{"id":132314,"date":"1991-11-01T00:00:00","date_gmt":"1991-10-31T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/controller-of-estate-duty-madras-vs-n-shankaran-etc-on-1-november-1991"},"modified":"2019-01-17T21:49:27","modified_gmt":"2019-01-17T16:19:27","slug":"controller-of-estate-duty-madras-vs-n-shankaran-etc-on-1-november-1991","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/controller-of-estate-duty-madras-vs-n-shankaran-etc-on-1-november-1991","title":{"rendered":"Controller Of Estate Duty, Madras vs N. Shankaran Etc on 1 November, 1991"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Controller Of Estate Duty, Madras vs N. Shankaran Etc on 1 November, 1991<\/div>\n
Equivalent citations: 1991 SCR, Supl. (2) 167 1992 SCC Supl. (1) 447<\/div>\n
Author: S Rangnathan<\/div>\n
Bench: Rangnathan, S.<\/div>\n
           PETITIONER:\nCONTROLLER OF ESTATE DUTY, MADRAS\n\n\tVs.\n\nRESPONDENT:\nN. SHANKARAN ETC.\n\nDATE OF JUDGMENT01\/11\/1991\n\nBENCH:\nRANGNATHAN, S.\nBENCH:\nRANGNATHAN, S.\nFATHIMA BEEVI, M. (J)\nOJHA, N.D. (J)\n\nCITATION:\n 1991 SCR  Supl. (2) 167  1992 SCC  Supl.  (1) 447\n 1991 SCALE  (2)958\n\n\nACT:\n    Estate  Duty Act, 1953--Sections 21(5),  9,\t 27--'Blend-\ning'-'Partition '--Whether 'disposition '.\n\n\n\nHEADNOTE:\n    A  common question of law that arises for  determination\nin  these appeals by special leave is whether the act  of  a\nmember of a joint family by which he impresses his individu-\nal  property with the character of joint family property  or\n\"throws\"  it  into the hotch potch of the  joint  family  or\n\"blends\"  it with the joint family property is\ta  'disposi-\ntion'  within the meaning of the Estate Duty Act,  1953.  In\nCivil  Appeal  No. 1204 of 1979 the facts are:\tOne  Natesan\nChetty who died on 1.3.1972, was the Karta of a Hindu  Undi-\nvided  Family, consisting of himself and his four  sons.  He\nowned  five  house  properties in  Madras,  On\t18.6.70\t and\n16.9.1970,  he made declarations by which he  impressed\t the\nproperties with the character of joint family properties and\nfurther declared that they would thereafter belong to HUF of\nwhich he was the Karta. Thereafter a partition was  effected\nin  the family in March 1971 in which two of the  properties\ncame  to his share. Sri Chetty had also borrowed Rs.  46,800\nfrom  HUF out of the rental income from the  properties\t for\nhis business purposes. These borrowings were duly repaid  in\nApril, 1971.\n    In\tcompleting  the\t assessment to estate  duty  of\t the\nestate passing on the death of Natesan Chetty, the Assistant\nController of Estate Duty held that the declarations made by\nthe  deceased  on 18.6.70 and  16.9.70\twere  \"dispositions\"\nwithin the meaning of the said expression as defined in\t the\nsecond explanation to section 2(15) of the Estate Duty\tAct.\nHe further held that since the declarations were made  with-\nout consideration, they amounted to gift which had been made\nwithin two years of the date of death and hence liable to be\nassessed  as part of the estate passing on death under\tsec-\ntion  9 of the Act. The two properties which had  fallen  to\nthe  share  of the deceased passed on the death of  the\t de-\nceased.\t He accordingly included Rs. 1,22,500 the  value  of\nthe other three properties also in\n168\nthe  principal\tvalue of the estate. The  Asstt.  Controller\nfurther\t held that a sum of Rs. 46,800 being the loan  taken\nand discharged by the deceased should also be added back  in\ncomputing  the\tprincipal value of the estate by  virtue  of\nsection 46(2) of the Act.\n    Dissatisfied with the conclusion of the Asstt.  Control-\nler,  the  accountable\tperson preferred an  appeal  to\t the\nAppellate  Controller of Estate Duty which  was\t successful.\nThereupon the Department preferred an appeal to the Tribunal\nwhich,\tfollowing the decision of the Madras High  Court  in\nRajamani  Ammal\t v.  Controller of Estate  Duty,<\/a>  (1972)  84\nI.T.R.\t790 held that the sum of Rs. 1,22,500 could  not  be\nincluded in the value of the estate passing on the death and\nconsequently,  that the add back of Rs. 46,800 was also\t not\njustified.  Thereupon the Controller of Estate Duty  applied\nunder  Section\t64  (1) of the Act for a  reference  to\t the\nMadras High Court for its opinion on the two questions.\t The\nMadras High Court was of the opinion that the basic question\nat  issue was covered by the earlier decisions of the  Court\nin Rajamani Ammal v. Controller of Estate Duty and  Control-<\/a>\nler of Estate Duty v. Smt. Mookammal, (1978) 110 I.T.R. 581.\nThe  High  Court declined to call for a reference  and\tdis-\nmissed\tthe application for reference. Hence the appeals  by\nthe Department.\nDismissing the appeals, this Court,\n    HELD: \"Blending\" or \"partition\" will not be a  'disposi-\ntion' within the ordinary connotation of the expression\t but\nwill  be one if either of the Explanations to Section  2(15)\nare attracted. [179 G]\n    Unlike  an unequal partition, the act of  blending\twill\nnot amount to a 'disposition' attracting Ss. 9 and 27 of the\nAct. [179 H - 180 A]\n    The\t High  Court was right in holding that the  acts  of\nblending  did not result in the 'gift' of immovable  proper-\nties within the meaning of the statute. [180 C]\n    Though  a declaration of blending does not amount  to  a\n'gift' where the act of blending is followed up by a  subse-\nquent  partition,  the two transactions\t taken\ttogether  do\nresult\tin  the extinguishment, at the expense\tof  the\t de-\nceased,\t of  his rights in the properties which\t go  to\t the\nshare of other coparceners at the subsequent partition\tand,\nif  the two can be treated as parts of the same\t transaction\nthe Explanation to Section 2 (15) may be attracted. [180  D-\nE]\n169\n    Rajamani  Ammal v. Controller of Estate Duty,<\/a> (1972)  84\nITR 790; Controller of Estate Duty v. Smt. Mookammal,<\/a> (1978)\n110 ITR 581; Rangabayaki Ammal v. CED, (1973) 88 ITR 96; CED\nv.  Kantilal Trikamlal, (1978) 105 ITR 92; Stremann v.\tCIT,\n(1965)\t66  ITR 62 SC; Goli Eswariah v. CGT, (1970)  76\t ITR\n675;  C.G.T.v. Getti Chettiar, (1971) 82 ITR 599;  Cherukuru\nEswaramma  v.C.E.D,  (1968)  69 ITR 109; CED  v.  Jai  Gopal\nMehta, (1972) 85 ITR 175FB; C.E.D., v. Laxmi Bai, (1980) 126\nITR  73; C.E.D.v. Babubhai T. Panchal, (1982) 133  ITR\t455;\nand C.E.D.v. Satyanaravan Babulal Chaurasia, (1983) 140\t ITR\n158, referred to.\n\n\n\nJUDGMENT:\n<\/pre>\n
    CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1204 (NT)
\nof 1979.\n<\/p>\n
    From the Judgment and Order dated 3.2.1978 of the Madras
\nHigh Court in Tax Case Petition No. 271 of 1977.
\nWITH
\n\t      Civil Appeal No. 4371 (NIT) of 1991.\n<\/p>\n
\t      Ms. A. Subhashini for the Appellant.\n<\/p>\n
\t      Ms. Janaki Ramchandran and A.T.M. Sampath\t for
\n\t      the Respondents.\n<\/p>\n
\t      The Judgment of the Court was delivered by
\n    RANGANATHAN, J. Both these matters raise the same  ques-
\ntion  viz. whether the act of a member of a joint family  by
\nwhich he impresses his individual property with the  charac-
\nter  of joint family property or “throws” it into the  hotch
\npotch  of  the joint family or “blends” it  with  the  joint
\nfamily property is a “disposition” within the meaning of the
\nEstate Duty Act, 1953 (‘the Act’, for short).
\n    Civil  Appeal no. 1204\/79 is an appeal from an order  of
\nthe High Court declining to call upon the Income-tax  Appel-
\nlate  Tribunal to refer the above question for the  decision
\nof  the High Court in view of certain earlier  decisions  of
\nthe  Court. The Madras High Court also declined to direct  a
\nreference  on the above issue in T.C.P. No. 478 of 1977\t and
\nthat  is the subject matter of SLP (C) No. 335 of  1979.  In
\nview  of the pendency of Civil Appeal No. 1204\/79, we  grant
\nspecial leave in SLP (C) No. 335\/79 also.\n<\/p>\n
    Before  discussing the correctness of the above  conclu-
\nsion,  it  may be convenient to set out\t the  background  of
\nfacts in Civil Appeal No. 1204\/79.\n<\/p>\n
170<\/span><\/p>\n
That appeal arises out of the estate duty assessment  conse-
\nquent  on  the\tdeath of one Natesan  Chetty,  who  died  on
\n1.3.72.\t He was the Karta of a Hindu Undivided Family  (HUF)
\nconsisting  of\thimself and his four sons. He was  also\t the
\nowner, in his individual capacity, of five house  properties
\nin  Madras. On 18.6.1970 and 16.9.1970 he made\tdeclarations
\nby  which he impressed the above mentioned  properties\twith
\nthe  character of joint family properties and declared\tthat
\nthey  would  thereafter belong to HUF of which\the  was\t the
\nkarta. Subsequently, a partition was effected in the  family
\nin March 1971 in which two of the above mentioned properties
\ncame  to the share of the deceased. Sri Natesan\t Chetty\t had
\nalso  borrowed a sum of Rs. 46,800 from the HUF out  of\t the
\nrental income from the above mentioned properties for  being
\ninvested in the business earned on by him. These  borrowings
\nwere  made between March 1970 and April 1971 and  they\twere
\nrepaid in April 1971.\n<\/p>\n
    In\tcompleting  the\t assessment to estate  duty  of\t the
\nestate passing on the death of Natesan Chetty, the Assistant
\nController of Estate Duty held that the declarations made by
\nthe deceased on 18.6.1970 and 16.9.1970 were  “dispositions”
\nwithin the meaning of the said expression as defined in\t the
\nsecond explanation to section 2(15) of the Act. These dispo-
\nsitions\t having\t been made for no consideration\t within\t the
\nmeaning\t of s. 27 (1), amounted, according to him, to  gifts
\nand  since  the gift had been made within two years  of\t the
\ndate of death, the subject matter of the gift was liable  to
\nbe  assessed  as pan of the estate passing  on\tdeath  under
\nsection 9 of the Act.\n<\/p>\n
    As\talready\t mentioned, two of the properties  had\tbeen
\nallotted  to the share of the deceased in the  partition  of
\n1971  and it is common ground that they passed on the  death
\nof  the deceased as they belonged to him on the date of\t his
\ndeath.\tThe question, however, was whether the\tother  three
\nproperties which went to the other members of the family  as
\na result of the declarations and partition were also  liable
\nto  be included as pan of the estate deemed to pass  on\t the
\ndeath  of the deceased by the application of section 9\tread
\nwith  S.27 (1) and section 2(15) of the Act.  The  Assistant
\nController  answered  this question in the  affirmative\t and
\nincluded their value, taken at Rs. 1,22,500, in the  princi-
\npal value of the estate. As a consequence of his  conclusion
\nthat  the properties were liable to be included in  the\t es-
\ntate,  the officer ,,I so took the view that the sum of\t Rs.
\n46,800 being the loan taken by the deceased from the HUF and
\ndischarged  within  two years prior to the death  should  be
\nadded hack in computing the principal value of the estate by
\nreason of the provisions of section 46 (2) of the Act. It is
\nnot  in dispute before us that though two points  were\tthus
\ninvolved  in the assessment–one regarding the inclusion  of
\nthe value of
\n171<\/span>
\nthree  items  of property as part of the estate of  the\t de-
\nceased\tpassing\t on his death and the  other  regarding\t the
\naddition  or disallowance of the debt of Rs. 46,800 —\tthey
\nare  inter-connected  and  that, if the\t first\tquestion  is
\nanswered  in  favour of the assessees, the  second  question
\nwill also stand answered likewise.\n<\/p>\n
    Dissatisfied  with the conclusion of the Assistant\tCon-
\ntroller,  the accountable person preferred an appeal to\t the
\nAppellate  Controller of Estate Duty which  was\t successful.
\nThereupon the Department preferred an appeal to the Tribunal
\nwhich,\tfollowing  a decision of the Madras  High  Court  in
\nRajamani  Ammal\t v.  Controller of Estate  Duty.<\/a>  (1972)  84
\nI.T.R.\t790 held that the sum of Rs. 1,22,500 could  not  be
\nincluded  in  the value of the estate passing on  the  death
\nand,  consequentially, that the add back of Rs.\t 46,800\t was
\nalso not justified. Thereupon the Controller of Estate\tDuty
\napplied, under S. 64 (1) of the Act, for a reference to\t the
\nMadras\tHigh Court, for its decision, of the  following\t two
\nquestions:\n<\/p>\n
\t\t   “1  Whether,\t on  the facts\tand  in\t the
\n\t      circumstances  of\t the  case,  the   Appellate
\n\t      Tribunal was right in holding that the  trans-
\n\t      action by which a Hindu impressed his separate
\n\t      properties  [as] with joint  family  character
\n\t      could not be considered as a disposition under
\n\t      the  second explanation to section  2(15)\t and
\n\t      section 27 of the Estate Duty Act ?\n<\/p><\/blockquote>\n
\t\t   2.  Whether,\t on  the facts\tand  in\t the
\n\t      circumstances  of the case, the  Tribunal\t was
\n\t      right  in\t holding that the  addition  of\t Rs.
\n\t      1,22,500\tmade under section 9 and Rs.  46,800
\n\t      made  under  section 46(2) could not  be\tsus-
\n\t      tained in the case of the deceased ?”<\/p><\/blockquote>\n
    The Madras High Court was of the opinion that the  basic
\nquestion  at issue was covered by the earlier  decisions  of
\nthe  Court in Rajamani Ammal v. Controller of  Estate  Duty,<\/a>
\n(1972)\t84 ITR 790 as well as a subsequent decision in\tCon-
\ntroller\t of  Estate Duty v. Smt. Mookammal, (1978)  110\t ITR\n<\/p>\n
581. The Court found no substance in the attempt, on  behalf
\nof  the Revenue, to distinguish the above decisions  on\t the
\nstrength of a decision of the Court in Ranganayaki Ammal  v.
\nCED,  (1973)  88 I.T.R 96 which had been  confirmed  by\t the
\nSupreme\t Court\tin  CED v. Kantilal  Trikamlal,\t (1978)\t 105
\nI.T.R.\t92.  In this view of the matter the High  Court\t de-
\nclined\tto call for a reference on the two  questions  above
\nmentioned and dismissed the application for reference. Hence
\nthe present Civil Appeal. It is not necessary to set out the
\nfacts in SLP No. 335 of 1979 where the question involved  is
\nthe same except that there was no subsequent partition after
\nthe blending and that no question regarding the deductibili-
\nty of debts also arose in this case.\n<\/p>\n
172<\/span><\/p>\n
    It\twill  be seen that both these appeals  are  directed
\nagainst the orders of the High Court declining to call for a
\nreference.  It\tis fairly clear that the  questions  whether
\nRajamani  Ammal was rightly decided and whether, if  so,  it
\nneeded\treconsideration in the light of\t Kantilal  Trikamlal
\nare  questions\tof law. But, in view of the  long  lapse  of
\ntime,  we have considered the issues on merits and since  we
\nare satisfied that the High Court’s conclusion was  correct,
\nwe dispose of the appeals straightaway without going through
\nthe formality of asking the Tribunal to make a reference  to
\nthe  High Court and then awaiting the High Court’s  decision
\non the question of law referred.\n<\/p>\n
    The\t Estate Duty Act 1953 has ceased to  be\t enforceable
\nsince 16.3.1985. In the circumstances we need not elaborate-
\nly  set\t out the provisions of the Act\tand  the  principles
\nbehind them. An outline of the provisions necessary for\t the
\ndetermination  of the issue before us will suffice. The\t Act
\nlevies\ta duty on the aggregate market value of the  proper-
\nties passing on the death of any person (statutorily  termed
\nthe  ‘principle value of the estate’). It is  manifest\tthat
\nthe  statute could be easily circumvented if  duty-were\t re-
\nstricted only to properties which actually pass on a  death,
\nfor,  various  of devices could be thought of by  which\t the
\nproperty  of such person could ostensibly be transferred  to
\nothers\tsometime before the death, although it continues  to
\nbe really under the domain and control of the deceased\ttill
\nthe time of his death. The statute therefore contains elabo-
\nrate provisions deeming certain properties to pass on  death
\neven  though  their beneficial enjoyment  may  not  actually
\nchange\thands  at the time of his death. One  such  item  of
\nproperties which are deemed to pass on the death of a person
\nare those which formed the subject matter of a gift made  by
\nhim  within a specified period preceding his death.  S.9  of
\nthe Act, which contains this deeming provision reads thus:\n<\/p>\n
\t      “9.Gifts\t within\t a  certain  period   before
\n\t      death–(1) Property taken under a\t disposition
\n\t      made by the deceased purporting to operate  as
\n\t      an  immediate gift inter vivos whether by\t way
\n\t      of  transfer, delivery, declaration of  trust,
\n\t      settlement  upon\tpersons\t in  succession,  or
\n\t      otherwise, which shall not have been bona fide
\n\t      made two years or more before the death of the
\n\t      deceased\tshall  be  deemed  to  pass  on\t the
\n\t      death”.\n<\/p><\/blockquote>\n
In  short, the provision enabled the Revenue to\t ignore\t any
\ngift  of property made by the deceased within two  years  of
\nhis death by creating a statutory fiction that properties so
\ngifted passed on the death of the deceased,
\n173<\/span>
\nalthough, in fact and in law, they ceased to be his a  short
\ntime before his death. This is the first fiction.
\n    The\t legislature next proceeded to enact a\tsecond\tfic-
\ntion.  This was in order to bring into the net\tof  taxation
\ntransactions which may not be comprehended within the  legal
\nconcept of a gift because they are ostensibly made for\tsome
\nconsideration. It provided in section 27 that:\n<\/p>\n
\t      “27.    (1)   Dispositions   in\tfavour\t  of
\n\t      relatives–Any  disposition  made by  the\t de-
\n\t      ceased in favour of a relative of his shall be
\n\t      treated for the purposes of this Act as a gift
\n\t      unless—\n<\/p><\/blockquote>\n
\t      (a)   the disposition was made on the part  of
\n\t      the  deceased for full consideration in  money
\n\t      or  money’s worth paid to him for his own\t use
\n\t      or benefit; or\n<\/p><\/blockquote>\n
\t      (b)  ……….  ; and references to a gift in
\n\t      this\tAct\tshall\t   be\t   construed
\n\t      accordingly:  ……….\t”\n<\/p><\/blockquote>\n
Resort to this provision in the present case is needed for a
\npurpose. Admittedly, the deceased received no  consideration
\nfor  impressing\t the property with the\tcharacter  of  joint
\nfamily\tproperty. If this amounted to a transfer,  then\t S.9
\nalone would be sufficient to bring the properties within the
\nnet of taxation. But it could be argued that a gift involves
\na  ‘transfer’ without consideration but the act of  blending
\ndoes  not constitute a ‘transfer’ [vide: Stremann v.  CI.T.,
\n(1965)\t56 I.T.R. 62 (S.C.) and a host of other cases  under
\nthe Income-tax Act]. Section 27 helps the Department in\t the
\npresent case only in that it uses a much wider word, ‘dispo-
\nsition’,  and treats dispositions in favour of relatives  as
\ngifts.\n<\/p>\n
    The statute had to make provision for a third fiction as
\nwell as it could still be contended that the word  ‘disposi-
\ntion’ would not be sufficient to comprehend certain types of
\ntransactions. To be on the safe side, therefore, the statute
\nproceeded to enact a special definition of the word  ‘dispo-
\nsition’\t in section 2(15) of the Act wide enough to rope  in
\nvarious\t kinds of acts in respect of property.\tThis  provi-
\nsion,  insofar as it is material for our  present  purposes,
\nreads as follows:\n<\/p>\n
\t      “2(15)   ‘Property’ includes any\tinterest  in
\n\t      property,\t movable or immovable, the  proceeds
\n\t      of  sale thereof and any money  or  investment
\n\t      for  the time being representing the  proceeds
\n\t      of  sale and also includes any  property\tcon-
\n\t      verted  from one species into another  by\t any
\n\t      method;\n<\/p><\/blockquote>\n
\t      Explanation  I–The  creation by a  person  or
\n\t      with his consent
\n\t      174<\/span>
\n\t\t     of\t a debt or other  right\t enforceable
\n\t      against  him  personally or  against  property
\n\t      which  he\t was or might  become  competent  to
\n\t      dispose  of, or to charge burden for  his\t own
\n\t      benefit, shall be\t      deemed to have been  a
\n\t      disposition made by that person, and in  rela-
\n\t      tion to such a disposition expression ‘proper-
\n\t      ty’ shall include the debt or right created.
\n\t      Explanation   2–The  extinguishment  at\t the
\n\t      expense  of  the deceased of a debt  or  other
\n\t      right shall be deemed to have been a  disposi-
\n\t      tion  made  by the deceased in favour  of\t the
\n\t      person for whose benefit the debt or right was
\n\t      extinguished, and in relation to such a dispo-
\n\t      sition the expression ‘property’ shall include
\n\t      the benefit conferred by the extinguishment of
\n\t      the debt or right;\n<\/p><\/blockquote>\n
    The\t short case of the department now is this;  the\t de-\n<\/p><\/blockquote>\n
ceased\tin these cases was the full and exclusive  owner  of
\nthe immovable properties in question. By the act of blending
\nhe has convened them into HUF propertieS. The properties  no
\nlonger\tbelong to him as an individual; they belong  to\t the
\nfamily thereafter with certain rights qua them in the  other
\nmembers\t of  the  HUF. In other words, there  ‘has  been  an
\nextinguishment,\t at the expense of the deceased, of a  part,
\nat least, of his rights in the properties with a correspond-
\ning benefit to the others. There has also been the creation,
\nby  the\t deceased,  of a right\tin  the\t others\t enforceable
\nagainst\t the deceased and the properties e.g. the  right  to
\ndemand\ta  partition. The deceased, therefore,\thas  made  a
\ndisposition in favour of his relatives for
\n    no\tconsideration  within two years of  his\t death.\t The
\nvalue  of  the properties, in respect of which he  made\t the
\ndisposition in favour of the family, are, therefore,  liable
\nto be included in the principal value of the estate  passing
\non his death under section 9 read with section 27 read\twith
\nthe Explanations to section 2(15). This is quite apart\tfrom
\nthe fact that the value of the two properties, which  subse-
\nquently\t fell to the share of the deceased at the  partition
\nin March 1971, are liable to be included as his own property
\nactually passing on his death. The question that we have  to
\nconsider  is, therefore, whether the legal incidence of\t the
\nact of blending an be brought within the four corners of the
\ntwo Explanations to section (15) of the Act.
\nIt was precisely this question which had been considered  by
\nthe
\nMadras High Court earlier in Rajamani Ammal v. Controller of
\nEstate Duty<\/a> (1972) 84 I.T.R. 790. in deciding the issue, The
\nHigh Court had the benefit of two earlier decisions of\tthis
\nCourt  in Goli Eswariah v. C G.T., (1970) 76 I.T.R. 675\t and
\nCG.T, v. Getti Chettiar., (1971) 82 I.T.R. 5991,
\n175<\/span>
\nwhere  this Court had held, in the context of the  Gift\t Tax
\nAct,  that the act of blending and the act of  a  coparcener
\nreceiving, on partition of a HUF, less than the share he was
\nentitled to receive would not constitute gifts. The  details
\nof this decision need to be set out at some length.
\n    Three  contentions had been urged in Rajamani:  (a)\t The
\nfirst  was that the act of blending constituted a  ‘disposi-
\ntion’  within  the general meaning of that  word.  Repelling
\nthis contention, the Court observed:\n<\/p>\n
\t      “The  learned counsel for the  revenue  placed
\n\t      strong  reliance on the word “disposition”  in
\n\t      section  27 (1) of the Act and contended\tthat
\n\t      even  an act of throwing of the  self-acquired
\n\t      property\tinto  the common stock\tof  a  joint
\n\t      Hindu  family is included in that\t expression.
\n\t      In a case arising under the Gift-tax Act,\t the
\n\t      word  “disposition” came up for  consideration
\n\t      in  the decision in Goli Eswariah\t v.  Commis-
\n\t      sioner  of  Gift-tax,  (1970)  70\t I.T.R\t 675
\n\t      (S.C.).  The Supreme Court held that the\tword
\n\t      “disposition”  refers  to\t a  bilateral  or  a
\n\t      multilateral  act and it does not refer  to  a
\n\t      unilateral  act. This decision of the  Supreme
\n\t      Court  approves the decision of this court  in
\n\t      Commissioner of Gift-tax v.P.  RangasamiNaidu,
\n\t      (1970)  76 I.T.R. 315 (Mad) (F.B). It is\ttrue
\n\t      that  these decisions are under  the  Gift-tax
\n\t      Act.  It is also true that the word  “disposi-
\n\t      tion” was considered in these decisions,\twith
\n\t      particular  reference  to\t the  definition  of
\n\t      “transfer of property” under that Act. We\t are
\n\t      of  the  view that the word  “disposition”  in
\n\t      section  27(1)  of the Estate  Duty  Act\talso
\n\t      refers to a bilateral or multilateral act. The
\n\t      section  refers  to a disposition by  the\t de-
\n\t      ceased in favour of a relative and also speaks
\n\t      of partial failure of consideration. Section 9
\n\t      also refers to property “taken under a  dispo-
\n\t      sition”.\tTherefore, in our opinion  the\tword
\n\t      “disposition”  in section 27(1), however\twide
\n\t      its  ambit may be, would not include the\tuni-
\n\t      lateral act of a person by which he throws his
\n\t      self-acquired  property into the common  stock
\n\t      of the joint family.”\n<\/p><\/blockquote>\n
 (b)  It had been next contended, on behalf of\tthe  Revenue
\nthat,  by  throwing the self-acquired  properties  into\t the
\ncommon stock of the joint family, the deceased had created a
\nright  enforceable against him in favour of the sons or\t the
\nother coparceners viz. the right to demand partition of\t the
\nproperties  in question which they could not have  exercised
\nearlier. This contention was rejected by the learned  judges
\nby  applying  the principle enunciated in  an  earlier\tFull
\nBench  decision\t of  the Court in CIT  v.  Rangasami  Naidu,
\n(1970)\t76 I.T.R. 675, where a similar contention  had\tbeen
\nrepelled  in the context of the Gift Tax Act. The Court\t had
\nthere observed:\n<\/p>\n
176<\/span><\/p>\n
\t      “With  the  father having\t absolute  power  of
\n\t      disposition  inter  vivos or  testamentary  in
\n\t      respect  of his self-acquisition and  with  no
\n\t      power  in the son to interdict any  alienation
\n\t      or  disposition  or call\tfor  partition,\t the
\n\t      son’s  interest  is next to nothing.  But\t the
\n\t      right  is\t real. It lies dormant. It  is\tthis
\n\t      dormant right which the undivided sons have in
\n\t      their father’s property that entitles them  to
\n\t      take the self-acquired property of the  father
\n\t      as  coparceners to the exclusion of a  divided
\n\t      son.  Juridically,  it must  be  this  dormant
\n\t      birth-right  that\t enables the father  at\t his
\n\t      pleasure,\t without  formalities,\tto  deny  to
\n\t      himself  his independent power or\t predominant
\n\t      interest\tand  look upon the property  as\t the
\n\t      property of the family.\n<\/p><\/blockquote>\n
\t      In our view, it is this birth-right  imperfect
\n\t      and  subordinate\tto  the\t special  power\t and
\n\t      predominant interest of the father that  comes
\n\t      into  play and makes the interest of  the\t son
\n\t      real  and an interest in praesenti,  when\t the
\n\t      father  chooses  to waive his rights.  At\t his
\n\t      pleasure and without reference to his son,  if
\n\t      the father abandons or determines once for all
\n\t      not to exercise his independent power over the
\n\t      property, the son’s interest therein becomes a
\n\t      real and full-fledged coparcenary right. There
\n\t      is no vesting of rights here by the father  on
\n\t      the  son, but what is dormant springs to\tlife
\n\t      but irrevocably at the pleasue of the father.”<\/p><\/blockquote>\n
    (c)\t A third contention raised on behalf of the  Revenue
\nwas that throwing the self-acquired property into the common
\nstock of the joint family would amount to “extinguishment at
\nthe expense of the deceased of a debt or other right” within
\nthe meaning of Explanation 2 to section 2 (15). This conten-
\ntion was also repelled by the learned Judges. They observe:\n<\/p>\n
\t      “We are also of the opinion that throwing\t the
\n\t      self-acquired  property into the common  stock
\n\t      of the joint family will not amount to “extin-
\n\t      guishment at the expense of the deceased of  a
\n\t      debt  or\tother right” within the\t meaning  of
\n\t      Explanation 2 to section 2 (15). As seen\tfrom
\n\t      the  judgments cited above, after the  act  of
\n\t      throwing\tinto  the common stock,\t it  is\t the
\n\t      joint family or the coparcenary that owns\t the
\n\t      property.\t The person who converted his  indi-
\n\t      vidual property into joint family property  is
\n\t      a\t member\t of the Hindu joint  family  or\t the
\n\t      coparcenary and contines to be a member of the
\n\t      joint family. His interest in
\n\t      177<\/span>
\n\t\t    the\t erstwhile separate  property  would
\n\t      extend to the whole of the property even as of
\n\t      the  other  coparceners, for the\tinterest  of
\n\t      every  coparceners extends over the  whole  of
\n\t      the joint family property. There is  community
\n\t      of  interest and unity of\t possession  between
\n\t      all  the coparceners. On the death of any\t one
\n\t      of the coparceners the others take the proper-
\n\t      ty  by  survivorship.It may be,  the  ultimate
\n\t      survivor\tis  the person who threw  the  self-
\n\t      acquired\tproperty into the common stock.\t It,
\n\t      therefore,
\n\t\t    follows that there was no extinguishment
\n\t      of the right of the deceased and creation of a
\n\t      right in favour of another, in these of throw-
\n\t      ing  the\tself-acquired  properties  into\t the
\n\t      common\tstock.\tThe decision  in  Valliammal
\n\t      Achi v. Controller of Estate  Duty, (1969)  73
\n\t      I.T.R.  806  (Mad) relied on  by\tthe  learned
\n\t      counsel  for the revenue, and the decision  in
\n\t      Kantilal\tTrikamlalv.  Controller\t of   Estate
\n\t      Duty,  (1969) 74 I.T.R. 353 (Guj.), relied  on
\n\t      by  the  learned counsel for  the\t accountable
\n\t      person,related to what we may term as “unequal
\n\t      partitions”.  They do not deal with  cases  of
\n\t      throwing the self-acquired properties into the
\n\t      common  stock. We are not concerned  with\t the
\n\t      case as to whether an unequal partition  would
\n\t      amount  to  an extinguishment of a  right\t and
\n\t      creation\tof a benefit within the meaning-  of
\n\t      Explanation 2 to section 2(15), which was\t the
\n\t      point that was considered in those cases.”
\n\t\t  The above decision is clearly against\t the
\n\t      Revenue. The Revenue, however, strongly relies
\n\t      upon  a later decision of the same High  Court
\n\t      in  Ranganayaki Ammal & Ors. v. Controller  of
\n\t      Estate  Duty,<\/a> (1972) 88 I.T.R. 96. It is\tsub-
\n\t      mitted  that  Ranganayaki Ammal has  been\t af-
\n\t      firmed  by this Court in CED v. Kantilal\tTri-
\n\t      kamlal, (1976) 105 ITR 92 – a common  judgment
\n\t      reversing Kantilal Trikamlal v. CE.D.,  (1969)
\n\t      74 I.T.R. 353 (Guj) and affirming\t Ranganayaki
\n\t      Ammal  (Mad) – and, therefore, Rajmani  is  no
\n\t      longer good law. It is therefore, necessary to
\n\t      refer  to\t these\tcases  though  the  question
\n\t      involved there was somewhat different.
\n\t\t  In Ranganayaki Ammal, the deceased  Bheema
\n\t      Naidu and his widow and children constituted a
\n\t      Hindu  undivided family. A little\t within\t the
\n\t      period of two years prior to the death of\t the
\n\t      deceased,\t a  partition was  effected  of\t the
\n\t      joint family properties and in that  partition
\n\t      he  took a smaller share instead of his  legal
\n\t      half benefiting the other to the extent of the
\n\t      difference. The same thing had happened in the
\n\t      case  of\tKantilal Trikamlal  also.  Trikamlal
\n\t      Vadilal  and  his son Kantilal  constituted  a
\n\t      Hindu  undivided\tfamily.\t On  16th  November,
\n\t      1953,  and instrument styled a “release  deed”
\n\t      was  executed between the two  persons.  Under
\n\t      this instrument, a sum of rupees one lakh\t out
\n\t      of the joint family properties was taken by
\n\t      178<\/span>
\n\t      the deceased m lieu of his share in the  joint
\n\t      family  properties  and  he  relinquished\t his
\n\t      interest\tin the remaining properties  of\t the
\n\t      joint family which were declared to belong  to
\n\t      Kantilal\tas his sole and absolute  properties
\n\t      and Kantilal also relinquished his interest in
\n\t      the  amount  of rupees one lakh given  to\t the
\n\t      deceased\tand declared that the  deceased\t was
\n\t      the  sole\t and  absolute\towner  of  the\tsaid
\n\t      amount.  Trikamlal Vadilal died on  3rd  June,
\n\t      1955, that is within two years of the  release
\n\t      deed. The Assistant Controller found that,  as
\n\t      on  November 16, 1953, the deceased was  enti-
\n\t      tled  to a one-half share in the joint  family
\n\t      properties,   the\t value\tof  which  was\t Rs.
\n\t      3,44,058, but had relinquished his interest in
\n\t      the joint family properties by receiving\tonly
\n\t      a sum of rupees one lakh. The officer,  there-
\n\t      fore,   held  that  the\tdifference   between
\n\t      Rs.3,44,058 and Rs, 1,06,724 (being the amount
\n\t      received by the deceased together with  inter-
\n\t      est) was includible in the principal value  of
\n\t      the estate of the deceased, being the value of
\n\t      a\t disposition by the deceased in favour of  a
\n\t      relative\t for  partial  consideration.\tThis
\n\t      assessment  was upheld eventually by  the\t Su-
\n\t      preme  Court.  Both  these  decisions,   thus,
\n\t      raised  the question whether there was  “gift”
\n\t      within the meaning of S.9 read with S.27\tread
\n\t      with the Explanations to S.2(15) of the Estate
\n\t      Duty  Act where a coparcener in a HUF, at\t the
\n\t      family   parti-tion,  voluntarily\t agrees\t  to
\n\t      accept properties of a value less than what
\n\t      he is entitled to claim, as a matter of right,
\n\t      at  such\tpartition. This\t Court–as  did\t the
\n\t      Madras  High Court in Ranganayaki\t Ammal,\t the
\n\t      Andhra Pradesh decision in Cherukuru Eswaramma
\n\t      v. C.ED., (1968) 69 I.T.R. 109 and the  Punjab
\n\t      & Haryana High Court judgment in C.E.D.v.\t Jai
\n\t      Gopal  Mehra,  (1972) 85 I.T.R. 175  (F.B.)  –
\n\t      answered the question in the affirmative. This
\n\t      Court  distinguished Go[i Eswariah, (1970)  76
\n\t      I.TR. 675, S.C. and Getti Chettiar, (1971)  82
\n\t      I.T.R. 599, S.C. on the ground that the  defi-
\n\t      nition of ‘disposition’ in Explanation 2\tSec-
\n\t      tion  2(15)  of the Estate Duty  Act  is\tmuch
\n\t      wider  than the scope of that expression\tused
\n\t      in  the  Gift Tax Act.We\tdo not\tconsider  it
\n\t      necessary\t to  set out here the full  and\t de-
\n\t      tailed  reasoning\t of this Court\tin  Kantilal
\n\t      Trikamlal’s case.\n<\/p><\/blockquote>\n
\t\t  Before proceeding further, we may refer to
\n\t      a\t few later decisions of High Court  relevant
\n\t      to  the  issue before ns. The  Allahabad\tHigh
\n\t      Court,  in  C.E.D.v. Laxmi Bai,  (1980)  1.26,
\n\t      I.T.R. 73, a decision rendered after  Kantilal
\n\t      Trikamlal,  thought that the act\tof  blending
\n\t      would not be a ‘disposition’ within fie  mean-
\n\t      ing of:the Estate Duty Act. In C.E.D v. Babub-
\n\t      hai  T.  Panchal, (1982)\t133  I.T.R.455,\t the
\n\t      Gujarat  High Court had occasion\tto  consider
\n\t      the question whether a transaction of  release
\n\t      by  a  member  of a  Hindu  Undivided  family,
\n\t      within a period of two years of his death,  of
\n\t      his  interest in the family  properties  would
\n\t      amount to a ‘disposition’ within the’  meaning
\n\t      of  Explanation  2  to Section  2(15)  of\t the
\n\t      Estate Duty Act. The
\n\t      179<\/span>
\n\t      question was answered in the negative. In CE.D
\n\t      v. Satyanarayan Babulal Chaurasia, (1983)\t 140
\n\t      I.T.R.  158,  the Bombay High  Court,  without
\n\t      touching\tthe  issue in detail,  merely  held,
\n\t      applying\tGoli  Eswarian v. C  G.T.,  (1970)76
\n\t      I.T.R. 675 S.C, that the act of blending\tdoes
\n\t      not involve a transfer.\n<\/p><\/blockquote>\n
\t\t  The question that falls for our considera-
\n\t      tion  now\t is whether,  despite  the  extended
\n\t      definition in S.2(15) of the Act, as explained
\n\t      in  Kantilal Trikamlal, the act  of  blending,
\n\t      unlike the voluntary acceptance of an  unequal
\n\t      partition,  fails outside the purview  of\t the
\n\t      deeming  part of the definition  contained  in
\n\t      the explanations. We think the answer to\tthis
\n\t      question has to be in the affirmative, Revert-
\n\t      ing  once\t again\tto the\tcontentions  of\t the
\n\t      Revenue  in Rajamani (which are also the\tcon-
\n\t      tentions\t reiterated   before  us   for\t the
\n\t      Revenue), it will be remembered that  Rajamani
\n\t      specifically  dealt with the language  of\t the
\n\t      two  explanations\t 10  S.2(15)  and  that\t its
\n\t      decision rested on three grounds:\n<\/p><\/blockquote>\n
\t\t       (i) a ‘disposition’, as held on\tGoli
\n\t      Eswariah, (1970) 76 I.T.R. 675 S.C., has to be
\n\t      a ‘bilateral’ or ‘multilateral’ act or  trans-
\n\t      action, not a unilateral act;\n<\/p><\/blockquote>\n
\t\t       (ii)  the  act of blending  does\t not
\n\t      create  any  right  enforceable  against\t the
\n\t      blender or his property but only brings to the
\n\t      surface rights already latent and inherent  in
\n\t      the others; and\n<\/p><\/blockquote>\n
\t\t       (iii)  the act of blending  does\t not
\n\t      result  in the extinguishment of any right  of
\n\t      the  blender with a correlative  conferral  of
\n\t      benefit on others.\n<\/p><\/blockquote>\n
\t\t   our\tview.  Kantilal Trikamlal  does\t not
\n\t      affect  the  validity  of\t any  of  the  three
\n\t      grounds  set  out above. So far as  the  first
\n\t      ground  is concerned, it does not\t touch\tupon
\n\t      the  reasoning  of Goli Eswariah, not  to\t say
\n\t      doubt or dissent from it. It refers to  C.E.D.
\n\t      v. Kancherla Kesava Rao, (1973) 89 I.T.R. 261,
\n\t      S.C.—hinting at possible distinction–and to
\n\t      Getti  Chettiar (but without any hint of\tdis-
\n\t      sent)  and  points out that  the\tconventional
\n\t      construction of disposition’ has to submit  to
\n\t      the larger sweep of hypothetical extension  by
\n\t      definition”  and that, unlike under  the\tGift
\n\t      Tax Act, “there is no limitation,\t environmen-
\n\t      tal or by the society of words, warranting the
\n\t      whittling down of the unusually wide range  of
\n\t      Explanation  2 to S.2 (15)”. In  other  words,
\n\t      the cumulative effect of Goli Eswariah,  Getti
\n\t      Chettiar\t and  Kantilal\tTrikamlal  is\tthat
\n\t      ‘blending’  or  ‘partition’  will\t not  be   a
\n\t      ‘disposition’ within the ordinary\t connotation
\n\t      of the expression but will be one if either of
\n\t      the  Explanations\t to S.2(15)  are  attracted.
\n\t      This  takes  us to the other  two\t contentions
\n\t      dealt with in Rajamani as to the scope of\t the
\n\t      two explanations. On this aspect, Rajamani has
\n\t      held that, unlike an
\n\t      180<\/span>
\n\t      equal partition, the act of blending will\t not
\n\t      amount to a ‘disposition’ attracting Ss.9\t and
\n\t      27  of  the  Act. It  distinguishes  cases  of
\n\t      unequal  partition  dealt’with  in  Valliammal
\n\t      Achi, v.C.E.D., (1969) 73 I.T.R, 806 (Mad) and
\n\t      the High Court’s decision in Kantilal  Trikam-
\n\t      lal  (1969) 74 I.T.R. 353 (Guj.) cited  before
\n\t      it  which have now received the imprimatur  of
\n\t      this  Court  in  Kantilal\t Trikamlal.  We\t are
\n\t      inclined\tto  think that the  distinction\t has
\n\t      been  made on sound lines. We do not  consider
\n\t      it  necessary to repeat or elaborate the\trea-
\n\t      soning  in Rajamani on these two points as  it
\n\t      succinctly epitomises well-settled  principles
\n\t      of  Hindu Law. Suffice it to say that  we\t en-
\n\t      dorse  this reasoning and think that the\tHigh
\n\t      Court  was  right in holding, in\tthe  present
\n\t      cases,  that  the\t acts of  blending  did\t not
\n\t      result  in the ‘gift’ of immovable  properties
\n\t      within  the  meaning of the statute  and\tthat
\n\t      Rajamani\trequired no reconsideration  because
\n\t      of Ranganayaki Ammal\/Trikamlal.
\n\t\t  This disposes of the question sought to be
\n\t      referred\tin  these cases. We  should  however
\n\t      like  to\tadvert to another aspect  which\t may
\n\t      arise  for consideration at some future  date.
\n\t      It may, perhaps, be possible to contend  that,
\n\t      though  a\t declaration of\t blending  does\t not
\n\t      amount to a ‘gift’, where the act of  blending
\n\t      is followed up by a subsequent partition,\t the
\n\t      two  transactions taken together do result  in
\n\t      the  extinguishment,  at the  expense  of\t the
\n\t      deceased,\t of  his rights\t in  the  properties
\n\t      which go to the share of other coparceners  at
\n\t      the subsequent partition and that, if the\t two
\n\t      can  be treated as parts of the same  transac-
\n\t      tion, Explanation 2 to S.2(15) may be attract-
\n\t      ed.  But this, apart from being a totally\t new
\n\t      question\tof law not raised at any  stage\t and
\n\t      not debated before us, would also require\t not
\n\t      only  a closer look from the legal  angle\t but
\n\t      also investigation into facts, particularly as
\n\t      to whether the act of blending and the  subse-
\n\t      quent partition can be treated, in law and  on
\n\t      facts,  as parts of a single transaction.\t We,
\n\t      therefore, express no opinion on this issue.
\n\t\t  For  the  reasons discussed  above,  these
\n\t      appeals fail and are dismissed. But we make no
\n\t      order regarding costs.\n<\/p><\/blockquote>\n
Y.L.\n<\/p>\n
Appeals dismissed.\n<\/p>\n
181<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Controller Of Estate Duty, Madras vs N. Shankaran Etc on 1 November, 1991 Equivalent citations: 1991 SCR, Supl. (2) 167 1992 SCC Supl. (1) 447 Author: S Rangnathan Bench: Rangnathan, S. PETITIONER: CONTROLLER OF ESTATE DUTY, MADRAS Vs. RESPONDENT: N. SHANKARAN ETC. DATE OF JUDGMENT01\/11\/1991 BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-132314","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nController Of Estate Duty, Madras vs N. 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