C.S.P. Singh, J. - (1.) THIS is a composite reference at the instance of the assessee as well as the department, and the questions referred are : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the value of the share of the lineal descendant of the deceased in the joint family property was includible under Section 4(1)(c) for rate purposes ? 2. Whether the Tribunal was correct in law in holding that the estate duty chargeable under Section 5 of the Estate Duty Act was not deductible for computing the principal value of the property passing on the death of the deceased ? "
(2.) MAHARAJA Pateshwari Prasad Singh died on 30th June, 1964, leaving behind his widow, Maharani Raj Laxmi Devi, the accountable person, and an adopted son as his legal heirs. The MAHARAJA was the karta of the joint Hindu family which owned a number of properties including Neel Bagh Palace at the time of his death. In the present reference we are concerned with the inclusion of 1/3 share of the son in the joint family property under Section 34(1)(c) of the E.D. Act, the claim for deduction of estate duty from the principal value of the estate of the deceased, and the valuation of the Neel Bagh Palace. The Assistant Controller included the value of one-third share of the adopted son in the principal value of the estate for rate purposes. He also negatived the claim of the accountable person regarding deduction of estate duty as, in his view, the estate duty was neither a debt nor an encumbrance, which was liable to be deducted under Section 44 while calculating the principal value. As regards the valuation of the Neel Bagh Palace he accepted the valuation given by the executive engineer, valuation cell, I.T. Dept., Lucknow, in preference to the valuation given by the accountable person, which was based on the report of an approved valuer, Sri T. N. Gupta. The appeal filed by the accountable person failed and thereupon the matter was taken up before the Tribunal. The Tribunal held against the assessee as respects the inclusion of the value of one-third share of the son in the principal value of the estate of the deceased as also the claim for deduction of estate duty from the principal value of the estate. As regards the valuation of the Neel Bagh Palace it held that, as the building was in the occupation of the deceased and was governed by the provisions of the U.P. Rent Control and Eviction Act, it had to be valued by applying a multiple to the annual value of the building worked out for purposes of municipal assessment. Taking the net annual income at Rs. 11,500 it applied a multiple of 16 and valued the palace at Rs. 1,84,000. Coming to the first question, it is not disputed that at the time when the Maharaja died he was the member of the HUF which owned coparcenary property, and that his adopted son had one-third share in that property. The question is whether the value of the son's interest in th coparcenary property could be aggregated under Section 3'4(lXc) of the Act? Section 34(1)(c) runs : " 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 Aliysantana law, also the interest 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." In order that Section 34(1)(c) may apply the property that passes must consist of the coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, and on this condition being fulfilled the interest in the joint family property of all the lineal descendants of the deceased has to be aggregated so as to form one estate for purposes of fixing the rate of duty applicable on the principal value of the estate. When the Maharaja died his interest in the coparcenary ceased, and, in view of Section 7(1), this interest passed on his death to the extent to which benefit accrued to the other coparceners. This position is clear from a reading of Section 7(1), which may be extracted : " 7. (1) Subject to the provisions of this section, 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 the Mitakshara, Marumakkattayam or Aliyasantana law."
(3.) AS has been seen the Maharaja had a lineal descendant, i.e., adopted son, and Section 34(1)(c) apparently permitted an aggregation of the value of the interest of the lineal descendant in the principal value of the estate of the deceased. Counsel for the assessee, however, urged that with the passing of the Hindu Succession Act, 1956, being Act No. 30 of 1956, a coparcener is deemed to be separate from the other coparceners, and as such there was no coparcenary in existence at the time of the Maharaja's death. It was also urged that the entire conception of coparcener and coparcenary property stands abrogated in view of Sections 6 and 30 of the Hindu Succession Act, 1956, and, as such, Section 34(1)(c) has become redundant, and could not be applied. For reasons to be set out hereinafter we are unable to accept this contention. To begin with we may notice the purpose of the Hindu Succession Act. The preamble of the Act describes the Act as one to amend and codify the law relating to intestate succession among. Hindus. We may now next turn to Section 4. It will be useful to extract Clauses (a) and (b) of this provision : " 4. (!) Save as otherwise expressly provided in this Act,-- (a) any text, rule or interpretation of Hindu law or any custom or usage as part of that law in force immediately before the commencement of this Act shall cease to have effect with respect to any matter for which provision is made in this Act ; (b) any other law in force immediately before the commencement of this Act shall cease to apply to Hindus in so far as it is inconsistent with any of the provisions contained in this Act." It is necessary to state the effect of this provision at this stage. As will be noticed Section 4 has an overriding effect over any text, rule or interpretation of Hindu law or any custom or usage in force before this enactment. There is, however, a rider to the effect that the provisions of the Act prevail only as respects such matters for which provision is made in the Act. This is further clarified by Section 4(1)(b) which clearly states that laws inconsistent with the provisions of the Act will cease to apply to Hindus. We may now turn to Sections 6 and 30 of the Act. It is necessary to set them out in extenso : "6. When a male Hindu dies after the commencement of this Act, having at the time of his death an interest in a Mitakshara coparcenary property, his interest in the property shall devolve by survivorship upon the surviving members of the coparcenary and not in accordance with this Act : Provided that, if the deceased had left him 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 the Mitakshara coparcenary property shall devolve by testamentary or intestate succession, as the case may be, under this Act and not by survivorship......" " 30. (1) Any Hindu may dispose of by will or other testamentary disposition any property, which is capable of being so disposed of by him, in accordance with the provisions of the Indian Succession Act, 1925 (39 of 1925), or any other law for the time being in force and applicable to Hindus. Explanation.--The interest of a male Hindu in a Mitakshara coparcenary property or the interest of a member of a tarwad, tavazhi, illom, kulumba or kavaru in the property of the tarwad, tavazhi, illom, kutumba or kavaru shall, notwithstanding anything contained in, this Act or in any other law for the time being in force, be deemed to be property capable of being disposed of by him or by her within the meaning of this sub-section." ;