TMI Blog1976 (7) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances leading to the single critical legal issue, proliferating into a plurality of points, may now be made. We begin with the facts in the Gujarat Appeal [Kantilal Trikamlal((1969) I.T.R. 353)] since the Madras Appeal [Ranganayaki Ammal ((1973) 88 I.T.R. 96)] raises virtually the same question, is plainer on the facts and may conveniently be narrated immediately after. To appreciate the complex of facts we choose to enunciate the principal proposition of law canvassed before us by the Revenue in the two appeals. Does a relinquishment by a decedent of a slice of a share or a partition of joint property in such manner that he takes less than his due effected within two years of his death with a view to relieve himself of a part of his wealth and pro tanto to benefit the accountable person, a near relation have to suffer estate duty under the Estate Duty Act, 1953 (for brevity, the Act) ? One Trikamlal Vadilal (hereinafter referred to as the deceased) and his son Kantilal (referred to later as the accountable person) constituted a Hindu undivided family. They continued as members of a joint and undivided Hindu family until November 16, 1953 when an instrument styled r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the instrument there was a disposition by the deceased of his interest in the joint family properties in favour of Kantilal for partial consideration and it was therefore by reason of s. 27, sub-s. (1 ), liable to be treated as a gift for the purpose of s. 9, sub-s. (1). Another argument also appealed to the Central Board and that was one based on s. 2(15), Explanation 2. The Board held that, in any event, under the instrument there was extinguishment at the ex- pense of the deceased of his interest in the joint family properties and there was therefore a deemed disposition by the deceased of the benefit which accrued to Kantilal as a result of such extinguishment and the charge to estate duty was accordingly attracted under s. 9, sub-s. (1), read with s. 27, sub-s. (1). On reference, the High Court held in favour of the assessee and the Revenue has appealed hopefully, relying on a ruling of the Madras High Court which itself is the sub- ject matter of the sister appeal. Here the tables were High Court as contrary to the ratio of this Court s pro- nouncements. Were it so, it were bad; but judgments, even of the summit court, are not scriptural absolutes but rela- tive re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration, made on the eve of death or within or manoeuvres, though sincere, being manifestly likely to defeat death duties posthumously flowing from properties covered thereby. The fiscal policy is dual: (i) the collec- tion of revenue; and (ii) reduction of the quantum of inher- itance on a progressive basis directed towards a gentle process of equalisation. The draftsman s efforts have been exerted to use words of the widest import and, where the traditional use of words iS likely to limit, to use legal fictions, by deeming devices, to expand the semantics there- of and to rope in all kinds of dealings with property for inadequate or no consideration within the statutory prox- imity of death. The sweep of the sections which will be presently set out must therefore be informed by the lan- guage actually used by the legislature. Of course, if the words cannot apply to any recondite species of property, courts cannot supply new logos or invent unnatural sense to words to fulfil the unexpressed and unsatiated wishes of the legislature. Law, to a large extent, lives in the language even if it expands with the spirit of the statute. It is good to remember that the Indian Act has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint Hindu families and the subject matter of the dispositon was linked up with their share in the HUF (acro- nymically speaking). For this reason our attention has to be rivetted to ss. 7 and 39 which resolve a likely difficul- ty in ascertaining the interest in property which passes on the death of a deceassed coparcener in the joint family property the pristine rule of Hindu law being his share lapses in favour of the survivors and is not a descendible estate or a predictable fraction. Sections 7 and 39, by a deeming process, circumvent this contretemps and crystallize a clear share in the coparcener at the point immediately before death. Had the properties of the coparcener been partitioned immediately before the death what share in the joint family property would have been allowed to the de- ceased represents the principal value of such share for the purposes of computation of death duty. Section 27 is a strategic provision which deems as a gift all dispositions made by the deceased person in favour of his relations unless such disposition was made for full consideration or the deceased was concerned in a fiduciary capacity with the property. Relative means, in this contex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss in and by which joint enjoyment is transferred into an enjoyment in severalty. Since in such a case each one of the coparceners had an antecedent title which extended to the whole of the joint family properties and had therefore full interest his share, no creation of right or interest in such specific property takes place in his favour nor does any extinguishment of any right or interest in the other property take place to his detriment. 2. Sections 9(1) and 27(1) form part of a single scheme. The word disposition in section 27 (1 ) cannot be treated in isolation and must take its colour and meaning from the sense in which the word has been used in sec. 9 (1). 3. Disposition means giving away or giving up by a person of something which was his own (82 ITR 599, 606 SC). No meaning howsoever wide and comprehensive of the expression disposition can possibly take in its ambit or coverage, parti- tion (89 ITR 261, SC). 4. The mere fact that on a partition a copar- cener takes a lesser share than he could have demanded does not mean that there is disposition as contemplated in Explanation 2 to s. 2(15) which defines proper- ty . In such a partition, there is no ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, that the divi- sion in status and the partition made by metes and bounds have taken place simultaneously on the execution of the deed in question. We also take it that the release, relinquish- ment or division in the cases on hand has been bona rule made in the sense that one sharer has not over-reached the other or played fraud or together the sharers have not gone through a mere simulacrum of a partition or exercise in colourable division. We proceed on the further footing--and that is law well-established now--that partition is really a process in and by which a joint enjoyment is transformed into an enjoyment in several- ty. Each one of the sharers had an antecedent title and, therefore, no conveyance is involved in the process, as a conferment of a new title is not necessary . Now to the 7 points of Shri Desai. The 6th point is a shade platitudinous and the other side does not dispute its soundness. Certainly the definition of property in s. 2(15) has to inform and must be read along with s. 9 and s. 27 and cannot be functional in isolation. It is not a substantive rule of law operative by itself. Similarly, point no. 7, stated the way it has been, may not be and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spo sition falling within Explanation 2 to s. 2(15) and there- fore property within the substantive definition. In this context we may have to read ss. 9 and 27 for property taken under a disposition made. by the deceased may be deemed to be a gift in favour of the accounting person in the circum- stances mentioned in s. 9. Similarly, s. 27 also tracks down certain dispositions made by deceased persons in favour of relatives by treating them as gifts . The basic concept of disposition looms important in such circumstances. This introductory statement of the law takes us to the other points of Shri Desai which we will tackle together, guided by the text of the sections aforesaid read in the light of the citations, aplenty, of cases-Indian and Eng- lish. We may compendiously state, forgetting for a moment the complication in the Gujarat Case of the release deed executed by the decedent being either a relinquishmere or a partition that in both the appeals, the decedents and the recipients were members of an undivided Hindu family and within the two years proximity of death the partition ar- rangement was effected where under a lesser share than due was allotted to the latter. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other gains. This legal result, produced by voluntary action, is disposition within the scope of Explanation 2 to s. 2(15). The assessee s contention, effectively presented by counsel, takes a legalistic course, ignoring the purpose, language and amplitude of Explanation 2. Argues Shri Desai, in a partition, equal or unequal, there is no element whatsoever of consideration, partial or full, since in a partition there is only an adjustment of rights and substitution of joint enjoyment by enjoyment in severalty. In his view it is a confusion to mix up unequal partition with inadequate consideration and it is a worse confusion to talk in terms of bona fide and main fide partition where the shares are merely unequal by choice. What is forgotten in this chain of reasoning is the office of Explanation 2 which-is deliberately designed to take into its embrace what otherwise may not be disposi- tion . Once we reconcile ourselves to the enlargement of sense imported by the Explanation, we part company with the traditional concept. We have also to stress the expression other right in the Explanation which is of the widest import and cannot be constricted by reading it ejusdem generi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the one along which that word in the Estate Duty Act is travelling. Mr. Justice Hegde rightly observed, if we may say so with respect, that Words in the section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose that they are in- tended to serve. (p. 605-606) The word transaction in s. 2(xxiv) of the Gift Tax Act takes its The word that is it must be a transfer of property colour from the main clause that is , it must be a transfer of property in some way. Since a partition is not a transfer in the ordinary sence of law, the Court reached the conclusion that a mere partition with unequal allotments not being a transfer, cannot be covered by s. 2(xxiv). A close reading of that provision and the judgment will dissolve the mist of misunderstanding and discloses the danger of reading observations from that case for application in the instant case. The language of s. 2 (15 ), Explanation 2, is different and wider and the reasoning of Getti Chettiar (supra) cannot ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge on the conno- tation of disposition . The High Courts, in their divergent stands, have lined up before both strands of reasoning. Madras, a Full Bench of the Punjab High Court, and the classic observations in In re Stratton s Disclaimer(1) support the point of view championed in Ranganayaki Ammal. The contrary thinking finds support in Andhra Pradesh and Punjab as welt as in Gujarat (Kantilal). The sense of our statutes modelled as they are on a series of English Acts, is best expressed so far as the concept of disposition is concerned, by Jenkins L.J., in In re: Stratton s Disclaimer(1) relating to s. 45 of the Finance Act, 1940 [which runs similar in strain to s.2(15). Noting the strength of the sweeping and unparticularized reference to a debt or other right , Jenkins L.J., repelled the application of the ejusdem generis rule and impart- ed to the word right the widest import: Mr. Russel did not seek to limit the effect of the words debt or other right by an applica- tion of the ejusdem generis rule, and, in my view, it would not be possible to do so. In the absence of any such restriction on its meaning the word right is a word of the widest import, and if, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covers the diminution in the share taken by the copar- cener and augmentation of the share taken by the other and impresses the stamp of property on this process by the deeming provision. Sections 9 and 27 strengthen this conclusion. We were confronted by Shri Desai with Kancharla Kesava Rao([1973] 89 I.T.R. 261) for contending that giving away or giving up could not in all cases be disposition where the transaction is a partition. This Court, in the above ruling, held that a partition in a coparcenary was just an adjustment of rights, not a transfer in the strict sense. Shri Justice Hegde, speaking for the Court, placed on s. 24 of the Act more or less the same intepretation as was put in Getti Chettiar (supra) by this Court. Whatever might be the interpretation disposition in s. 24 of the Act, we are satisfied that the only straight-forward construction of that expression in s. 27 is as we have explained at length above. Section 9, dealing with gifts takes in property under a disposition made by a deceased, throwing up the question What is a gift? . Section 27 supplies the answer: an dispsition made by the deceased in favour of a relative of his shll be treated for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition made by the deceased is more than two years before death.,, the property covered thereby shall not pass on the death unless it shall not have been bona fide. That is to say, even if the transaction were more than two years before the death, if it were entered into in bad faith, estate duty may still attach to that property. So far as dispositions made within two years of the death of the deceased are concerned, there is no question of mala fides or bona fides. All such transactions are caught within the coils of s. 5 read with ss. 9 and 27. The re- quirement of bona fides has nothing to do. with disposi- tions within 2 years and has much to do with those beyond 2 years. The marginal obscurity in s. 9 is due perhaps to compressed draftsmanship. Now to costs. We have already indicated how serious arguments have appealed in contrary ways to several fudges of the High Courts and certain observations of this Court have themselves been capable of different shade of sense from what we have read into them. Indeed the point involved in the case is of general public importance which on account of the conflict in the High Courts, needs to be decided by the Supreme Court. One of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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