section 17(6). Nor do I think that, upon a cesser of that so-called 'interest,' a 'benefit' of any value can be said to have accrued to the surviving 'coparcener' when the deceased 'interest ' lapsed. Lastly, if the respondents are wrong on any one of those three points -passing, competency to dispose, cesser--it is submitted that they are not the proper people to be assessed, and are not liable. The respondents were not the administrators of the estate of the son, and were not in possession of and had not intermeddled with the son's property. [Reference was also made to Aiyyagari Venkataramayya v. Aiyyagari Ramayya(I.L.R. 25 Mad. 690, 717).] Sir Frank Soskice Q.C. in reply. Except to the extent that the argument for the respondents asserts that it is the whole family which enjoys the coparcenary property, it does not appear that the appellants 16 basic and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Ceylon property. As to cesser, the interest which ceases is that which consists of a right to call for a partition, and that is an interest which, within the meaning of section 17(6), extends to the whole income of the half share. Upon that basis it is quite easy to value. The present assesses was persons who could be assessed under section 25 of the Ordinance of 1938. Lastly, the property in the hands of the father has the quality that it may become joint property, but it is not property which has the character of joint property within section 73. Joint must mean property which is jointly held, enjoyed or possessed. Section 73 is not applicable. July 10. The judgment of their Lordships was delivered by VISCOUNT SIMONDS, WHO stated the facts set out above and continued: It was and is claimed by the appellant that estate duty in respect of the son's estate was exigible either under section 7 of the Ordinance (which corresponds with section 1 of the Finance Act, 1894) or under section 8 (1)(a) or (b) which reproduced part of section 2 of the same Act.) It became necessary, therefore, to determine with as much precision as the subject-matter permitted, what was the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the son within the meaning of section 7 of the Ordinance or whether, alternatively, he was competent to dispose of any property at the time of his death within section 8(1)(a), or whether there was any property in which he had an interest ceasing on his death within section 8(1)(b) an interest which falls to be measured by the extent to which a benefit accrues or arises by its cesser, which benefit is in its turn valued in accordance with the provisions of section 17(6) of the Ordinance. First, then, did any and what property pass on the death of the son? An attempt was made at the hearing before their Lordships to argue that the whole of the property in Ceylon of the Hindu undivided family so passed, though a claim for estate duty in respect of one half only was made. Their Lordships considered this argument to be inadmissible in view of the assessment that had been made and the course that the proceedings had so far taken. Counsel was therefore limited to the argument that the son's share in that property passed and that share was on-half. It appears to their Lordships that this contention is refuted by the most elementary consideration of the Mitakshara law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretion of the Karta, usually the senior male member of the family, whose right and duty it is to maintain out of it not only the coparceners but also the female members of the family, the wives, widows and unmarried daughters of living or dead coparcerners, and further to devote such money as may be necessary for such family purposes as the education, marriage, and religious ceremonies of the coparceners and of the members of their respective families (see Mulla, sec. 237). To say that in such circumstances a coparcener has a share of the property which passes on his death is in their Lordships' opinion a clear misuse of language. Nor does it help to say that the property is vested in or owned by (if vest and own are legitimate words to use) the coparceners for the time being rather than by all the members of the undivided family. It appears to their Lordships unnecessary to examine further this aspect of the claim, and the less so because they do not dissent from the views expressed by the District Judge and Gratiaen J. in their careful and exhaustive judgments. Section 7 failing him, the appellant turns to section 8(1) (a) and contends that the son was at or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, at least the Ceylon property would have fallen to someone's share, but this did not appear to their Lordships to be equivalent to saying that the son had been competence to dispose of it. The same considerations apply to the contention that the son was competent to dispose of one half of the Ceylon property because he might have alienated for value and his alienee might have applied to the court (to use a phrase sometimes used in this connexion) to work out the equities in his favour. Such a process leaves the son at a long distance from competency to dispose of any particular part of the family property. Finally section 8(1) (b) of the Ordinacne was invoked. Duty is exigible under this sub-section in respect of property (a) in which the son had an interest ceasing on his death, (b) to the extent to which a benefit accrues or arises by the cesser of such interest, the value of that benefit being measured in accordance with the provisions of section 17(6) of the Ordinance, that is to say, if the interest extended to the whole income of that property, being the value of that property or, if it extended to less than the whole income of the property, being the corresponding pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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