9911796707
TMI Blog1986 (7) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ed was joint throughout his life. On February 21, 1954, prior to proceeding to Malaya by air, the deceased took out a personal accident insurance policy with the United India Fire and General Insurance Company Ltd. (hereinafter called " the insurance company"). Under the terms of the said policy which was to be in force for one month, the insurance company had agreed that if at any time during the currency of the said policy, the deceased should sustain any accident resulting in any injury or injury leading to his death, then, the insurance company undertook to pay the assured or to the legal representative of the assured in case of the assured's death, such sum as might be appropriate in the Table of Benefits appended to the policy. The Table of Benefits mentioned that in case of death or total disablement, the benefit payable was Rs. 2 lakhs, in case of partial disablement Rs. 1 lakh, and in case of temporary disablement, a weekly payment of Rs. 1,200 or Rs. 300 according to the nature of the disablement. The policy, inter alia, provided that " the policy is unassignable and the company shall not be affected by notice of any trust or purported to be imposed upon assignment of or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parceners to the said properties. He rejected the contention that M. Ct. Muthiah who had been adopted away from this family in 1931 was nevertheless entitled, as on the date of the deceased's death, to an equal interest in the deceased's family properties, so that the quantum of the deceased's coparcenary interest was not one-half but only one-third of the total value of the family properties. It was urged before the Deputy Controller that the adoption of M. Ct. Muthiah in 1931 was on the basis that, notwithstanding his adoption into another family, M. Ct. Muthiah must continue to retain his interest in the properties belonging to the family of his birth. A " muri " in Tamil in Cadjan-leaf purported to have been executed on June 7, 1931, was produced before the Deputy Controller in support of the above plea. The Deputy Controller did not accept the genuineness of the said document. But even otherwise, the Deputy Controller proceeded to hold that the " muri " had no legal effect on the continued rights of the adopted son in the family of his birth subsequent to his adoption. He accordingly included, in the dutiable estate, one-half of the joint family properties as being the measure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the accident policy and whether the sum of Rs. 2,00,000 is includible in the principal value of the estate ? 2. If the sum of Rs. 2 lakhs was liable to be assessed to duty, whether the said amount could be aggregated with the other properties or should be assessed as an estate by itself ? 3. Whether the share of the deceased, Chidambaram Chettiar, in the property of the joint family at the time of his death was one-half or one-third of the property ? " The High Court by the judgment under appeal answered the first question in favour of the Revenue and against the accountable person and the second and third questions were answered against the Revenue and in favour of the accountable person. Being aggrieved by the answer against the first question, the accountable person has preferred the appeal being Appeal No. 2086 of 1974 and on the certificate granted by the High Court and on the subsequent two questions, the Revenue obtained the certificate of fitness to appeal to this court which is Appeal No. 67(NT) of 1975. The High Court in the judgment under appeal held that under section 5 of the Act, all properties which passed on the death of a person were liable to estate du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property which was deemed to pass on his death under section 6 of the Act. The beneficial interest in the policy which accrued or arose on death was the sum paid out under the policy and this beneficial interest having been purchased by the deceased, the provisions of section 15 of the Act were also attracted. Further, the estate had been depleted to the extent of the premium paid and the beneficial interest purchased and the deceased not having received a full equivalent for what he has paid and having regard to the nature of the policy, the intention from the beginning was to make a provision. The principal value of the estate that was deemed to pass under section 6 and which accrued or arose under section 15 was that sum which was paid out under the policy. As there was no devolution of interest from the deceased to another person and from the very inception, the amount was payable only to the nominee or legal representative, section 5 of the Act was not applicable. It was further held by the High Court that in the case of a personal accident policy, the property was not the policy but the ultimate money that was paid and that should be deemed to pass on death of the deceased b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing on the death includes any property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and " on the death " includes " at a period ascertainable only by reference to the death ". Section 3(1)(a), (b) and (c), inter alia, provides for certain situations in which a person is deemed competent to dispose of property. Section 5, as we have noted before, deals with the levy of estate duty. Section 6 deals with property within disposing capacity and provides that property which the deceased was at the time of his death competent to dispose of shall be deemed to pass on his death. Section 14 deals with policies kept up for a donee. It is not necessary to set out the actual terms of the said provision. Section 15 deals with annuity or other interest purchased or provided by the deceased and provides that any annuity or other interest, purchased or provided by the deceased, either by himself alone or in concert or by arrangement with any other person shall be deemed to pass on his death to the extent of the beneficial interest accruing or arising, by survivorship or otherwise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capable of being ascertainable during his lifetime or at the time of his death. It was urged that a property or interest in property has necessarily to change hands in order to attract estate duty. There has also to be a change in the beneficial possession and enjoyment of the property or the interest in that property. In other words, it was submitted, the property or interest which was liable for estate duty under the Act has to pass through the estate of the deceased. According to counsel, applying the above principles, it could not be said that an accident insurance policy had the characteristics of a property or interest in property and, therefore, was not liable for estate duty because an accident insurance policy could not be construed as a movable property unlike life insurance policy or an annuity because as laid down in section 2(15), it was not only necessary for a person to have property or interest in property but that interest must be in regard to a movable property and his interest in that movable property should also be capable of being ascertained during his lifetime or at the time of his death. An accident insurance policy, according to him, could not be construed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of a life insurance policy or annuity. But here the interest directly went to the beneficiary in the case of the death by accident of the estate holder. It was in the premises submitted that it cannot be accepted that the deceased had any power of disposition over the accident policy during his lifetime because the interest in an accident policy could not also be elevated to that of a contingent interest since there is always the chance of the accident policy being rendered worthless during the lifetime of the deceased. There is also no chance for the deceased to reap the fruition of the policy during his lifetime because in the case of an accident policy, the condition of the policy itself was to the effect that the policy would bear fruition only if the estate holder did not die due to natural causes but in an accident. A large number of authorities, both Indian and English, and a large number of dictionaries relevant for this purpose were relied upon. So far as the first appeal is concerned, namely, Civil Appeal No. 2086 of 1974, the question of accessibility to estate duty of the amount received as a result of the death of the assured is involved. This question h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 2(1)(a) of that Act. The information filed on behalf of the Attorney-General alleged that Margaret Louis Quixley died intestate on April 11, 1927. Letters of administration to her estate were dated July 5, 1927, and granted to her sister, the defendant, out of the Principal Probate Registry. The deceased was at the time of her death in the service of the Girls' Public Day School Trust as a secondary school teacher at the Blackheath High School and had been in such service for a period of upwards of five years. Such service was " recognised service " within the meaning of the School Teachers (Superannuating) Acts, 1918 to 1925, and "contributory service " within the meaning of the School Teachers (Superannuation) Act, 1925, and the contributions prescribed by the School Teachers (Superannuation) Acts, 1922, 1924 and 1925, were duly paid, by and in respect of the deceased down to the time of her death. In the above circumstances, a death gratuity become payable by the Board of Education to the defendant as the legal personal representative of the decased under the School Teachers (Superannuation) Act, 1925. Rowlatt J. observed that the question involved was not free from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the death of the deceased. It was a comprehensive Act providing for superannuation benefit for teachers on retirement and gratuity to legal heirs in the case of death in service. Section 5 provided for death gratuity to be paid to legal heirs if the teacher died while in service. Section 9 provided for contribution compulsory at a certain fixed percentage both by the teacher and by the employer. Section 12 provided for repayment of contributions on the teacher ceasing to be eligible. See in this connection Halsbury's Statutes Of England, 2nd edn., vol. 8, p. 388. In that context, in our opinion, this question of liability arising on the death of an accident policy holder has to be understood in a different perspective. In Quixley's case [1929] All ER (Rep) 696, there was a vested right in the teacher during her lifetime and the teacher could dispose of that right in the manner she liked. But in case of death by accident in an aircrash, the deceased had only a right of nomination for his heirs to get the money but the money would arise or the property would be born only on the contingency of the death happening. We have examined the nature of the right in the light of the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as in Quixley's case [1929] All ER (Rep) 696, yet the compensation was payable as a reward for the services rendered. Therefore, the deceased had interest in it and had also the right to appoint the person to whom it should be paid. The distinction between pecuniary damages for the loss caused to the estate and pecuniary loss sustained by the members of his family through his death has no relevance for the purpose of deciding whether the compensation payable in a case like the present was property which should be deemed to pass on the death of the deceased. The High Court felt that the case came within the ratio of the decision of the Court of Appeal in Quixley's case [1929] All ER (Rep) 696. But the facts of the instant appeal are different. Prior to the judgment under appeal, the problem arose before the Jammu and Kashmir High Court in the case of CED v. Kasturi Lal lain [1974] 93 ITR 435 (J & K). Fazal Ali C.J., as the learned judge then was, of the Jammu & Kashmir High Court held that before property could pass to the heirs of a deceased person under section 5 of the Estate Duty Act, 1953, it had to fulfil the following conditions (headnote): " (i) the property must be in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry nature of things, the damages by way of compensation arose after the person had died. The Act definitely provided for whom it was available. If it were part of his estate passing on his death, it would pass on to his heirs other than those specified in the Act, in case they were not in existence. But that did not happen. If the members of the family specified in the Act are not in existence, the payment has not to be made. Hence, the compensation was not property capable of passing on death. The High Court felt that there was a lot of difference between compensation received on account of permanent or temporary injury in an air crash and the compensation received by the heirs of a person dying in an air crash. In the former case, the amount received by the person formed part of his estate but where compensation was received by his heirs on his death in an air crash, according to the High Court, it cannot partake of his estate. When a person boarded a plane, he could not, at that time, be said to have created an estate or interest capable of passing after his death. Section 15 of the Act provided for those types of cases where the owner of property tried to dissipate his propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of life policy. It was contended for the assessee that the purchase of an accident policy by the deceased could not be held to be an interest purchased or provided by him within the meaning of section 15 of the Act and that the words " other interest " in section 15 should be understood in the cognate sense of the word " annuity " on the principle of noscitur a sociis. The term " other interest " was of widest amplitude and there was no warrant in the section itself or in any other provision of the Act to infer that the Legislature wanted to restrict the meaning and import of the term " other interest ". The contention that the import of the term " other interest " should be restricted and that it should take colour from the word " annuity " and should bear a cognate meaning must be rejected. If the legislative intent as outlined in the statement of objects and reasons given in the Bill for clause 15 was any guide, it clearly pointed in the direction that the Legislature wanted to cover all kinds of interests which have been purchased or provided by the deceased in the nature of annuities or policies other than life insurance policy as passing on his death to the extent of a be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation and was, therefore, dutiable under section 5 of the Act. In any case, he had a right to property under the said policies which he could have disposed of by will and, therefore, it must be deemed to pass on his death under section 6 of the Act. In the view we have taken of the policy involved in the instant case, we are unable, with respect, to agree with the High Court that the deceased had right in expectancy-the deceased had no right, the nominee or the beneficiary would have the right-the property does not pass through the deceased. Relying on section 34(3) of the Act, it was contended by the accountable person that the aforesaid two sums should not be aggregated with other property of the deceased and should be assessed as an estate by itself. As we have noted before, the question is the subject-matter of Civil Appeal No. 67 of 1975. On this aspect, the judgment under appeal held in favour of the accountable person while the Gujarat High Court was of the view that sub-section (3) would not be applicable because it could not be said that the deceased had no interest in the contract of insurance contained in the two accident policies. The High Court held that the deceased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sured alone would have the sole and exclusive right of receiving payment or enforcing any claim under the policy. Dastur & Co. issued an office circular which made it clear that the compensation payable by the insurance company in each case would be equivalent to two years' salary of the individual concerned at the time of accident resulting in a claim under the policy. Clause 5 of the circular stated that the benefits enjoyed by the staff under the scheme were ex gratia in character and might be withdrawn or modified at the sole discretion of the company. In pursuance of the insurance policy, a sum of Rs. 68,400 was paid by Dastur & Co. to the estate of the deceased. A sum of Rs. 50,000 was also paid to the estate of the deceased by the airlines in accordance with the provisions of the Indian Carriage by Air Act. The Appellate Controller and the Assistant Controller held that both the amounts were liable to estate duty. The Tribunal held that the amount of Rs. 68,400 was liable to estate duty and out of the amount of Rs. 50,000, Rs. 43,846 was not liable to estate duty. The Bombay High Court held that with regard to the amount of Rs. 68,400, the insurance policy and the circular i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power to dispose of property or interest in property, he cannot or his estate cannot be brought within the purview of the Act solely because of that factor. In order that an estate may be liable to estate duty, the power of disposition must be with regard to property capable of being ascertainable during the lifetime of the deceased or at the time of his death. It was next urged that property or interest in property had necessarily to change hands in order to be liable to estate duty under the Act. There had to be a change in the beneficial possession and enjoyment of the property or the interest in that property. In other words, the property or interest which is liable to estate duty has to pass through the estate of the deceased. It is important to bear in mind that though the deceased might have a right of disposition as and when the property would be available in case the contingency happens, namely, the death of the deceased in an accident, but that right is different from the right to the money accruing or arising because of the death due to accident. See in this connection the case of Shri H. Anraj v. Government of Tamil Nadu [1986] 1 SCC 414; 61 STC 165 (SC). So, in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat case, the effect of nomination under the Insurance Act was analysed. The meaning of the expression " property passes " came up for consideration in the observations of Viscount Simonds in the case of Public Trustee v. IRC [1960] AC 398 ; [1961] 43 ITR (ED) 19 (HL), where at page 407 of the report, Viscount Simonds, dealing with section I of the Finance Act, 1894, of U.K., observed that: " The word ' passes ' familiar as it has now become to us, was not in 1894 a term of art in the law relating to ' death duties ' and that it would appear to have been a matter of sheer necessity for the Act to proceed to a definition of the area of charge. It was natural that the draftsman should do so by the use of the word 'deem', a word which has been described by Lord Radcliffe, is apt to include the obvious, the uncertain and the impossible. Section 6 of the Act which makes property which the deceased at the time of his death was competent to dispose of deemed to pass on his death is apt, as in the words of Lord Radcliffe, inter alia, to include the " impossible ". But the question here in the instant case is whether the expression " impossible " also includes the possibility of includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... option under the custom of the Nattukottai Chettiar community. Now, whether a particular custom prevails in a particular community or not is a matter of evidence. Mayne's Treatise on Hindu Law and Usage, 10th edn., edited by S. Srinivasa Iyengar at page 280 described the peculiar form of dwyamushyayana adoption thus: " 208. An exception to the rule that adoption severs a son from his natural family exists in the case of what is called a dwyamushyayana or son of two fathers. This term has a two-fold acceptation. Originally it appears to have been applied to a son who was begotten by one man upon the wife of another, but for and on behalf of that other. He was held to be entitled to inherit in both families, and was bound to perform the funeral obligations both of his actual and his fictitious father. This is the meaning in which the term is used in the Mitakshara; but sons of this class are now obsolete. Another meaning is that of a son who has been adopted with an express or implied understanding that he is to be the son of both fathers. This again seems to take place in different circumstances. One is what is called the Anitya, or temporary adoption, where the boy is taken from a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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