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TMI Blog1982 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Veeraraju continued as members of the coparcenary till 1948. In January, 1948, one of the sons of Veeraraju gave a notice to the other members of the coparcenary, demanding partition. Subsequent thereto, movables were divided, but the immovable properties came to be divided only on, and under a document dated December 11, 1948. The document is described as a "family settlement deed ", and we shall refer to it by the same description. The family settlement deed refers to the earlier partition among the three brothers, the later reunion between the deceased, Somaraju, and Veeraraju, as well as to the death of Veeraraju in 1933, and recites that the deceased and the four sons of Veeraraju, who were parties to the document, have been continuing as members of the joint family till the end of 1947. It then recites that Viswanadham, s/o Veeraraju, gave a notice on January 18, 1948, demanding partition and (stating) that the several sons of Veeraraju had acquired several properties and businesses and were running them separately. It is stated further : " From the beginning of 1948, as we are no longer willing to live joint under the advice of the first amongst us, we are living as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s defined in sub-s. (7) of s. 27. He held that, inasmuch as the deceased retained benefit, the transaction fell within the mischief of s. 10, as also ss.11 and 12 of the Act and, therefore, half of the total value of all the properties covered by the family settlement deed must be treated as the value of the estate passing on the death of the deceased. He valued the half interest at Rs. 4,27,765. The accountable person filed an appeal. The Deputy Controller held, firstly, that the transaction entered into by the deceased and his nephews, through the deed December 11, 1948, was a disposition of the property. He held further that the family settlement deed itself purported to operate as a gift, and because the deceased had clearly reserved a benefit to himself, the provisions of s. 10 were attracted ; but, inasmuch as the reservation extended only to a portion of the estate, he observed, estate duty had to be levied only to the extent of the benefit reserved by the donor. He agreed with the Asst. Controller that " nephews " fell within the definition of " relatives " in s. 27(7). On the above findings, he allowed the appeal in part, and directed the Asst. Controller to amend the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., retention of the house property for the lifetime of the deceased, and the annuity payable by the nephews, it must be held that the gift was not a bona fide one. He submitted that, since the gift was not a bona fide one, the entire subject-matter of gift must be treated as the property passing on the death of the deceased, notwithstanding the fact that the gift was made more than two years prior to the death of the deceased. Alternatively, he argued that, according to ss. IO and II, the entire benefit reserved should be valued and brought to charge. He submitted that the house property should be valued in full, and contended further that the entire value of Ac. 642.28 cents should also be included in the estate of the deceased, inasmuch as the annuity payable to the deceased by the four nephews was charged upon this property. Because a charge amounts to an interest in the property, the entire value of Ac. 642.28 cents should be deemed to pass under s. 7, read with s. 3(1)(c) of the Act, he contended. On the other hand, it is contended by Sri Y. V. Anjaneyulu, learned counsel for the accountable person, that the transaction dated December 11, 1948, was not a gift, but only a parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the document is stated to be Rs. 2,50,000. While all the properties were taken by the nephews, the deceased was given an annuity of Rs. 1,000 per month during his life, and was also given the right to reside in the house called " hillock building " along with the adjoining land of Ac. 4.87 cents. Even in the house property and the adjoining land, the deceased was to have only a life interest, without the right to transfer. The deceased actually lived for about 10 years after this transaction. The annuity comes to Rs. 12,000 per annum, and the residential property also seems to be a substantial one. There is no reason to believe that it was not a bona fide and genuine partition in which the deceased, who had become fairly old by that time, and was no longer in a position to, or inclined to, do any business or agriculture, must have deemed it more convenient to take the annuity and (life interest in) the residential property, and spend his last days in peace. His wife had pre-deceased him, and he had no one else except the nephews, who were busy quarrelling with each other. In these circumstances, and in the absence of any other evidence, it is difficult for us to hold that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise : Provided that the property shall not be deemed to pass by reason only that it was not, as from the date of the gift, exclusively retained as aforesaid, if, by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least two years before the death ...... " According to s. 9, any gift of property made within two years of the death, is deemed to pass on the death of the donor. If, however, the gift is made two years prior to the death, and is a bona fide one, the property covered by the gift is not deemed to pass on the death of the donor. In this case, the document dated December 11, 1948, assuming that it is a gift, was executed roughly nine years prior to the death of the deceased, and there is absolutely no material to doubt the bona fides of the transaction. As we have indicated above, the deceased had become fairly old by 1948, had no wife, and was in no position to engage himse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed could do, was to proceed against the income or the corpus of this land, but not to take possession of the land and enjoy it. We are, therefore, of the opinion that s. 10 is wholly inapplicable in the facts of the case. Mr. M. S. N. Murthy then contended that s. 11 is attracted in this case. Section 11, in so far as it is relevant, reads as follows: "11(1). Subject to the provisions of this section, where an interest limited to cease on a death has been disposed of or has determined, whether by surrender, assurance, divesting, forfeiture or in any other manner (except by the expiration of a fixed period at the expiration of which the interest was limited to cease), whether wholly or partly, and whether for value or not, after becoming an interest in possession, and the disposition or determination (or any of them if there are more than one) is not excepted by sub-section (2), then (a) if, had there been no disposition or determination, as aforesaid of that interest and no disposition of any interest expectant upon or subject to that interest, the property in which the interest subsisted would have passed on the death under section 5, that property shall be deemed by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass on the deceased's death to the extent to which a benefit accrues or arises by the cesser of such interest, including, in particular, a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law. (2) If a member of a Hindu coparcenary governed by the Mitakshara school of law dies, then the provisions of sub-section (1) shall apply with respect to the interest of the deceased in the coparcenary property only (a) if the deceased had completed his eighteenth year at the time of his death, or (b) where he had not completed his eighteenth year at the time of his death, if his father or other male ascendant in the male line was not a coparcener of the same family at the time of his death. Explanation.-Where the deceased was also a member of a sub-coparcenary (within the coparcenary) possessing separate property of his own, the provisions of this sub-section shall have effect separately in respect of the coparcenary and the sub-coparcenary ........" The life interest created in the house property, as also the annuity provided for life, do fall under s. 7(1). The question then arises, how to value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... default in the payment o annuity, to realize the same from out of the income of the said land, s. 40 must be deemed to be applicable. We are unable to agree. In the event of default, the deceased was entitled to recover the arrears due to him, either from the income or from the corpus of the property. But, it cannot be said with any definiteness that the interest which he had, extended either to the whole or part of the income of the property. If there was default in the payment of annuity for only, say, one month, and the deceased took proceedings for realizing the same, it could have been satisfied even from a part of the income of the property, whereas, if the default was for a longer period, whole of the income may not have satisfied the arrears. Indeed, it was equally open to the deceased to directly apply for a sale of the property, without touching the income. In such a fluid situation, it is difficult to say that the interest which the deceased had, and which interest devolves upon the nephews as a benefit, extended to the whole or part of the income of the said land. The result of the discussion is that the annuity which undoubtedly ceased on the death of the deceased and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dges observed, contemplates the levy of a tax or duty on a valuation which is arrived at on the principles enunciated in the statute itself. If the valuation principles stated in the statute cannot be worked out with any precision in respect of any property, it would follow as necessary corollary that that property is not one which is intended to be subject to the tax or duty, contemplated by the statute. On this principle, it was held, if a benefit arising by cesser of an interest cannot be measured under s. 40, the cesser of such interest does not attract the payment of estate duty under s. 7. Mr. M. S. N. Murthy, however, brought to our notice that this decision of the Gujarat High Court has been dissented from by a Bench of the Madras High Court, and he commended to us the reasoning of the Madras High Court. The judgment relied upon by Mr. Murthy is reported in the same volume, at page 320; (CED v. Ibrahim Gulam Hussain Currimbhoy [1975] 100 ITR 320 (Mad). The difference of opinion between the two High Courts is on the question whether the interest in the goodwill of deceased is capable of valuation or not under s. 40. While the Gujarat High Court held that such an interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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