K.B. ROHETGI v. ASSISTANT CONTROLLER OF ESTATE DUTY
[Citation -1984-LL-0728-6]

Citation 1984-LL-0728-6
Appellant Name K.B. ROHETGI
Respondent Name ASSISTANT CONTROLLER OF ESTATE DUTY
Court ITAT
Relevant Act Income-tax
Date of Order 28/07/1984
Judgment View Judgment
Keyword Tags property passing on death • joint family property • coparcenary interest • coparcenary property • appellate controller • assistant controller • hindu succession act • accountable person • complete partition • notional partition • partial partition • mitakshara law • rate purpose • estate duty
Bot Summary: Regarding the accountable person's claim of complete partition, in view o f the Supreme Court's observations in Gurupad Khandappa Magdum's case, we extract below the observations in Mulla's Hindu Law under the head Explanation 1 to section 6 of the Hindu Succession Act, 1956: ...But the operation of the notional partition and its inevitable corollaries and incidents is to be only for the purposes of this section namely, devolution of interest of the deceased in coparcenary property and would not bring about total disruption of the coparcenary as if there had in fact been a regular partition and severance of status among all the surviving coparceners. If the coparcenary interest of the deceased passed on his death whether under section 5 or under section 7 of the Act, the interests of the lineal descendants of the deceased in the joint family property have to be aggregated so as to form one estate for the purpose of determining the rate of estate duty. The aid of Explanation 1 to section 6 of the Hindu Succession Act is to be taken only in order to ascertain the share or interest of the deceased coparcener in the coparcenary property. Explanation 1 to section 6 resorts to the simple expedient, undoubtedly fictional, that the interest of a Hindu Mitakshara coparcener 'shall be deemed to be' the share in the property that would have been allotted to him if a partition of that property had taken place immediately before his death. An actual partition of the HUF need not be assumed to have taken place and it need not be further assumed that it was the share which the deceased received at such partition that devolved on his heirs under the proviso to section 6. Section 6, in terms, says that what passes is the coparcenary interest and the Explanation to section 6 merely explains how to ascertain the coparcenary share by recourse to the fiction. The very fact that at least 5 High Courts have upheld the provisions of aggregation of lineal descendants' shares for rate purpose under section 34(1)(c), shows by implication that there was no complete partition of the HUF on the death of a coparcener.


Shri Gulzari Mal died on 12-3-1981, leaving behind four sons. One son and wife of Gulzari Mal had predeceased him. Gulzari Mal headed joint family whose assets were of Rs. 2,48,331. 2. first controversy before us is regarding aggregation made by Assistant Controller of five-sixths share of deceased's five lineal descendants in joint family estate. Thus, Assistant Controller, after working out deceased's one-sixth share in estate at Rs. 41,388, aggregated five-sixths of lineal descendants' shares in joint family at Rs. 2,05,915. 3. accountable person contended that lineal descendants' shares could not be aggregated. Assistant Controller rejected this contention. Appellate Controller upheld Assistant Controller's order on this point after noting that large number of High Courts had taken view that lineal descendants' shares were aggregable under section 34(1)(c) of Estate Duty Act, 1953 ('the Act'), and decision in favour of accountable person was only of Madras High Court in V. Devaki Ammal v. ACED [1973] 91 ITR 24. 4. Appellate Controller, however, accepted assessee's contention that while aggregating lineal descendants' shares, notional partition in smaller HUFs of lineal descendants should be presumed; as result thereof shares of wives of lineal descendants should be excluded and, therefore, could not be aggregated under section 34(1)(c). Appellate Controller, while taking said view, has followed case of Satyanarayan Saraf v. ACED [1978] 111 ITR 432 (Cal.). 5. accountable person is in appeal before us and urges that decision in V. Devaki Ammal's case should be followed as Supreme Court had refused special leave petition---[1983] 143 ITR (St.) 67. We are, however, unable to accept this contention because Supreme Court had similarly refused special leave petition against contrary decisions taken by Allahabad, Gujarat, Punjab and Haryana, Madhya Pradesh High Courts, etc. (for decisions upholding aggregation under section 34(1)(c), please see footnote 2 at page 369 of Law and Practice of Estate Duty by V. Balasubramanian, 4th edn.) 6. next contention is that on death of Shri Gulzari Mal, there was notional partition under section 6 of Hindu Succession Act, 1956. Reliance is placed on Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440 (SC). It is true that proviso to section 6 does come into operation because deceased Gulzari Mal left surviving him female relative specified in Class I of Schedule, namely, widow of predeceased son, Shyam Sundar. We have, however, to consider whether on death of Gulzari Mal, there was complete partition of HUF headed by Gulzari Mal or there was notional partition only so far as interest of Gulzari Mal in coparcenary property was concerned. 7. Regarding accountable person's claim of complete partition, in view o f Supreme Court's observations in Gurupad Khandappa Magdum's case, we extract below observations in Mulla's Hindu Law (15th edn.) under head Explanation 1 to section 6 of Hindu Succession Act, 1956: "...But operation of notional partition and its inevitable corollaries and incidents is to be only for purposes of this section namely, devolution of interest of deceased in coparcenary property and would not bring about total disruption of coparcenary as if there had in fact been regular partition and severance of status among all surviving coparceners. It has been appropriately said that legal fictions have legal frontiers. Supreme Court has pointed out in number of decisions that legal fiction should not be extended beyond its aroused purpose. " After discussing Gurupad Khandappa Madgum's case, commentator observed that--- " . . . decision of Supreme Court does not say that fiction and notional partition must bring about total disruption of joint family or that coparcenary ceases to exist even if deceased was survived by two coparceners. It is submitted that notional partition need not result in total disruption of joint family. Nor would it result in coparcenary ceasing to exist. . . ." Gujarat High Court in Ramniklal J. Daftary v. CED [1982] 136 ITR 422 were dealing with case of deceased who was coparcener in HUF governed by Mitakshara law and who died under circumstances attracting proviso to section 6. High Court held that interests of lineal descendants were includible under section 34(1)(c). Court observed: " In order to attract application of section 34(1)(c) of Estate Duty Act, 1953, what is necessary to be established is that property passing on death includes coparcenary interest in joint family property. If coparcenary interest of deceased passed on his death whether under section 5 or under section 7 of Act, interests of lineal descendants of deceased in joint family property have to be aggregated so as to form one estate for purpose of determining rate of estate duty. aid of Explanation 1 to section 6 of Hindu Succession Act is to be taken only in order to ascertain share or interest of deceased coparcener in coparcenary property. Explanation 1 to section 6 resorts to simple expedient, undoubtedly fictional, that interest of Hindu Mitakshara coparcener 'shall be deemed to be' share in property that would have been allotted to him if partition of that property had taken place immediately before his death. actual partition of HUF need not be assumed to have taken place and it need not be further assumed that it was share which deceased received at such partition that devolved on his heirs under proviso to section 6. Section 6, in terms, says that what passes is coparcenary interest and Explanation to section 6 merely explains how to ascertain coparcenary share by recourse to fiction. Hence, what devolves under proviso to section 6 is coparcenary share of deceased. " High Court held that interests of lineal descendants of deceased in joint family property should be taken for rate purposes under section 34(1)(c). 8. Allahabad High Court in Maharani Raj Laxmi Kumari Devi v. CED [1980] 121 ITR 1002 was considering problem similar to one before us. They specifically considered Gurupad Khandappa Magdum's case and held that provisions of Hindu Succession Act did not destroy existence of coparcenary at time of death of coparcener and interests of lineal descendants of deceased coparcener were rightly aggregated in principal estate of deceased. High Court observed as under: " Section 4 of Hindu Succession Act, 1956, lays down that Act has overriding effect over any text, rule or interpretation of Hindu law or any custom or usage in force before that enactment. There is, however, rider to effect that provisions of Act prevail only as respects such matters for which provision is made in Act. proviso to section 6 of Hindu Succession Act does not effect disruption in coparcenary family. In first place, proviso creates fiction only for purposes of section 6. Section 7 sets out mode of devolution of interest in coparcenary property. Thus, fiction created by proviso is only for purposes of fixing persons who are entitled to succeed to property of deceased coparcener. It comes into operation only after death of coparcener and only for limited purpose of laying down succession. This interpretation is in consonance with principle that legal fiction must be limited to purpose for which it has been created and cannot be extended beyond its legitimate field. Section 6 does not effect partition by operation of law. In fact, in event of Hindu coparcener not having female or male relative specified in Schedule, proviso does not come into play at all, for, in that event, property of deceased coparcener devolves on surviving members of coparcenary and not in accordance with Schedule. Further, very fact that section 6 talks of male Hindu having interest in Mitakshara coparcenary postulates that at time of death of Hindu male coparcenary existed of which he was member. This militates against contention that proviso effects partition in coparcenary during lifetime of coparcener. After death of coparcener there cannot be any question at all of partition between deceased coparcener and surviving member of coparcenary, because partition can be effected only between living coparceners or persons who claim under deceased coparcener. Section 30 of Hindu Succession Act makes striking departure from existing law governing coparceners but it does not destroy existence of coparcenary. All that section 30 does is to lift bar on testamentary disposition of undivided portion of coparcener in his coparcenary property. other of undivided portion of coparcener in his coparcenary property. other rights which coparcener has are left untouched. Thus, as section 30 does not impinge upon other rights which coparcener has under Hindu law, nor does it expressly or by implication affect existence of coparcenary, abrogation of restriction of testamentary disposition does not destroy existence of coparcener or coparcenary property. " 9. Tribunal, Delhi Bench 'B' in WTO v. H. H. Sir Sawai Man Singhji of Jaipur (HUF) [1984] 7 ITD 401 was interpreting Gurupad Khandappa Magdum's case and they noticed interpretation of said Supreme Court decision by Allahabad High Court in Maharani Raj Laxmi Kumari Devi's case but they did n o t follow said Allahabad High Court decision, observing that said decision was under Act (see para 9). said Bench, thus, gave their own interpretation to Supreme Court decision contrary to interpretation given by Allahabad High Court in aforesaid case of Maharani Raj Laxmi Kumari Devi. 10. As case before us is under Act, we respectfully follow aforesaid decision of Allahabad High Court in Maharani Raj Laxmi Kumari Devi's case and hold that there was notional partition of HUF headed by Gulzari Mal only so far as interest of Gulzari Mal in coparcenary property was concerned and HUF remained intact so far as surviving coparceners are concerned. ACED was, therefore, right in aggregating shares of lineal decendants for rate purpose under section 34(1)(c). 11. very fact that at least 5 High Courts have upheld provisions of aggregation of lineal descendants' shares for rate purpose under section 34(1)(c), shows by implication that there was no complete partition of HUF on death of coparcener. Latest decision on this point is C. Vanajakshi Venkata Rao v. CED [1983] 143 ITR 1014 (AP), where on page 1019 decisions of other High Courts are enumerated. 12. If appellant's interpretation (of Supreme Court's decision) is accepted, it will lead to preposterous result of disruption of all HUFs in country as on date, because over last 30 years (since enactment of Hindu Succession Act) there is no HUF in which member has not died leaving female heirs. 13. It may also be noted that concept of partition under income-tax law is not same as under Hindu law. While in Hindu law partition can be in two stages, namely, severance of status and partition by metes and bounds, Income-tax Act, 1961 recognises only partition by metes and bounds. Under income-tax law there are statutory provisions regarding non-recognition of partial partition and converted property which have made departure from traditional Hindu law. Statutory provisions prevail over traditional Hindu law. Thus, provisions of section 34(1)(c) would prevail and lineal descendants' shares have to be aggregated for determining estate duty payable on death of coparcener. We would, accordingly, reject assessee's contention challenging aggregation of lineal descendants' shares. 14. We may also mention that Madhya Pradesh High Court in CED v. Prakashchand [1984] 147 ITR 1 has dissented from Satyanarayan Saraf's case and have held that notional partition contemplated by section 39 of Act was between deceased and other members of HUF who were entitled to share in joint family property if partition was to take place in lifetime of deceased and, therefore, wife of son of deceased cannot be brought into picture at that stage. It is, therefore, arguable whether Appellate Controller was right in following Satyanarayan Saraf's case. However, as revenue is not in appeal before us, we do not express any opinion on this aspect. 15 and 16. [These paras are not reproduced here as they involve minor issues.] 17. In result, appeal is partly allowed. *** K.B. ROHETGI v. ASSISTANT CONTROLLER OF ESTATE DUTY
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