R.K.ABICHANDANI - (1.) The Income-tax Appellate Tribunal Ahmedabad Bench "A" has referred the following question of law for the opinion of this Court under Section 64 of the Estate Duty Act, 1953. "Whether, in law and on facts, the Appellate Tribunal is right in holding that the interest of the wives of the co-parceners has to be excluded in determining the share of the lineal descendants which is to be included in the principal value of the estate left by the deceased for rate purposes u/s. 34(1)(c) of the E. D. Act, 1953?"
(2.) The Estate Duty account in respect of the estate of Dahyabhai Maneklal who passed away on 9.11.1962, was filed on 21.11.1963. The Assistant Controller of Estate Duty, Ahmedabad, in the assessment order made under Section 58(3) of the said Act worked out the value of the estate of the deceased in the H.U.F. and came to the conclusion that 1/5th share of the deceased in the HUF was of the value of Rs. 3,23,541/-. The interest of three lineal descendants of the deceased was valued at Rs. 9,70,623/- and this exercise was done for aggregation as contemplated by the provisions of Section 34(1) of the Act under which for the purpose of determining the rate of the estate duty to be paid on any property passing on the death of the deceased, all property so passing, and, where it consisted of a coparcenary interest, also the interests in the joint family property of all the lineal descendants of the deceased member were required to be aggregated so as to form one estate and the estate duty was to be levied thereon at the rate applicable in respect of the principal value thereof. 2.1 In the appeal, the Controller of Estate Duty, in para 6 of his order, found that the Assistant Controller of Estate Duty was justified in including the share of the lineal descendants in the principal value of the HUF estate. The contention that the share of the wives of the lineal descendants should have been deducted from the share of the lineal descendants and the balance alone should have been added, was negatived by the Controller of Estate Duty. 2.2 The Accountable Person carried the matter to the Tribunal and the Tribunal dealing with the above contention held that the share of the wives of the co-parceners should not have been taken into consideration while working out the interests of the lineal descendants of the deceased in the joint family property, relying upon the decision of the Calcutta High Court in the case of SATYANARAYAN SARAF VS. ASSISTANT CONTROLLER reported in 111 I.T.R. 432, in which it was held that the interest of wives of the coparceners was to be excluded in determining the share of lineal descendants which is to be included in the principal value of the estate of the deceased for rate purposes. The assessment was directed to be modified accordingly. This has led to the present reference.
(3.) Estate Duty is to be levied in accordance with Section 35 of the Act upon the principal value, ascertained as provided in Section 5 of the Act, of all property, settled or not settled, which passes on the death of a person after the commencement of the Act. Under Section 7(1) it is, inter alia, provided that the property in which the deceased, or any other person had an interest ceasing on the death of the deceased, shall be deemed to 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 Mitakshara, Marumakattayam or Aliyasantana law. 3.1 Part IV of the Act deals with aggregation of property and rates of duty. Section 34(1)(c) which falls for our consideration reads as under: "34(1) - For the purpose of determining the rate of the estate duty to be paid on any property passing on the death of the deceased - (c) - in the case of property so passing which consists of a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law, also the interests in the joint family property of all the lineal descendants of the deceased member; shall be aggregated so as to form one estate and estate duty shall be levied thereon at the rate or rates applicable in respect of the principal value thereof." 3.2 The principal value is required to be worked out under the said provision for the purpose of determining the rate of estate duty to be paid on any property passing on the death of the deceased, though interest of all coparceners other than the deceased in the joint family property of a Hindu family falls within the expression "property exempt from estate duty", due to the effect of the provision of sub-Section (2) of Section 34 read with Explanation (iii) thereof. 3.3 For the purpose of working out the rate under Section 34(1)(c) of the Act, the interest in the joint family property of all the lineal descendants of the deceased member is to be aggregated with all the property passing on the death of the deceased. The said provision of sub-Section (c) is not concerned with the devolution of the interest of the deceased in the joint family property which would devolve as per the provisions of Section 6 of the Hindu Succession Act, 1956. The interest of male Hindu in coparcenary property shall devolve by survivorship upon the surviving members of the coparcenary, provided that, if the deceased had left behind him a surviving a female relative specified in Class I of the Schedule or a male relative specified in that class who claims through such female relative, the interest of the deceased in Mitakshara coparcenary property shall devolve by testamentary or intestate succession, as the case may be, under the Hindu Succession Act, 1956 and not by survivorship as laid down in Section 6. For the purpose of that Section, under Explanation 1, it is provided that 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 the property had taken place immediately before his death, irrespective of whether he was entitled to claim partition or not. Therefore, in cases where a male Hindu dies having interest in the coparcenary property without leaving behind him a surviving a female relative or a male relative claiming through such female relative of Class I of the Schedule, such share would devolve by survivorship and upon surviving members of the coparcenary and in view of the Explanation (iii) to sub-Section (2) of Section 34 the interest of such surviving coparceners would fall within the expression "property exempt from estate duty". However, the interest of the deceased in the coparcenary property which passes by succession, testamentary or intestate, would attract the provisions of the said Act including the provisions relating to aggregation for the purpose of applying the rate.;