Judgment

FAZAL ALI, J. - This appeal by certificate is directed against Full Bench judgment of the Madras High Court dated December 5, 1969 - Alladi Kuppuswami v. Controller of Estate Duty. Madras, 76 ITR 500 : (AIR 1970 Mad 366) (FB) by which the reference made to the High Court by the Central Board of Revenue was answered in favour of the accountable person and against the Revenue. The case involves an interesting and important question of law in respect of ambit and scope of Sections 7 (1) & (2) as also 39 of the Estate Duty Act, 1953 - hereinafter referred to as the Act. 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 of the Estate Duty Act, 1953, but during his lifetime he had settled certain properties absolutely on his wife Smt. Alladi Venkalakshmamma - to be referred in short as Smt. Alladi - and he had also declared certain other properties to form 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 of the Hindu Succession Act, 1956 and the Assistant Controller of Estate Duty valued her estate at a total amount of Rs. 7.25,527 including a sum of Rs. 2,02, 271 being the value of her 1/4 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 properties 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 pass 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 Central Board of Revenue which upheld the order of the Assistant Controller of Estate Duty.

2. Thereupon the respondent moved the Board of Revenue to make a reference to the High Court of Madras for decision of the questions of 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 S. 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 S. 7 of the 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 power of the Union Legislature?

3. Whether, on the facts and in the circumstances of the case, the accrued interest on fixed deposits in Government securities up to the date of death of the deceased was correctly included in her estate under Sec. 34 (2) of the Estate Duty Act. 1953?"

Although three questions had been referred to the High Court by the Board, a