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IN THE HIGH COURT OF MADHYA PRADESH (INDORE BENCH)
G.L. Oza, P.D. Mulye, JJ.
Maharaja Bahadursingh Kasliwal
Vs.
Controller of Estate Duty
Miscellaneous Civil Case Nos. 132 and 133 of 1976
Decided On: 30.01.1978
ESTATE DUTY - Partition of HUF - Deceased's share in HUF assets - Valuation of jewellery - Insurance policies - Deemed to pass on death.
Fact of the Case:
The deceased, Premkumari Devi, died on 30th April, 1958. She was the wife of Shri Rajkumarsinghji. There was a partition of the HUF of Sir Seth Hukumchand on 31st March, 1950. In this partition, Sir Seth Hukumchand, his wife, Lady Kanchanbai, and Shri Rajkumarsinghji shared the assets each one getting one-third. Shri Rajkumarsinghji, in addition to the one-third share that he got on partition of the HUF, also got from Sir Seth Hukumchand and his wife substantial properties in terms of jewellery and other things and Rajkumarsinghji then executed a deed of partition of his HUF constituted of himself, his wife and five sons. In this partition, he not only partitioned the assets that he got as his one-third share in the HUF of his father but also partitioned the jewelleries and other valuables that he received as gift from his father and mother.
Finding of the Court:
1. The deceased did not get only 1/21 share of the assets of the original HUF of Sir Seth Hukumchand but got something more, as she also got one-seventh share in the jewellery and valuables that Shri Rajkumarsinghji got as gift from his father and mother, consequently, she should be given the benefit of deducting proportionate liability of tax relating to the bigger HUF, than 1/21 share. 2. The valuation of the jewellery as mentioned by the approved valuer was reasonable and there was no justification to adopt the subsequent sale of jewellery in 1960 as basis for valuation. 3. The Tribunal was justified in holding that the Appellate CED was not right in including Rs. 25,687 the 1/7th share of the deceased in the life insurance policies to the "principal value of the estate of the deceased even though the premiums were paid out of funds of the joint family in which the deceased had 1/7th share."
Issues: 1. Whether, on the facts and in the circumstances of the case, there was justification in allowing only 1/21 share of tax liability of Sir Hukumchand, HUF, instead of the 1/7th or any higher proportion of liabilities ? 2. Whether, on the facts and in the circumstances of the case, there was any justification, in law, to adopt the subsequent sale of jewellery in 1960 as basis for valuation despite the approved valuer's valuation ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Appellate CED was not right in including Rs. 25,687 the 1/7th share of the deceased in the life insurance policies to the "principal value of the estate of the deceased even though the premiums were paid out of funds of the joint family in which the deceased had 1/7th share?
Ratio Decidendi: 1. A partition in a HUF cannot be considered either as 'disposition' or 'conveyance' or 'assignment' or 'settlement' or 'delivery' or 'payment' or 'alienation' within the meaning of those words in Section 2(xxiv) of the Gift Tax Act. 2. A policy of insurance on the life of a deceased person effected by virtue or in consequence of a settlement made by the deceased shall be treated as having been effected by the deceased. 3. The value of the policy will be the property of the person in whose name the policies were taken and not of the HUF from where the premiums were paid.
Final Decision: 1. The first question in Misc. Civil Case No. 133 of 1976 is answered in the affirmative and the second in the negative. 2. The third question in the reference at the instance of the department (MCC No. 133 of 1976) is answered in the affirmative. 3. The first question in Misc. Civil Case No. 132 of 1976 is answered that there is no justification in allowing only 1/21 share of tax liability. 4. The second question in Misc. Civil Case No. 132 of 1976 is answered in the negative.
Oza, J.
1. This and Misc. Civil Case No. 133 of 1976 are references made by the Income Tax Appellate Tribunal, Indore, one at the instance of the accountable person and the other at the instance of the Controller of Estate Duty.
2. The facts relevant for the purpose of disposal of these two references are:
3. These references arise out of the estate duty payable on the death of the deceased, Premkumari Devi, who died on 30th April, 1958. Premkumari Devi was the wife of Shri Rajkumarsinghji. The genealogical tree of the family is as follows :
Sir Hukumchand (Karta) Lady Kanchanbai (wife) | Sri rajkumarsinghji (son) Smt. Premkumari Devi (wife) __________________________|______________________________ | | | | | Rajabhadur Maharaja Jambu Chandra Yashkumar Singh Bahadur Kumar Kumar Singh (son) Singh Singh Singh (son) (son) (son)
4. There was a partition of the HUF of Sir Seth Hukumchand on 31st March, 1950. In this partition, Sir Seth Hukumchand, his wife, Lady Kanchanbai, and Shri Rajkumarsinghji shared the assets each one getting one-third. Shri Rajkumarsinghji, in addition to the one-third share that he got on partition of the HUF, also got from Sir Seth Hukumchand and his wife substantial properties in terms of jewellery and other things and Rajkumarsinghji then executed a deed of partition of his HUF constituted of himself, his wife and five sons. In this partition, he not only partitioned the assets that he got as his one-third share in the HUF of his father but also partitioned the jewelleries and other valuables that he received as gift from his father and mother. Thus, Smt. Premkumari Devi not only got one-seventh share out of the one-third which Seth Rajkumarsinghji got but also got one-seventh share in the jewellery and other valuables which came to Shri Rajkumarsinghji as gift from his father and mother.
5. There was also liability on the HUF of Sir Seth Hukumchand as arrears of Income Tax due to the Income Tax department and when Shri Rajkumarsinghji partitioned his HUF the liabilities of the Income Tax also fell to the share of all the members of the HUF including deceased Premkumari Devi. It was, therefore, contended that Premkumari Devi on partition did not get only 1/21 share of the assets of the original HUF of Sir Seth Hukumchand but got something more, as she also got one-seventh share in the jewellery and valuables that Shri Rajkumarsinghji got as gift from his father and mother, consequently, she should be given the benefit of deducting proportionate liability of tax relating to the bigger HUF, than 1/21 share. As this contention was not accepted and she was only allowed deduction of 1/21 share of the tax liability of the HUF of Sir Seth Hukumchand and one-seventh of the tax liability finally determined in the case of the Hindu divided family of Shri Rajkumarsinghji, therefore, the accountable person sought reference on this question.
6. The next item of dispute is about the valuation of the jewellery. The accountable person valued the jewellery and ornaments held by the deceased at Rs. 7,45,820. This was done on the basis of valuation made by an approved valuer for wealth-tax purposes and it is reported that it was accepted for the wealth-tax purposes. The Dy. CED, however, found that out of this jewellery two items which were valued by the approved valuer at Rs. 5,50,000 were in fact sold for Rs. 6,31,000 after the death of the deceased. The Dy. CED, therefore, did not accept the valuation as mentioned by the approved valuer but estimated the value of the jewellery on the death of the deceased at Rs. 8,50,000 instead of Rs. 7,45,820 as valued by the valuer.
7. On these facts, the Tribunal has referred the following two questions :
"(1) Whether, on the facts and in the circumstances of the case, there was justification in allowing only 1/21 share of tax liability of Sir Hukumchand, HUF, instead of the 1/7th or any higher proportion of liabilities ?
(2) Whether, on the facts and in the circumstances of the cas
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