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TMI Blog1991 (11) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... int family property or "throws" it into the hotchpotch of the joint family or "blends" it with the joint family property is a "disposition" within the meaning of the Estate Duty Act, 1953 ("the Act", for short). Civil Appeal No. 1204 of 1979 is an appeal from an order of the High Court declining to call upon the Income-tax Appellate Tribunal to refer the above question for the decision of the High Court in view of certain earlier decisions of the court. The Madras High Court also declined to direct reference on the above issue in T. C. P. No. 478 of 1977 and that is the subject-matter of S . L. P. (Civil) No. 335 of 1979. In view of the pendency of Civil Appeal No. 1204 of 1979, we grant special leave in S. L. P. (Civil) No. 335 of 1979 also. Before discussing the correctness of the above conclusion, it may be convenient to set out the background of facts in Civil Appeal No. 1204 of 1979. That appeal arises out of the estate duty assessment consequent on the death of one Natesan Chetty who died on March 1, 1972. He was the karta of a Hindu undivided family consisting of himself and his four sons. He was also the owner, in his individual capacity, of five house properties in Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the death should be added back in computing the principal value of the estate by reason of the provisions of section 46(2) of the Act. It is not in dispute before us that though two points were thus involved in the assessment-one regarding the inclusion of the value of three items of property as part of the estate of the deceased and passing on his death and the other regarding the addition or disallowance of the debt of Rs. 46,800-they are interconnected and that, if the first question is answered in favour of the assessee, the second question will also stand answered likewise. Dissatisfied with the conclusion of the Assistant Controller, the accountable person preferred an appeal to the Appellate Controller of Estate Duty which was successful. Thereupon, the Department preferred an appeal to the Tribunal which, following a decision of the Madras High Court in A. N. K. Rajamani Ammal v. CED [1972] 84 ITR 790, held that the sum of Rs. 1,22,500 could not be included in the value of the estate passing on the death and consequentially, that the add back of Rs. 46,800 was also not justified. Thereupon, the Controller of Estate Duty applied, under section 64(1) of the Act, for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The Estate Duty Act, 1953, has ceased to be enforceable since March 16, 1985. In the circumstances, we need not elaborately set out the provisions of the Act and the principles behind them. An outline of the provisions necessary for the determination of the issue before us will suffice. The Act levies a duty on the aggregate market value of the properties passing on the death of any person (statutorily termed the "principal value of the estate"). It is manifest that the statute could be easily circumvented if duty were restricted only to properties which actually pass on a death, for, various kinds of devices could be thought of by which the property of such person could ostensibly be transferred to others some time before the death, although it continues to be really under the domain and control of the deceased till the time of his death. The statute, therefore, contains elaborate provisions deeming certain properties to pass on death even though their beneficial enjoyment may not actually change hands at the time of his death. One such item of properties which are deemed to pass on the death of a person is that which formed the subject-matter of a gift made by him within a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to comprehend certain types of transactions. To be on the safe side, therefore, the statute proceeded to enact a special definition of the word "disposition" in section 2(15) of the Act wide enough to rope in various kinds of acts in respect of property. This provision, in so far as it is material for our present purposes, reads as follows : "2. (15) 'Property' includes any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale and also includes any property converted from one species into another by any method ; Explanation 1. -The creation by a person or with his consent of debt or other right enforceable against him personally or against property which he was or might become competent to dispose of, or to charge or burden for his own benefit, shall be deemed to have been a disposition made by that person, and in relation to such a disposition the expression property' shall include the debt or right created. Explanation 2.-The extinguishment at the expense of the deceased of a debt or other right shall be deemed to have been a disposition made by the deceased in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision need to be set out at some length. Three contentions had been urged in Rajamani Ammal [1972] 84 ITR 790 (Mad), (a) The first was that the act of blending constituted "disposition" within the general meaning of that word. Repelling this contention, the court observed (p. 796) : "The learned counsel for the Revenue placed strong reliance on the word 'disposition' in section 27(1) of the Act and contended that even an act of throwing of the self-acquired property into the common stock of joint Hindu family is included in that expression. In a case arising under the Gift-tax Act, the word 'disposition' came up for consideration in the decision in Goli Eswariah v. CGT [1970] 76 ITR 675 (SC). The Supreme Court held that the word 'disposition' refers to a bilateral or a multilateral act and it does not refer to a unilateral act. This decision of the Supreme Court approves the decision of this court in CGT v. P. Rangasami Naidu [1970] 76 ITR 315 (Mad) [FB]. It is true that these decisions are under the Gift-tax Act. It is also true that the word 'disposition' was considered in these decisions, with particular reference to the definition of 'transfer of property' under that Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes a real and full-fledged coparcenary right. There is no vesting of rights here by the father on the son, but what is dormant springs to life but irrevocably at the pleasure of the father." (c) A third contention raised on behalf of the Revenue was that throwing the self-acquired property into the common stock of the joint family would amount to 'extinguishment at the expense of the deceased of a debt or other right' within the meaning of Explanation 2 to section 2(15). This contention was also repelled by the learned judges. They observed at (p. 797) : "We are also of the opinion that throwing the self-acquired property into the common stock of the joint family will not amount to 'extinguishment at the expense of the deceased of a debt or other right' within the meaning of Explanation 2 to section 2(15). As seen from the judgments cited above, after the act of throwing into the common stock, it is the joint family or the coparcenary that owns the property. The person who converted his individual property into joint family property is a member of the Hindu joint family or the coparcenary and continues to be a member of the joint family. His interest in the erstwhile separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trikamlal [1976] 105 ITR 92 (SC) also. Trikamlal Vadilal and his son, Kantilal, constituted a Hindu undivided family. On November 16, 1953, an instrument styled as a "release deed" was executed between the two persons. 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 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. Trikamlal Vadilal died on June 3, 1955, that is, within two years of the release deed. The Assistant Controller found that, as on November 16, 1953, the deceased was entitled to a one-half share in the joint family properties the value of which was Rs. 3,44,058, but had relinquished his interest in the joint family properties by receiving only a sum of rupees one lakh. The Officer, therefore, held that the difference between Rs. 3,44,058 and Rs. 1,06,724 (being the amount re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a transfer. The question that falls for our consideration now is whether, despite the extended definition in section 2(15) of the Act, as explained in Kantilal Trikamlal [1976] 105 ITR 92 (SC) the act of blending, unlike the voluntary acceptance of an unequal partition, falls outside the purview of the deeming part of the definition contained in the Explanations. We think the answer to this question has to be in the affirmative. Reverting once again to the contentions of the Revenue, in Rajamani Ammal [1972] 84 ITR 790 (Mad) (which are also the contentions reiterated before us for the Revenue), it will be remembered that Rajamani Ammal [1972] 84 ITR 790 (Mad), specifically dealt with the language of the two Explanations to section 2(15) and that its decision rested on three grounds : (i) a "disposition", as held in Goli Eswariah [1970] 76 ITR 675 (SC), has to be a "bilateral" or "multilateral" act or transaction, but not unilateral act ; (ii) the act of blending does not create any right enforceable against the blender or his property but only brings to the surface rights already latent and inherent in the others ; and (iii) the act of blending does not result in the exti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that Rajamani Ammal [1972] 84 ITR 790 (Mad), required no reconsideration because of Ranganayaki Ammal / Trikamlal [1976] 105 ITR 92 (SC). This disposes of the question sought to be referred in these cases. We would, however, like to advert to another aspect which may arise for consideration at some future date. It may, perhaps, be possible to contend that, though a declaration of blending does not amount to a "gift", where the act of blending is followed by a subsequent partition, the two transactions taken together do result in the extinguishment, at the expense of the deceased, of his rights in the properties which go to the share of other coparceners at the subsequent partition and that, if the two can be treated as parts of the same transaction, Explanation 2 to section 2(15) may be attracted. But this, apart from being a totally new question of law not raised at any stage and not debated before us, would also require not only a closer took from the legal angle but also investigation into facts, particularly as to whether the act of blending and the subsequent partition can be treated, in law and on facts, as parts of a single transaction. We, therefore, express no opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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