Decided on March 04,1994



B.M. Kothari, Accountant Member - (1.) THESE are cross appeals directed against the order passed by the learned Controller of Estate Duty (Appeals) [(CED)(A)] in the matter of the Estate of late Smt. Sarladevi Sarabhai.
(2.) We will first consider the revenue's appeal. The first ground is that the CED (Appeals) has erred in reducing the interest in the firm of M/s Reva by Rs. 1,18,080. The first appellate authority has discussed this point in paras 7 to 11 of his order. The Accountable Person (AP) disclosed deceased's interest in the partnership firm by the name M/s Reva at Rs. 4,32,758 which was enhanced by the Asstt. Controller of Estate Duty (ACED) to Rs. 5,57,340. The main reason for enhancement of the aforesaid value of interest in the partnership firm was on account of revaluation of the immovable property owned by the firm at Rs. 5,54,000 as against Rs. 3,98,272 shown in the balance-sheet. The first appellate authority determined the value of this property at Rs. 4,31,050 by adopting the land value at the rate of Rs. 85 per sq.yd. Such rate was adopted by him on the basis of value of this very land determined by the Tribunal in the Wealth-tax appeals in the case of Estate of Smt. Sarladevi Sarabhai [IT Appeal Nos. 233 to 237 (Ahd.) of 1980 dated 13-1-1981] for assessment years 1970-71 to 1974-75. The date of death of the deceased is 11-1-1975. In view of the aforesaid facts we do not find any justification in interfering with the finding given by the first appellate authority in relation to this point. Ground No. 1 of revenue's appeal is, therefore, rejected. Ground No. 2 relates to deletion of the value of foreign movable property owned by the deceased. This has been dealt with by the CED (Appeals) in paras 12 & 13 of his order. It has been observed that the foreign assets owned by the deceased having been confiscated by the Government of Uganda, there is no market value for the said property. Such a view is clearly covered in favour of the assessee by the decision of ITAT in the case of Estate of Late Smt. Mrudula A. Sarabhai [ED Appeal Nos. 27 and 29 dated 12-6-1985]. Respectfully following the said decision, the view taken by the CED (Appeals) is confirmed. Ground No. 2 of revenue's appeal is also rejected.
(3.) IN ground No. 3, the revenue has contended that the CED (Appeals) has erred in holding that deceased's interest in the HUF of Ambalal Sarabhai is not chargeable to duty. He further failed to appreciate the fact that Section 7 of the E.D. Act does not require that the deceased should be a coparcener. This point has been dealt with by the learned CED (Appeals) in paras 17 to 19 of his order. It has been held that HUF of Ambalal Sarabhai came into being after the death of late Shri Ambalal (who died in July 1967) on 21-12-1968 as a result of gift by Smt. Giraben, one of the daughters of the deceased. The deceased being only a female member cannot be considered as a coparcener. She would become entitled to a share in the property of the HUF only if there is an actual partition. She as a member of the joint family did not have a right to demand partition. During the subsistence of the family, she had no right over any property of the said HUF. Accordingly there is no passing of any property of the HUF on her death. IN view of such findings given by him in para 18, he further observed that the other consequential grounds relating to allowance of maintenance expenses and the questions of accretion and inclusion of lineal descendants' share for rate purposes did not arise. Further the issue as to whether 1/3 rd or 1/5th of the joint family property passed on the death of the deceased also does not survive for consideration. 4.1 The learned Sr. D.R. vehemently argued that the view taken by the CED (Appeals) is patently wrong. He relied on the judgment of Hon'ble Bombay High Court in the case of CED v. P.G. Chaware [1993] 204 ITR 513. He also extensively read the findings given by the Assessing Officer and urged that the share of the deceased in the HUF property held as dutiable by the ACED was perfectly valid and the same ought to have been confirmed by the first appellate authority. 4.2 The learned Counsel for the AP supported the order of the CED (Appeals). It was pointed out that Shri Ambalal Sarabhai died in July 1967 when the HUF had no property or assets. The HUF was created by the gift made by Gira Sarabhai on 21-12-1968. Smt. Sarladevi Sarabhai died on 11-10-1975. She is not one of the coparceners and, therefore, she had no right to claim partition of the HUF properties. The CED (Appeals) has rightly held that no estate in relation to HUF property passed on the death of Smt. Sarladevi Sarabhai. He also placed reliance on decisions reported in CED v. Smt. S. Harish Chandra [1987] 167 ITR 230 30 Taxman 100 (All.), Ramratan v. CED [1983] 142 ITR 863 [1982] 9 Taxman 235 (MP)(FB), CED v. Smt. Rani Bahu [1983] 142 ITR 843 (MP) (FB), CED v. Smt. Kalawati Devi [1980] 125 ITR 762 4 Taxman 250 (All.) and CED v. Smt. Ginni Devi Jain [1993] 204 ITR 110 (Pat.) to support the view taken by the CED (Appeals) in favour of the AP. 4.3 We have carefully considered the submissions made by the learned representatives and have also gone through the decisions relied upon by the learned representatives of the parties. IN our view the findings given by the first appellate authority in relation to this point is incorrect and cannot be upheld. The contention of the AP that the HUF received the properties for the first time as a result of gift received from Gira Sarabhai in December 1968 has not been disputed by the revenue. It is also true that when Ambalal Sarabhai, husband of the deceased, died in July 1967, the property owned by the HUF at the time of death of the deceased Smt. Sarladevi were not owned by the HUF. But the rights of the female members or other members of the HUF cannot be different on the basis of source and the time when the HUF acquired properties as a result of subsequent gift or as a result of income received by the HUF from such gifted assets. The right of the female members of the HUF will have to be determined on the basis of their legal rights as on the date of the death and in accordance with law as in force on that date. The Hon'ble Gujarat High Court in the case of Goswami Vrajraiji Ranchhodlalji Maharaj v. CED [1978] 112 ITR 851 has held that the widow of a member of an HUF is to be in the place of her husband and the husband's interest in the joint family property, though indefinite, would vest immediately upon his death in his widow. The widow who acquired the interest of the deceased husband under Section 3(2) of the Hindu Women's Rights to Property Act, 1937 and who was possessed of the said interest on the coming into force of the Hindu Succession Act, 1956 became the absolute owner of that asset by operation of Section 14 of the later Act and thus she would have all the rights of a full owner and would be competent to dispose of it which is an incident of full ownership. Her interest would be deemed to be property passing on her death under Section 5 or Section 6 of the E.D. Act. IN the case of Sarabhai Tribhovandas v. CED [1981] 130 ITR 326 6 Taxman 181, the Hon'ble Gujarat High Court held that Section 14(1) of the Hindu Succession Act, which provides that any property possessed by a female Hindu, whether acquired before or after the commencement of the Act, shall be held to be her as full owner thereof and not as a limited owner, applied and that one-half vested in her. On the death of the widow her half share in the joint family properties passed and was liable to estate duty. 4.4 Section 14 of the Hindu Succession Act confers upon females full rights of inheritance and sweeps away the traditional limitation of her powers to disposition which were regarded under the Hindu Law as inherent in her estate. IN order to attract the provisions of Section 14 of the Hindu Succession Act it is enough if the woman has right to the property of which she is in possession, however restricted the nature of her interest may be. The expression "any property possessed by a female Hindu" would include the widow of the karta's right to have a share on the partition as a property possessed by her in accordance with Section 14 of the said Act. The use of expression "whether acquired before or after the commencement of this Act" in Section 14 of the Hindu Succession Act shows that this section is intended to be retrospective in the sense that the acquisition of property might have been made even before the Act. The transformation of a limited estate of a Hindu woman into an absolute estate envisaged by the section applies also to properties acquired at any point of time either before or after the commencement of the Hindu Succession Act. We are, therefore, of the considered opinion that the value of interest of the deceased in the HUF property is dutiable. IN view of the aforesaid finding, the decision given by the CED (Appeals) is cancelled and the matter is restored back to him for deciding the other necessary and consequential points which were not decided by him in view of such a finding given about the non-taxability of the share of the deceased in the HUF property. The CED (Appeals) is, therefore, directed to decide the other necessary and consequential points, namely, as to whether V3rd or V5th share in the joint family property should be treated as having passed on the death of the deceased, whether the share of lineal descendants in the HUF property should be included for rate purposes or not and whether the allowance of maintenance, and marriage expenses of the two unmarried daughters allowed by the ACED was adequate or some more relief was warranted under the facts and circumstances of the present case. The matter shall be decided by the CED (Appeals) afresh after providing reasonable opportunity to both the parties.;

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