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TMI Blog1991 (11) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1979, we grant special leave in S. L. P. (Civil) No. 335 of 1979 also. Before discussing the correctness of the above conclusion, it may be convenient to set out the background of facts in Civil Appeal No. 1204 of 1979. That appeal arises out of the estate duty assessment consequent on the death of one Natesan Chetty who died on March 1, 1972. He was the karta of a Hindu undivided family consisting of himself and his four sons. He was also the owner, in his individual capacity, of five house properties in Madras. On June 18, 1970 and September 16, 1970, he made declarations by which he impressed the abovementioned properties with the character of joint family properties and declared that they would thereafter belong to the Hindu undivided family of which he was the karta. Subsequently, a partition was effected in the family in March, 1971, in which two of the abovementioned properties came to the share of the deceased. Sri Natesan Chetty had also borrowed a sum of Rs. 46,800 from the Hindu undivided family out of the rental income from the above mentioned properties for being invested in the business carried on by him. These borrowings were made between March, 1970, and April, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red an appeal to the Appellate Controller of Estate Duty which was successful. Thereupon, the Department preferred an appeal to the Tribunal which, following a decision of the Madras High Court in A. N. K. Rajamani Ammal v. CED [1972] 84 ITR 790, held that the sum of Rs. 1,22,500 could not be included in the value of the estate passing on the death and consequentially, that the add back of Rs. 46,800 was also not justified. Thereupon, the Controller of Estate Duty applied, under section 64(1) of the Act, for a reference to the Madras High Court, for its decision, of the following two questions : "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the transaction by which Hindu impressed his separate properties [as] with joint family character could not be considered as a disposition under the second Explanation to section 2(15) and section 27 of the Estate Duty Act ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the addition of Rs. 1,22,500 made under section 9 and Rs. 46,800 made under section 46(2) could not be sustained in the case of the deceased ?" The Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensibly be transferred to others some time before the death, although it continues to be really under the domain and control of the deceased till the time of his death. The statute, therefore, contains elaborate provisions deeming certain properties to pass on death even though their beneficial enjoyment may not actually change hands at the time of his death. One such item of properties which are deemed to pass on the death of a person is that which formed the subject-matter of a gift made by him within a specified period preceding his death. Section 9 of the Act which contains this deeming provision reads thus : "9. Gifts within a certain period before death.-(1) Property taken under a disposition made by the deceased purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust, settlement upon persons in succession, or otherwise, which shall not have been bona fide made two years or more before the death of the deceased shall be deemed to pass on the death". In short, the provision enabled the Revenue to ignore any gift of property made by the deceased within two years of his death by creating statutory fiction that propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other right enforceable against him personally or against property which he was or might become competent to dispose of, or to charge or burden for his own benefit, shall be deemed to have been a disposition made by that person, and in relation to such a disposition the expression property' shall include the debt or right created. Explanation 2.-The extinguishment at the expense of the deceased of a debt or other right shall be deemed to have been a disposition 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. " The short case of the Department now is this : The deceased in these cases was the full and exclusive owner of the immovable properties in question. By the act of blending, he has converted them into Hindu undivided family properties. The properties no longer belong to him as an individual ; they belong to the family thereafter with certain rights qua them for the other members of the Hindu undivided family. In other words, there has been an extinguishment, at the expense of the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC). The Supreme Court held that the word 'disposition' refers to a bilateral or a multilateral act and it does not refer to a unilateral act. This decision of the Supreme Court approves the decision of this court in CGT v. P. Rangasami Naidu [1970] 76 ITR 315 (Mad) [FB]. It is true that these decisions are under the Gift-tax Act. It is also true that the word 'disposition' was considered in these decisions, with particular reference to the definition of 'transfer of property' under that Act. We are of the view that the word 'disposition' in section 27(1) of the Estate Duty Act also refers to a bilateral or multilateral act. The section refers to a disposition by the deceased in favour of a relative and also speaks of partial failure of consideration. Section 9 also refers to property 'taken under a disposition'. Therefore, in our opinion, the word 'disposition' in section 27(1), however wide its ambit may be, would not include the unilateral act of a person by which he throws his self-acquired property into the common stock of the joint family." It had been next contended on behalf of the Revenue that by throwing the self-acquired properties into the common stock of the joint f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment at the expense of the deceased of a debt or other right' within the meaning of Explanation 2 to section 2(15). As seen from the judgments cited above, after the act of throwing into the common stock, it is the joint family or the coparcenary that owns the property. The person who converted his individual property into joint family property is a member of the Hindu joint family or the coparcenary and continues to be a member of the joint family. His interest in the erstwhile separate property would extend to the whole of the property even as of the other coparceners, for the interest of every coparcener extends over the whole of the joint family property. There is community of interest and unity of possession between all the coparceners. On the death of any one of the coparceners, the others take the property by survivorship. It may be that the ultimate survivor is the person who threw the self-acquired property into the common stock. It, therefore, follows that there was no extinguishment of the right of the deceased and creation of a right in favour of another, in the case of throwing the self-acquired properties into the common stock. The decision in S. P. Valliammai Achi v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id amount. Trikamlal Vadilal died on June 3, 1955, that is, within two years of the release deed. The Assistant Controller found that, as on November 16, 1953, the deceased was entitled to a one-half share in the joint family properties the value of which was Rs. 3,44,058, but had relinquished his interest in the joint family properties by receiving only a sum of rupees one lakh. The Officer, therefore, held that the difference between Rs. 3,44,058 and Rs. 1,06,724 (being the amount received by the deceased together with interest) was includible in the principal value of the estate of the deceased, being the value of a disposition by the deceased in favour of a relative for partial consideration. This assessment was upheld eventually by the Supreme Court. Both these decisions, thus, raised the question whether there was a "gift" within the meaning of section 9 read with section 27 and read with the Explanations to section 2 (15) of the Estate Duty Act where a coparcener in a Hindu undivided family, at the family partition, voluntarily agrees to accept properties of a value less than what he is entitled to claim, as a matter of right, at such partition. This court as did the Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two Explanations to section 2(15) and that its decision rested on three grounds : (i) a "disposition", as held in Goli Eswariah [1970] 76 ITR 675 (SC), has to be a "bilateral" or "multilateral" act or transaction, but not unilateral act ; (ii) the act of blending does not create any right enforceable against the blender or his property but only brings to the surface rights already latent and inherent in the others ; and (iii) the act of blending does not result in the extinguishment of any right of the blender with a correlative conferral of benefit on others. In our view, Kantilal Trikamlal [1976] 105 ITR 92 (SC), does not affect the validity of any of the three grounds set out above. So far as the first ground is concerned, it does not touch upon the reasoning of Goli Eswariah [1970] 76 ITR 675 (SC), not to say doubt it or dissent from it. It refers to CED v. Kancharla Kesava Rao [1973] 89 ITR 261 (SC) hinting at a possible distinction and to Getti Chettiar [1971] 82 ITR 599 (SC) (but without any hint of dissent) and points out that "the conventional construction of 'disposition' has to submit to the larger sweep of hypothetical extension by definition" and that, unlike ..... X X X X Extracts X X X X X X X X Extracts X X X X
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