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SUPREME COURT OF INDIA
K.S. HEGDE AND A.N. GROVER, JJ.
M. K. Balakrishna Menon (In both the Appeals), Appellant
Versus
The Assistant Controller of Estate Duty-cum-Income-tax Officer, Emakulam (In both the Appeals), Respondent.
Civil Appeals Nos. 1137 of 1969 and 1421 of 1971, D/- 5-10-1971.
Advocates appeared
Mr. M. C. Chagla, Sr. Advocate, (Mr. M. R. K. Pillai, Advocate, with him), for Appellant (In both the Appeals); M/s. S. T. Desai and M. C. Bhandare, Sr. Advocates, (Mr. B. D. Sharma, Advocate, with them). or Respondent (In both the Appeals).
Constitution of India, 1950 – Article 226 – Estate Duty Act 1958 – Section 55 – Hindu Succession Act 1956 – Section 7 – Suit for partition – Assessment – Whether provisions of Succession Act can affect and are relevant for levy of estate duty under Act – (2) What is true effect of provisions of Section 7 (3) of Succession Act – (3) Whether estate duty would be leviable on entire property which belonged to Sthanamdar or it can be levied only on 1/114th share in Sthanam properties to which alone deceased Thampan would have been entitled if a partition had taken place under Section 7 (3) of Succession Act immediately before his death – Held, Section 7 (3) merely creates a legal fiction for purpose of distribution of properties which is to take place after death of Sthanamdar and that being sole purpose for which legal fiction was introduced it could not be extended further so as to include an actual division or partition having been effected in lifetime of Sthanamdar with result that he became a divided member for all purposes – Legal fiction created by words "as if Sthanam property had been divided per capita immediately before death of Sthanamdar" appears to be meant solely for purpose of gradually liquidating Sthanams and distributing Sthanam properties amongst members of Sthanee s tarwad and his personal heirs without infringing provisions of Constitution. – It may be pointed out that neither members of tarwad nor personal heirs of Sthanee had any interest in Sthanam properties. – First part of Section 7 (3) clearly provides that property which passes on death of Sthanamdar is whole of Sthanam property held by him. – Second part only deals with distribution of that property. – Court have no doubt that High Court was right in saying that word "devolve" as used in first part has meaning given to it by Leach M. R. in Parr v. Parr, (1833) 2 LJ Ch 167 of passing from a person dying to a person living – Sthanam property held by Sthanamdar has to pass from Sthanamdar to members of family to which he belonged and his heirs Legal fiction in words which have been set out do not cut down Sthanam property that passes on death of Sthanamdar to a per capita share fiction having been introduced only for determining respective shares for purpose of distribution to members of family and heirs of Sthanamdar. – Appeal Dismissed
Certainly. Here are the key points derived from the provided legal document:
The case concerns the extent of property liable to estate duty upon the death of a Sthanee or Sthanamdar in a Hindu family governed by Marumakkattayam law (!) .
The legal question revolves around whether provisions of the Hindu Succession Act, particularly Section 7(3), affect the property subject to estate duty and how the interest of the Sthanamdar in the property is to be interpreted (!) (!) .
The court held that Section 7(3) of the Hindu Succession Act creates a legal fiction of a notional partition immediately before death, which is used solely for the purpose of distribution of Sthanam properties among heirs, and does not reflect an actual division or partition during the Sthanamdar’s lifetime (!) (!) .
The property which passes on the death of the Sthanamdar is the entire Sthanam property held by him, not just a share, and this is consistent with the meaning of "devolve" as passing from a deceased to a living person (!) (!) .
The legal fiction introduced by Section 7(3) is intended only to facilitate the distribution of property after death and should not be extended to imply an actual division during the Sthanamdar’s lifetime, as doing so could infringe constitutional rights (!) (!) .
The nature of Sthanam property is such that the Sthanamdar has a limited estate, with restrictions on alienation, but during his lifetime, he holds the entire property, and the interest ceases only upon his death (!) (!) .
The court emphasized that the purpose of the legal fiction is to liquidate Sthanams gradually and distribute properties among heirs without infringing constitutional provisions, particularly those protecting property rights (!) (!) .
The court ultimately affirmed the view that estate duty is payable on the entire Sthanam property passing on the death of the Sthanamdar, not just a notional share, and dismissed the appeal accordingly (!) .
Please let me know if you need further analysis or specific legal interpretations.
Judgment
GROVER J.:- This is an appeal by special leave from a judgment of the Kerala High Court in which a question of substaintial importance arises relating to the extent of the property that attracts Estates Duty on the death of a Sthanee or Sthanomdar in a Hindu family governed by the Marumakkattayam Law.
2. It may be mentioned that Civil Appeal No. 1137/69 was brought to this Court by certificate against the same judgment but the certificate is defective for want of reasons and has therefore to be revoked.
3. One K. K. Thampan who was the third stanomdar of Kuthiravattithu Family died on May 17, 1960. The Sthanam owned several properties such as forest lands, agricultural lands, buildings etc. The deceased also owned several properties in his personal capacity. After his death a suit for the partition of the Sthanam was filed in a civil court by the various members of the Tarwad. The appellant before us was appointed a Receiver of the properties covered by the third Sthanam of which the Sthanamdar was the deceased K. K. Thampan. The Receiver was, in these circumstances, treated as an accountable person in respect of the Sthanam properties. Pursuant to a notice issued under Section 55 of the Estate Duty Act 1958, hereinafter called the "Act", by the Assistant Controller of Estate Duty (respondent herein) the appellant filed the necessary accounts. But he raised a contention in the assessment proceeding that according to Section 7 (3) of the Hindu Succession Act 1956, hereinafter called the "Succession Act ", the deceased Thampan was entitled only to 1/114th share in the properties in the Sthanam and therefore only that share could be taken into account indetermining the principal value of the estate liable to duty. The respondent, however, held that the entire estate passed on the death of the deceased and was liable to duty. The appellant filed a petition under Article 226 of the Constitution challenging the assessment order. A learned single Judge of the High Court allowed the petition and quashe the assessment order. The respondent filed an appeal before a division bench of the High court which was heard by a Full Bench together with other appeals involving a similar point. Before the High court it was not disputed by the appellant that if the Act stood alone the entire properties of the Sthanam were liable to estate duty under the Act. The sole contention was that Section 7 (3) of the Succession Act made a difference inasmuch as by virtue of the partition postulated under that provision immediately before the death of the Sthanamdar the property that passed or should be deemed to pass on the death of the Sthanamdar was only his per capita share of the Sthanam property and not the whole property of the Sthanam. The Full Bench negatived the contention of the appellant and held that on the death of the Sthanamdar the whole of the Sthanam property passed and was deemed to pass and the Estate duty was payable on the whole of the property.
4. The Act was enacted to provide for the levy and collection of estate duty. Section 5 (1) provides for levy of estate duty and says, inter alia, that in the case of every person dying after the commencement of the Act there shall, save as expressly provided, be levied and paid upon the principal value ascertained as provided of all property settled or not settle which passes on the death of such person a duty called "estate duty" at the rate fixed in accordance with Section 35. Section 7, to the extent it is material, is reproduced below:-
"S. 7. Interests ceasing on death.- (1) Subject to the provisions o this section, property in which the deceased or any other person had an interest ceasing on the death of the deceased shall be deemed to pass on the deceased s death to the extent to which a benefit accrues or arises by the cesser of such interest, including, in particular, a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or
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