Case: Controller of Estate Duty Madras Vs. Alladi Kuppuswamy

In order to decide the question of law arising in the appeal, it may be necessary to set out briefly the facts of the case. Sri Alladi Krishnaswami Iyer died some time before the passing ofthe Estate Duty Act, 1953, but during his life time he had settled certain properties absolutely on his wife Smt. Alladi Venkatakshmamma to be ref erred in short as Smt. Alladi--and he had also declared certain other properties to from part of the joint family properties. Sri Alladi Krishnaswami Iyer hereafter to be referred to as "Shri Alladi" was a member of the Hindu coparcenary consisting of himself, his wife and three sons. In the instant case we are only concerned with the joint family properties left by Shri Alladi. Smt. Alladi died on January 5, 1956 a few months before the passing ofthe Hindu Succession Act, 1956 and the Assistant Controller of Estate Duty valued her estate at a total amount ot Rs. 7, 25, 527 including a sum of Rs. 2, 02, 271 being the value of her the share in the joint family properties. The dispute in the present case centres round the inclusion of the aforesaid sum of Rs- 2, 02, 271/-. The Revenue assessed the estate duty on the footing that as Smt. Alladi was a member of the Hindu coparcenary her interest in the joint family proper- ties passed on her death to the other three sons and the value of this interest being 1/4th the heirs would be liable to pay estate duty on the value of the 1/ 4th share assessed at Rs. 2, 02, 271/-. The accountable persons raised several contentions before the Revenue including the question as to whether or not the Act would apply to agricultural lands as also whether interest on certain fixed deposits in Government securities would be assessable under the Act. It appears, however, that before the High Court the respondent pressed only the question relating to the inclusion of the value of 1/4th share of Smt. Alladi valued at Rs. 2, 02, 271/-. The respondent filed an appeal before the Board and contended that as Smt. Alladi died as a Hindu widow she possessed no coparcenary interest which could pas s on her death: her interest merged without any benefit accruing or arising to the coparceners and hence s. 7 sub-s. (1) had no application. The plea taken by the respondent did not find favour with the Central Board of Revenue which upheld the order of the Assistant Controller of Estate Duty.Thereupon the respondent moved the Board of Revenue to make a reference to the High Court of Madras for decision of the questions o f law involved in the case. The Board accordingly referred the following questions to the High Court:"1. Whether, on the facts and in the circumstances of the case, one-fourth share of the deceased in the joint family properties, to which she was entitled under section 3 of the Hindu Womens Rights to Property Act, 1937, was correctly included in her estate as property deemed to pass on her death under section 7 ofthe Estate Duty Act, 1953 ?2. Whether the Estate Duty Act. 1953, in so far as it seeks to levy duty on agricultural lands, is ultra vires of the legislative powers of the Union Legislature ?3. Whether, on the facts and in the circumstances of the case, the accrued interest on fixed deposits and Government securities up to the date of death of the deceased was correctly included in her estate under section 34(2) ofthe Estate Duty Act, 1953 ?Although three questions had been referred to the High Court by the Board at the hearing of the appeal the respondent gave up quest ions Nos. 2 and 3 and confined his arguments only to question No. 1 which falls for determination in this case. The High Court, relying mainly on the decisions of the Privy Council in Attorney-General of Ceylon v. Arunachalam Chettiar;((1957) A.C. 513--34 I.T.R. (E.D.) 20) and Gartside v. Inland Revenue Commissioners((1968) A.C5.53--70 I.T.R. 663 (II. L.)) came to the conclusion that the interest of Smt. Alladi was not a coparcenary interest which could have passed under s. 7 (1) of the Act and as the said interest was incapable of valuation was not exigible to estate duty. Thereafter the appellant applied to the High Court for granting a certificate of fitness for leave. to appeal to this Court and the same having been granted the appeal has now been placed before us for hearing.

Court's reasoning:
In our opinion the answer to the problem would naturally lie in a correct interpretation of ss- 7(1) &(2) of the Act as also on a true construction of s. 3(2) of the Hindu Womens Rights to Property Act, 1937 as amended by Act 11 of 1938. It is true that while this Court has had occasions to interpret the provisions of the Hindu Womens Rights to Property Act, 1937--hereafter referred to as the Act of 1937---on several occasions, yet the exact point which arises in this case has not yet been determined by this Court. In order to understand the implications Of the arguments advanced by counsel for the parties. before us, it may be necessary to extract the relevant provisions of the Act as also of the Act of 1937Once a Hindu widow is held to have a coparcenary interest, then there would be no difficulty in treating her as a member of the Hindu coparcenary, in which case her interest could be easily valued according to the relevant provision of s. 39 of the ActThus the position appears to be that a Hindu widow was introduced for the first time into the Hindu coparcenary having the same rights as her husband and became as it were a member of the Hindu coparcenary with two qualifications, viz., (1) that she had only a limited interest; and (2)that she could not be a coparcener because having regard to the nature of her entry into the family after marriage with her husband there was no question of her getting interest in the Hindu coparcenary by birth which is one of the most important incidents of a Hindu coparcenary. All the other rights of a coparcener were duly conferred on her by the Act of 1937.Dwelling on the content and import of the nature of the interest of a Hindu widow this Court pointed out in Jaisri Sahu v. Rajdewan Dubey &Others([1962] 2 S.C.R. 558, 564-565.) that on the death of her husband the properties vested in the widow and she fully represented the estateAs pointed out above the essence of coparcenary property is the unity of ownership which is vested in the whole body of coparceners and the two principal incidents of coparcenary property are that the interest of coparceners devolves by survivorship and not by inheritance and that the male issue of a coparcener acquires an interest in the coparcenary property by birth and not as representing his fatherIt is, therefore, manifest from the aforesaid decision that if the widow had not chosen to exercise her right of partition, there is no severance of the Hindu coparcenary and on her death the interest of the widow merges in the coparcenary property or lapses to the other coparcenersWe find ourselves in complete agreement with the observations made by the Patna High Court to which one, of us (Untwalia, J., as he then was) was a partyThus analysing the ratio of a aforesaid case regarding the incidents of a Hindu coparcenary it would appear that a Hindu coparcenary has six essential characteristics, namely, (1) that the lineal male descendants up to the third generation acquire an independent right of ownership by birth and not as representing their ancestors; (2) that the members of the coparcenary have the right to work out their rights by demanding partition; (3) that until partition, each member has got. ownership extending over the entire property conjointly with the. rest and so long as no partition takes place, it is difficult for any copercener to predicate the share which he might receive; (4) that as a result of such co-ownership the possession and enjoyment of the property is common; (5) that there can be no alienation of the property without the concurrence of the other coparceners unless it be for legal necessity; and (6) that the interest of a deceased member lapses on his death and merges in the coparcenary property. Applying these tests to the interest of a Hindu widow who has been introduced into a coparcenary by virtue of the Act of 1937, we find that, excepting condition No. (1), all other conditions are fully satisfied in case of a Hindu widow succeeding to the interest of her husband in a Hindu coparcenary. In other words, after her husbands death the Hindu widow under the Act of 1937 has got the right to demand partition, she cannot predicate the exact share which she might receive until partition is made, her dominion extends to the entire property conjointly with the other members of the coparcenary, her possession and enjoyment is common, the property cannot be alienated without concurrence of all the members of the family, except for legal necessity, and like other coparceners she has a fluctuating interest in the property which may be increased or decreased by deaths or additions in the family. It is manifest that she cannot fulfill the first condition, because she enters the coparcenary long after she is born and after she is married to her husband and acquires his interest on his death. Thus, short of the first condition, she possesses all the necessary indicia of a coparcenary interest. The fact that before the Act of 1956, she had the characteristic of a widow-estate in her interest in the property does not detract any the less from this position. It must follow as a logical corollary that though a Hindu widow cannot be a coparcener, she has coparcenary interest and she is also a member of a coparcenary by virtue of the rights conferred on her under the Act of 1937.There is yet another important aspect of the matter which has to be considered. At the time when the Estate Duty Act was passed in 1953, the Legislature was fully aware of the statutory interest conferred on a widow by virtue of the Act of 1937 and the incidents thereof. In these circumstances it is not reasonable to infer that the Legislature could have intended that though a Hindu widow has got the Same interest as her husband in the Hindu coparcenary and has also the right to demand partition and her interest which is a fluctuating. one would lapse to the other coparceners in case of her death without seeking partition in the same manner as that of other coparceners, yet it should be exempt from estate dutyr of the argument of the respondent was the Privy Council decision in Arunachalam Chettiars case(supra).In the first place, the facts of that case are clearly distinguishable from the facts of the present case. In that case, the Hindu undivided family consisted of father, son and some female members. According to the Privy Council, the females were merely entitled to maintenance. The females there could not have any interest in the coparcenary nor could any such argument be advanced because there was no statute similar to the Act of 1937. Moreover, in the Estate Duty Ordinance which was being construed by the Privy Council there was neither any provision like the inclusive part of sub-s. (1) and sub-s. (2) of s. 7 nor any provision similar to s. 39 of the Act. In these circumstances, we do not see how the Privy Council decision in Arunachalam Chattiars case (supra) can be called in aid to support the contention of the respondent. In the instant case, once it is held, as it must be, that Smt. Alladi was a member of the Hindu coparcenary, her interest was undoubtedly a coparcenary interest which lapsed on her death and merged into the coparcenary. It was also clearly capable of valuation, unlike the position in Arunachalam Chettiars case where the Privy Council was construing a provision similar to s. 40 of the Act, which, in our opinion, has no application in the present case, it being covered by s. 39 of the Act. A fortiori the same observations apply to the case of Gertside v. Inland Revenue Commissioners(supra).That case has no application here where we are concerned with the concept of a Hindu coparcenary which is totally alien to the estates contemplated under the English Acts. For these reasons, therefore, we are clearly of the opinion that the two cases relied upon by the High Court do not appear to be of any assistance in deciding the points at issue in the p resent appeal, and the High Court was in error in basing its decision on the aforesaid cases ignoring the decisions of this Court as also the peculiar and special provisions of the, it was vehemently contended by Mr. Sastri for the respondent that the right of a Hindu widow under the Act of 1937 was merely a statutory substitution of a new status by her introduction into the copercenary and she could not b e treated either as a coparcener or a me, tuber of the copercenary or to possess any kind of coparcenaryinterest.While we agree that the widow after the introduction in the coparcenary could not be held to have become a coparcener, because one of the essential characteristics of a coparcener, namely, acquisition of interest by birth, is wholly wanting in her case, yet when the Legislature which was fully aware of the status of a Hindu widow under the Shastric Law chose to improve her status by conferring a new right on her under the Act of 1937, and with this avowed object clothed her with all the rights and concomitants of a coparcener s interest, it is futile to contend that the widow could not be treated either as a member of the Hindu coparcenary or as having been conferred coparcenary interest in the property. Even though the widow is not a coparcener in the strictly legal sense of the term, the interest which she has is the same interest as her husband and that is the coparcenary interest with the only limitation placed on her by s. 3(3) of the Act of 1937, namely , that her interest would be the limited interest of a Hindu widow. The conclusion is therefore inescapable that Smt. Alladi did possess a coparcenary interest which lapsed on her death and merged into the coparcenary and the case was clearly covered by the inclusive part of sub-s. (1) of s. 7 and under s. 39 the value of the benefit accruing or arising from the cesser of her coparcenary interest was to be determined by taking the principal value of the share in the joint family property which would have been allotted to her, had there been a partition immediately before here last plank of the argument of the respondent was that the Estate Duty Act being a fiscal statute should be construed strictly so as to give every benefit of doubt to the subject.There can be no quarrel with this proposition but when the phraseology of a particular section of the statute takes within its sweep the transaction which is taxable, it is not for the Court to strain and stress the language of the section so as to enable the tax-payer to escape the tax. In t he view that we take in this case, it is manifest that the legislative intent reflected in the Act of 1937 and the Estate Duy Act, 1953, must be given full effectSummarising, therefore, the position that emerges is as follows:By virtue of the provisions of the Act of 1937 a Hindu widow undoubtedly possesses a coparcenary interest as contemplated by s. 7( 1 ) of the Act and she is also a member of a Hindu copercenary as envisaged by s. 7(2) of the Act. On the death of Smt. Alladi, therefore, there was clearly a cesser of her interest and her interest merged in the copercenary property and by reason of the inclusive part of sub s. (1 ) of s. 7, it must be taken to have passed on her death and was hence exigible to estate duty. Since Smt Alladi was a member of the copercenary, this interest of hers which passed on her death was liable to be valued in accordance with the method provided by s. 39 of the ActThe interpretation of s. 40 of the Act is not free from difficulty, but as the present case squarely falls within the ambit of s. 7 (1) latter p art and sub-s. (2) of s. 7 of the Act which attracts s. 39, it is not at all necessary for us to enter into the complex domain of the scope and ambit of s. 40 of the Act in this caseIn order to understand the content and character of the interest which a Hindu widow gets by virtue of the statutory provisions contained in the Act of 1937 there can be no doubt that prior to the passing of the Act of 1937 a Hindu woman had no right or interest at all in a Hindu coparcenary. She was neither a coparcener nor a member of the coparcenary nor did she have any interest in it, except the right to get maintenance. She also had no right to demand partition of the coparcenary property after the death of her husband. The Act of 1937 introduced broad and important changes by bettering the rights of a Hindu widow and conferring on her the same interest as possessed by her husbandIn the first place, the facts of that case are clearly distinguishable from the facts of the present case. In that case, the Hindu undivided family consisted of father, son and some female members. According to the Privy Council, the females were merely entitled to maintenance. The females there could not have any interest in the coparcenary nor could any such argument be advanced because there was no statute similar to the Act of 1937. Moreover, in the Estate Duty Ordinance which was being construed by the Privy Council there was neither any provision like the inclusive part ofsubs.(1) andsubs.(2) of s. 7 nor any provision similar to s. 39 of the Act. In these circumstances, we do not see how the Privy Council decision in Arunachalam Chattiars case (supra) can be called in aid to support the contention of the respondent. In the instant case, once it is held, as it must be, that Smt. Alladi was a member of the Hindu coparcenary, her interest was undoubtedly a coparcenary interest which lapsed on her death and merged into the coparcenary. It was also clearly capable of valuation, unlike the position in Arunachalam Chettiars case where the Privy Council was construing a provision similar to s. 40 of the Act, which, in our opinion, has no application in the present case, it being covered by s. 39 of the Act. A fortiori the same observations apply to the case of Gertside v. Inland Revenue Commissioners(supra).While we agree that the widow after the introduction in the coparcenary could not be held to have become a coparcener, because one of the essential characteristics of a coparcener, namely, acquisition of interest by birth, is wholly wanting in her case, yet when the Legislature which was fully aware of the status of a Hindu widow under the Shastric Law chose to improve her status by conferring a new right on her under the Act of 1937, and with this avowed object clothed her with all the rights and concomitants of a coparcener s interest, it is futile to contend that the widow could not be treated either as a member of the Hindu coparcenary or as having been conferred coparcenary interest in the property. Even though the widow is not a coparcener in the strictly legal sense of the term, the interest which she has is the same interest as her husband and that is the coparcenary interest with the only limitation placed on her by s. 3(3) of the Act of 1937, namely , that her interest would be the limited interest of a Hindu widow. The conclusion is therefore inescapable that Smt. Alladi did possess a coparcenary interest which lapsed on her death and merged into the coparcenary and the case was clearly covered by the inclusive part ofsubs.There can be no quarrel with this proposition but when the phraseology of a particular section of the statute takes within its sweep the transaction which is taxable, it is not for the Court to strain and stress the language of the section so as to enable ther to escape the tax. In t he view that we take in this case, it is manifest that the legislative intent reflected in the Act of 1937 and the Estate Duy Act, 1953, must be given full effectSummarising, therefore, the position that emerges is as follows:By virtue of the provisions of the Act of 1937 a Hindu widow undoubtedly possesses a coparcenary interest as contemplated by s. 7( 1 ) of the Act and she is also a member of a Hindu copercenary as envisaged by s. 7(2) of the Act. On the death of Smt. Alladi, therefore, there was clearly a cesser of her interest and her interest merged in the copercenary property and by reason of the inclusive part of sub s. (1 ) of s. 7, it must be taken to have passed on her death and was hence exigible to estate duty. Since Smt Alladi was a member of the copercenary, this interest of hers which passed on her death was liable to be valued in accordance with the method provided by s. 39 of the ActThe interpretation of s. 40 of the Act is not free from difficulty, but as the present case squarely falls within the ambit of s. 7 (1) latter p art andsubs.(2) of s. 7 of the Act which attracts s. 39, it is not at all necessary for us to enter into the complex domain of the scope and ambit of s. 40 of the Act in this