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TMI Blog1972 (8) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 read with section 27 and Explanation 2 to section 2(15) of the Act as a gift made by the deceased within two years of his death. The gift is said to arise from the following facts and circumstances which are not in dispute. Till December 31, 1951, the deceased with the widow of his pre-deceased son and four grandsons constituted a Hindu undivided family. On that date which fell within a period of 2 years prior to the death of the deceased, a partition was effected of the joint family properties between the deceased and the members of his son's branch. The deceased was allotted properties of the value of about 1/5th of the total instead of a half share to which he was legally entitled on a partition as between himself on the one hand and the widow and sons of his pre-deceased son on the other. On these facts the Deputy Controller held that the difference between the half share due to the deceased and the actual share he took on partition was liable to estate duty as a gift made by the deceased within two years of his death under section 9(1) read with section 27 and Explananation to section 2(15) of the Act. Such difference was computed at Rs. 7,33,007 and the same was included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the accountable persons that an unequal partition between the members of a Hindu family will not amount to a disposition contemplated in Explanation 2 to section 2(15) of the Act and that therefore it will neither attract section 9 nor section 27. It was also urged that section 9 only deals with properties taken under a disposition made by the deceased purporting to operate as an immediate gift inter vivos by way of transfer, delivery, declaration of trust, settlement or otherwise, that when a coparcener takes a lesser share than what is lawfully due to him at the partition, it cannot be said to be an immediate gift inter vivos by way of transfer, delivery, etc., that even section 27 which treats certain dispositions as deemed gifts will be subject to the provisions of section 9 dealing with gifts inter vivos. According to the learned counsel for the accountable persons, there is no transfer of the interest of the deceased to the other coparceners at the time of the partition so as to attract either section 9 or section 27. This court specifically considered the above contentions in S. P. Valliammai Achi v. Controller of Estate Duty and held that the scope of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the person benefited thereby." Though the above decision was rendered with reference to the same statutory provisions and it directly applies to the facts of this case, the learned counsel for the accountable persons contends that the said decision requires reconsideration in view of certain observations of the Supreme Court in Commissioner of Gift-tax v. N. S. Getti Chettiar. It is also pointed out that some of the other High Courts have taken a view contrary to the one expressed by this court in S. P. Valliammai Achi v. Controller of Estate Duty. The following decisions are referred to as taking a contrary view : Cherukuri Eswaramma v. Controller of Estate Duty, Kantilal Trikamlal v. Controller of Estate Duty, and Kulbhushan v. Controller of Estate Duty. In Commissioner of Gift-tax v. N. S. Getti Chettiar, the question was whether by allotting greater share to some members of the coparcenary than that to which they were entitled, the assessee could be held to have have made a gif t of a portion of his share of the property to others and was liable to be taxed under the Gift-tax Act, 1958, and their Lordships of the Supreme Court held, (1) that the partition did not effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the deceased in favour of the person for whose benefit the debt or right was extinguished and in relation to such a disposition the expression " property " shall include the benefit conferred by the extinguishment of the debt or right. Explanation 2 to section 2(15) creates a special definition of a disposition and, therefore, the word " disposition " occurring in that Explanation cannot be understood in the same sense as in the definition of transfer of property in section 2(xxiv) of the Gift-tax Act. As a matter of fact the decision in S. P. Valliammai Achi v. Controller of Estate Duty specifically refers to the position that if by a partition or relinquishment on the part of one or more coparceners the joint ownership is severed in favour of severalty, the process, having regard to the peculiar conception of a coparcenary, involves no transfer as defined in section 2(xxiv)(d) of the Gift-tax Act. But, nonetheless, the court expressed the view that Explanation 2 to section 2(15) is not concerned with that kind of situation but it deems statutorily extinguishment of a right and creation of a benefit thereby as a disposition which is in the nature of a transfer. The pecu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liar characteristics involved in the process of partition of a Hindu undivided family, and that the word "otherwise" occurring in section 9(1) has to be read ejusdem generis. It was also expressed that the position under the Estate Duty Act is much the same as under the Income-tax Act and the Gift-tax Act, because what is envisaged under section 9 of the Estate Duty Act is a gift inter vivos, i.e., between two persons and that as there is no transfer involved in the partition of joint family properties between two persons it cannot be a gift for the purpose of section 9 ; nor can there be a dispositio in favour of a relative within the meaning of section 27. That decision proceeds on the basis that as the word " disposition " has not been defined under the Estate Duty Act, it should be treated as a disposition of the property by any of the modes stated in section 9. The deeming disposition contemplated by Explanation 2 to section 2(15) was not considered by the court in that case. This decision was referred to in S. P. Valliammai Achi v. Controller of Estate Duty. But this court was not inclined to accept the said view without fuller consideration, especially when Explanation 2 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oparcener to another in the process of partition, that the word " disposition " in section 27 must possess the element of transfer of an interest in property from one person to another and that the partition, even if unequal, does not involve extinguishment of any interest in the property at the expense of the coparcener who receives less than what be might have received according to his rightful share. But, the learned judges had not discussed the provisions of Explanation 2 to section 2(15) of the Act, which provision was held to be the distinguishing feature by this court in S. P. Valliammai Achi v. Controller of Estate Duty. Reference was also made by the learned counsel for the accountable persons to the various decisions, including the decision of this court in A. N. K. Rajamani Ammal v. Controller of Estate Duty, which dealt with the question as to the process by which a self-acquired property converted into joint family property would amount to a disposition, creation of other right or extinguishment at the expense of the deceased of a debt or other right contemplated by Explanation 2 to section 2(15) of the Act. But, we are of the view that those decisions cannot be of mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary view. In this connection, it is pertinent to point out that a Full Bench of the Punjab High Court in Controller of Estate Duty v. Jaigopal Mehra followed Valliammai Achi v. Controller of Estate Duty and held that the relinquishment by the deceased of his share in the property of the joint family amounted to the extinguishment of his rights in that property in favour or for the benefit of his sons and that it clearly fell within the definition of " disposition " in Explanation 2 to section 2(15). It is true that it is very well-established that a partition is not a transfer in the sense in which that term is normally understood with reference to the Transfer of Property Act, and it is too late in the day to contend that a partition amounts to a transfer in the normal sense. It has been held in Narasimhulu v. Someswara Rao that the true nature of a partition arrangement is that each co-owner gets a specific property in lieu of his rights in all joint properties ; that is to say each co-sharer renounces his rights in other common properties in consideration of his getting exclusive right to and possession of specific properties in which the other co-sharers renounce their righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by that section. But section 27 provides that any disposition made by the deceased in favour of his relative shall be treated for the purpose of the Act as a gift unless the disposition has been made for full consideration in money or money's worth, etc., provided where the disposition was made for partial consideration in money or money's worth paid to him for his own use or benefit, the value of the consideration shall be allowed as a deduction from the value of the property for the purpose of estate duty. The word " any " preceding disposition in section 27 is significant and it shows that section 27 is intended to cover all dispositions whether they are inter vivos transactions or not. By Explanation 2 to section 2(15) extinguishment at the expense of the deceased of a debt or right has been deemed to be a disposition made by the deceased in favour of the person for whose benefit the debt or right was extinguished and that in relation to such a disposition the expression " property " will mean benefit conferred by the extinguishment of the debt or right. While construing section 45(2) of the English Finance Act of 1940 which corresponds to section 9 read with Explanation 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ypothesis seems to me to be drawn by the word 'deemed'. If this be so, only three actual facts are expressed to be necessary in order to involve the hypothetical situation : (1) the existence of a right, (2) its extinguishment, (3) its extinguishment at the expense of the deceased. When those three facts concur, the hypothesis goes into action, and the hypothesis is that these facts are equivalent to a disposition made by the deceased in favour of the person for whose benefit the right was extinguished. These words, in my opinion, all form part of the hypothesis and the concluding words are necessary to define the hypothetical disponee." As to the scope of section 46(1) of the Finance Act of 1950 (corresponding to section 27 of the Estate Duty Act), which amended section 44 of the Finance Act, 1940, Dymond's Death Duties states at page 256 : " The general effect of the new sub-section (1) is to render any disposition by the deceased to a relative a prima facie gift, and to place the onus of showing that the deceased received full or partial consideration on the transferee : duty can be escaped only if full consideration can be established, and not on the rather wider ground, disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indirectly, the value of his own property and to increase the value of the property of any other person, and, to that extent, the meaning of the expression " disposition of property " is extended beyond the general words and paragraphs (a) to (e) of the definition. In that case the court cited with approval the following passage from the judgment of Willams J. in Grimwade v. Federal Commisssioner of Taxation : " The whole emphasis of paragraph (f) is upon a transaction entered into by one person, which seems to me to mean that where there is an act done by one person with the requisite intent, and as a result there is a transfer of value from any property of that person to the property of another person, the conditions of liability are satisfied." With respect, we are inclined to adopt the reasoning of the learned judges in that case and hold that but for the Explanation 2 to section 2(15), the word " disposition " occurring in section 27 would comprehend only transactions by which properties are transferred from one person to another and Explanation 2 to section 2(15) makes transactions which are not in any sense disposition of property as deemed dispositions and sets out such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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