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Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • M.M Dutt, J.
Acts
  • section 34(1)(c) of the Estate Duty Act, 1953, hereinafter referred
  • section 33B of the Indian Income-tax Act, 1922,
  • section. Sub-section (1) of section 5,
  • provision of section 34(1)(c)
  • section 35. Section 7(1)
  • section 34(1)(c):34.(1)
  • section 34(1)(c),
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • M.M Dutt, J.
Acts
  • section 34(1)(c) of the Estate Duty Act, 1953, hereinafter referred
  • section 33B of the Indian Income-tax Act, 1922,
  • section. Sub-section (1) of section 5,
  • provision of section 34(1)(c)
  • section 35. Section 7(1)
  • section 34(1)(c):34.(1)
  • section 34(1)(c),
See more information ...
Smart Summary

Judgment Summary

Factual and Procedural Background

This rule concerns the construction of section 34(1)(c) of the Estate Duty Act, 1953 ("the Act"). Hanuman Prasad Saraf, governed by the Mitakshara school of Hindu law and acting as karta of his Hindu undivided family, died on January 21, 1961. The opinion identifies members of his family relevant to the dispute: his son Satyanarayan Saraf (the petitioner and the accountable person under the Act), his grandson Bhagawati Prasad, and the deceased's wife Durga Debi; the wife's (of the son) entitlement (the son's wife, i.e. the daughter-in-law) also plays a key role in the dispute.

By an order dated August 31, 1964, respondent No. 1 (Assistant Controller) assessed the principal value of the deceased's estate at Rs. 3,00,416 in respect of his 1/3 interest in the joint family property and determined estate duty at Rs. 2,01,952.26. The petitioner appealed to the Appellate Controller. During that appeal, respondent No. 1 served a notice proposing rectification under section 61 and, by order dated January 7, 1965, aggregated the 2/3 share of Satyanarayan and his son with the deceased's 1/3 and enhanced the duty. The respondent disallowed the petitioner's contention that the 1/9th share of the son's wife (who was not a lineal descendant) should be excluded for aggregation under section 34(1)(c).

The Appellate Controller declined to entertain the petitioner's additional grounds attacking the rectification order on the ground that an order under section 61 was not appealable. The Appellate Tribunal agreed (order dated December 12, 1967). The petitioner then brought the matter to the High Court under article 226 of the Constitution (rule issued April 29, 1968). The High Court heard the construction of section 34(1)(c) and related procedural objections and ultimately issued relief as described below. The Court stayed operation of its judgment for four weeks to permit an appeal.

Legal Issues Presented

  1. How is section 34(1)(c) of the Estate Duty Act, 1953 to be construed in respect of aggregation of interests where the property consists of a coparcenary interest governed by Mitakshara law?
  2. Whether, for purposes of aggregation under section 34(1)(c), the notional partition required to compute principal values should give effect to Hindu law rules of partition (including entitlement of a daughter-in-law/wife on a notional partition between father and son) so that shares not belonging to lineal descendants are carved out before aggregation?
  3. Whether the petitioner was precluded from relief under article 226 by the availability of alternative remedies (specifically, remedies under section 64 or other provisions of the Act) or by the fact that an order under section 61 was said not to be appealable?

Arguments of the Parties

Petitioner's Arguments

  • The petitioner (Satyanarayan), through his authorised representative, contended that in computing aggregation under section 34(1)(c) the 1/9th share which, on a notional partition, would fall to the wife of the petitioner's son (i.e., the daughter's-in-law share) should be excluded because she is not a lineal descendant of the deceased.
  • The petitioner challenged the legality of respondent No. 1's order under section 61 as it aggregated the estate improperly by failing to exclude the non-lineal descendant's share.
  • The petitioner also pursued relief under article 226 after tribunals held that an order under section 61 was not appealable; he argued that available statutory procedures would not provide the same relief and therefore a writ was maintainable.

Respondents' Arguments

  • Respondent No. 1 (and counsel Mr. Pal) argued that for the purposes of aggregation the son's wife should not be "brought into the picture" — i.e., the entire 1/3 that would notionally be allotted to the son should be aggregated (thereby excluding from consideration any fractional share for the son's wife).
  • The respondents also contended that the petitioner had an alternative remedy under section 64 (and could have sought a reference) and therefore the High Court should not entertain the writ petition under article 226; they relied upon precedents to support the contention that the existence of an alternative remedy could bar writ relief.
  • The respondents relied on the view taken by the Appellate Controller and the Appellate Tribunal that an order under section 61 was not appealable under section 62(1) as a basis for denying the petitioner's remedies before the tribunals.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Appovier v. Rama Subba Aiyan, [1866] 11 MIA 75 (PC) Principle that partition may be notional and that shares may be ascertained without actual metes and bounds division (definition of partition under Mitakshara law). The Court relied on the case to support the proposition that section 39 contemplates a notional partition immediately before death to ascertain principal value and that notional partitions are an accepted concept under Mitakshara law.
Ramanathan Chettiar v. Assistant Controller of Estate Duty, [1970] 76 ITR 402 (Madras High Court) Decision concerning aggregation issues under estate duty law (specifics in that case not detailed in the opinion). The Court stated that this decision does not militate against or have bearing on the view taken in the present case.
H.V. Somaraju v. Govt. of India, [1974] 97 ITR 97 (Andhra Pradesh High Court) Decision concerning estate duty issues (specifics not discussed in the opinion). The Court observed that this decision likewise does not affect the Court's conclusion and has no bearing on the point in issue.
Gita Devi Aggarwal v. Commissioner of Income-tax, [1970] 76 ITR 496 (Supreme Court) Illustration of the principle that availability of an alternative remedy may bar relief under article 226 where the petitioner has not adequately explained bypassing statutory remedies. The Court distinguished that case on facts: in Gita Devi the petitioner bypassed statutory remedies without explanation, whereas here the petitioner had attempted tribunal remedies and those tribunals held no appeal lay; thus the Supreme Court decision was not applicable.

Court's Reasoning and Analysis

The Court proceeded by first identifying the statutory framework: section 5 (charging section), section 7(1) (property deemed to pass on death to the extent a benefit accrues by cesser of interest), section 39(3) (principal value of coparcenary interest is the share which would have been allotted on a partition immediately before death), and section 34(1)(c) (aggregation for rate-determination purposes of interests in joint family property of the lineal descendants).

Step 1 — Principal value and notional partition: The Court held that to determine principal value under section 39 a notional partition immediately before death must be presumed. It relied on established Mitakshara principles (citing Mulla's Hindu Law, article 315) that where partition occurs between a husband and his sons, the wife is entitled to a share equal to that of a son and to hold that share separately.

Step 2 — Application to the facts: Applying that principle, if a notional partition had occurred immediately before Hanuman Prasad's death among Hanuman Prasad, his son Satyanarayan and his wife Durga Debi, each would be entitled to 1/3. The deceased's 1/3 share thus passes on death and must be valued accordingly.

Step 3 — Aggregation under section 34(1)(c): The Court analysed section 34(1)(c), which requires aggregation of the interests in the joint family property of all the lineal descendants with the property passing on the death to form one estate. The lineal descendants of Hanuman Prasad were identified as his son Satyanarayan and his grandson Bhagawati Prasad. To ascertain their shares for aggregation, the Court held a notional partition of the smaller undivided family (between Satyanarayan and his son) must be undertaken. Under Mitakshara principles, in that notional partition the wife of Satyanarayan would be entitled to a share equal to the son, resulting in shares of 1/9 each for Satyanarayan, his wife, and his son (given the 1/3 attributable to the son in the larger notional division).

Step 4 — Rejection of the respondents' contention: The respondents had ignored the share that would have been allotted to the son's wife and argued that the whole 1/3 notionally allotted to Satyanarayan should be aggregated. The Court rejected that contention, reasoning that section 34(1)(c) does not override the principles of Hindu law relating to partition. Where a person other than a lineal descendant (here the son's wife) is entitled to a share on notional partition, that share must first be allotted to that person; aggregation should proceed only with the shares of the lineal descendants after such allotment. Accordingly, the shares to be aggregated were 1/9 (Satyanarayan) + 1/9 (grandson) = 2/9.

Step 5 — Procedural/alternative remedy objection: The respondents argued that the petitioner had an alternative remedy under section 64 and therefore the writ was not maintainable. The Court explained that while the existence of an alternative remedy can be a bar to article 226 relief, it is not absolute and depends on facts and circumstances. Here the petitioner had challenged the rectification order before both tribunals and they had held that no appeal lay. The Court found that the statutory reference procedure under section 64 would not necessarily give the petitioner the same relief and that the petitioner had not been negligent. The Court therefore rejected the respondents' contention that the writ was barred by the availability of an alternative remedy, distinguishing the cited Supreme Court decision (Gita Devi Aggarwal) on its facts.

Holding and Implications

Holding:

The rule was made absolute in part. Specifically, the High Court quashed the impugned order of respondent No. 1 dated January 7, 1965 insofar as it had taken into consideration the 1/9th share of the petitioner's wife for the purpose of aggregation under section 34(1)(c) of the Act. The Court directed (by way of mandamus) that respondent No. 1 should take into consideration only the shares amounting to 1/9 + 1/9 = 2/9 (Satyanarayan and his son) for aggregation, reassess the estate duty accordingly, and refund any sum found due to the petitioner on reassessment. The rule was made absolute to that extent. There was no order as to costs. The Court stayed operation of its judgment for four weeks to enable the respondents to prefer an appeal.

Implications:

  • The direct effect is that the estate duty must be reassessed by respondent No. 1 on the basis that only the 2/9 share (1/9 + 1/9) of the lineal descendants is to be aggregated with the deceased's share; any overpaid duty must be refunded to the petitioner pursuant to reassessment.
  • The Court applied and reaffirmed that notional partition under Mitakshara law and the corresponding entitlements (including a wife's entitlement on a notional partition between father and son) must be respected when computing principal value and aggregation under section 34(1)(c); section 34(1)(c) does not displace those Hindu law principles.
  • The opinion addressed the procedural point that the availability of a statutory alternative remedy is not an absolute bar to relief under article 226; the Court exercised discretion to grant relief given the tribunals' views that no appeal lay and the inability of section 64 references to guarantee equivalent relief in the circumstances. The Court distinguished the Supreme Court authority relied upon by the respondents on its facts.
  • The opinion contains no pronouncement that it is creating a new, sweeping precedent beyond the application to the facts; its holding is narrowly confined to the correct method of ascertaining shares for aggregation under section 34(1)(c) in the factual matrix before the Court.
Show full summary ...

    Satyanarayan Saraf v. Assistant Controller, A-Ward, Estate Duty-Cum-Income-Tax Circle

    M.M Dutt, J.:— This rule involves the construction of section 34(1)(c) of the Estate Duty Act, 1953, hereinafter referred to as “the Act”.

    2. One Hanuman Prasad Saraf, who was governed by the Mitakshara school of Hindu law and was the karta of the Hindu undivided family, died on January 21, 1961. He was survived by the following members of his family:

    3. The petitioner, Satyanarayan Saraf, who is the son of Hanuman Prasad, is the accountable person in respect of the estate of the deceased within the meaning of the Act. The respondent No. 1, Assistant Controller, ‘A’ Ward, Estate Duty-cum-Income-tax Circle, by his order dated August 31, 1964, assessed the principal value of the estate of the deceased, Hanuman Prasad, at Rs. 3,00,416 in respect of his ⅓rd interest ceasing on his death in the joint family property of the said Hindu undivided family including a gift of Rs. 12,540 and determined Rs. 2,01,952.26 as the amount payable on account of estate duty. Against the said order, the petitioner preferred an appeal to the Appellate Controller of Estate Duty, Calcutta. During the pendency of the appeal, the respondent No. 1 served a notice upon the petitioner proposing to rectify a mistake apparent from the record. It was alleged that in assessing the duty payable in respect of the estate of the deceased, Hanuman Prasad, his ⅓rd interest in the undivided family had been taken into consideration but for the purpose of aggregation under section 34(1)(c), the interest of the lineal descendants of the deceased in the joint family property had not been considered. Thereafter, the respondent No. 1, by his order dated January 7, 1965, aggregated the ⅔rds share of Satyanarayan and his son, Bhagawati Prasad, with the ⅓rd interest of the deceased and enhanced the duty, overruling the contention of the petitioner that the 1/9th share of the son's wife of the deceased, that is, the wife of Satyanarayan, who was not a lineal descendant, should have been excluded for the purpose of aggregation. The relevant portion of the order of respondent No. 1 under section 61 is as follows:

    “Shri A. Chatterjee, authorised representative of the accountable person, appears and states that he has no objection to the inclusion of the value of properties falling to the lot of lineal descendants of the deceased, provided that 1/9th of the entire joint properties which, in the event of a partition, would have been allotted to the wife of the son, would not form part of the estate even for aggregation, as she is not the lineal descendant of the deceased. This contention of the authorised representative of the accountable person cannot be accepted. What we are concerned with here is a notional partition amongst the members of the family of which the deceased was a coparcener. We need go no further to effect such partition in sub-coparcenaries. The value of the estate falling to the lot of the deceased's son has to be taken for aggregation purpose without allowing him for any deduction for the share of the daughter-in-law of the deceased.”

    4. As the appeal against the original order of assessment was pending before the Appellate Controller when the order of rectification was passed by the respondent No. 1, the petitioner took certain additional grounds before the Appellate Controller challenging the propriety of the order of the respondent No. 1 passed under section 61 of the Act. The Appellate Controller, however, took the view that an order under section 61 was not an appealable order. In that view of the matter, he did not entertain the contentions made on behalf of the petitioner. The appeal was allowed in part on merits in respect of the original assessment. Against the said order of the Appellate Controller, the petitioner preferred an appeal to the Appellate Tribunal. Before the Tribunal, the petitioner, inter alia, challenged the legality of the said order of the respondent No. 1 passed under section 61 of the Act. The Appellate Tribunal, by its order dated December 12, 1967, however, took the same view as that of the Appellate Controller that the order of rectification under section 61 was not an appealable order as it does not come under any of the clauses of section 62(1) of the Act. It was observed by the Appellate Tribunal that if the order under section 61 was not properly passed, the accountable person would have all other remedies other than those under section 62. The petitioner, thereafter, moved this court under article 226 of the Constitution against the said order of rectification of the respondent No. 1 and obtained the present rule on April 29, 1968. Section 5 of the Act is the charging section. Sub-section (1) of section 5, inter alia, provides that in the case of every person dying after the commencement of the Act there shall be levied and paid upon the principal value a duty called “estate duty” at the rate fixed in accordance with section 35. Section 7(1) provides, inter alia, that 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 law. Section 39(3) lays down that the value of the benefit accruing or arising from the cesser of a coparcenary interest in any joint family property governed by the Mitakshara school of Hindu law which ceases on the death of a member thereof shall be the principal value of the share in the joint family property which would have been allotted to the deceased had there been a partition immediately before his death. Now I may refer to section 34(1)(c):

    “34.(1) For the purpose of determining the rate of the estate duty to be paid on any property passing on the death of the deaceased,—…

    (c) in the case of property so passing which consists of a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law, also the interests in the joint family property of all the lineal descendants of the deceased member;

    shall be aggregated so as to form one estate and estate duty shall be levied thereon at the rate or rates applicable in respect of the principal value thereof.”

    5. For the purpose of aggregation under section 34(1)(c), there can be no doubt that the principal value has to be ascertained first. Section 39 lays down that the principal value is the value of the share of the deceased in the joint family property which would have been allotted to him had there been a partition immediately before his death. It is, therefore, clear that section 39 contemplates a notional partition of the joint family property immediately before the death of the deceased in order to ascertain the principal value. Under the Hindu law a wife cannot herself demand a partition but if a partition takes place between her husband and his sons, she is entitled to receive a share equal to that of a son and to hold and enjoy that share separately even from her husband (article 315 of Mulla's Hindu Law, 13th edition, page 365). If immediately before the death of Hanuman Prasad a partition had taken place between him and his sons, his wife, Durga Debi, would have been entitled to a share equal to that of a son's share. The shares of Hanuman Prasad; his son, Satyanarayan, and his wife, Durga Debi, would be ⅓rd each. The ⅓rd share of Hanuman Prasad obtained by such notional partition passed on his death. Now I may consider the question of aggregation under section 34(1)(c) of the Act. Under the provision of that section the interests in the joint family property of all the lineal descendants of the deceased shall be aggregated with the property passing on the death of the deceased so as to form one estate and estate duty hall be levied thereon at the rate or rates applicable in respect of the principal value thereof. The lineal descendants of Hanuman Prasad are his son, Satyanarayan, and his grandson, Bhagawati Prasad. Satyanarayan, his son and his daughter constituted the smaller Hindu undivided family. According to the true notion of an undivided Mitakshara family, no individual member of that family, whilst it remains undivided, can predicate of the joint property, that he—that particular member—has a certain definite share, one-third or one-fourth. Partition, according to that law, consists in a numerical division of the property; in other words, it consists in defining the shares of the coparceners in the joint property; an actual division of the property by metes and bounds is not necessary (Appovier v. Rama Subba Aiyan, [1866] 11 MIA 75 (PC)). In order to ascertain the shares of the lineal descendants of Hanuman Prasad a notional partition of the smaller Hindu undivided family is also contemplated between Satyanarayan and his son, Bhagawati Prasad. Such a partition being one between the father and the son, the wife of Satyanarayan will be entitled to receive a share equal to that of her son, Bhagawati. In view of the well-settled principle of Hindu law as stated in article 315 of Mulla's Hindu Law referred to above, on such a partition Satyanarayan, his wife and his son would each be entitled to 1/9th share in the joint family property. The shares of the lineal descendants, namely, that of Satyanarayan and Bhagawati, which will be taken for the purpose of aggregation, are 1/9th+1/9th = 2/9ths.

    6. The respondent No. 1, however, has ignored the share “that would have been allotted to the wife of Satyanarayan for the reasons which have been already stated above. Mr. Pal, learned advocate for the respondents, has strenuously urged that for the purpose of ascertaining the shares of the lineal descendants of Hanuman Prasad, the son's wife should not be brought into the picture, but the shares should be allotted only between Satyanarayan and his son. In other words, it is contended by him that the whole of ⅓rd share that would have been allotted to Satyanarayan on a partition between him and his deceased father should be aggregated. I am unable to accept this contention. The provision of section 34(1)(c) does not override the principles of Hindu law relating to partition of property belonging to a Hindu undivided family governed by the Mitakshara law. In my opinion, as notional partition has to be taken resort to for the purpose of working out the shares of the deceased and his lineal descendants, full effect should be given to the principles, of Hindu law relating to partition of property belonging to a Hindu undivided family governed by the Mitakshara law. If any person other than a lineal descendant is entitled to a share, such share should be allotted to him and after such allotment the shares of the lineal descendants will be ascertained. The decision of the Madras High Court in Ramanathan Chettiar v. Assistant Controller of Estate Duty [1970] 76 ITR 402 and that of the Andhra Pradesh High Court in H.V Somaraju v. Govt. of India, [1974] 97 ITR 97 do not militate against the view which I have taken, nor have they any bearing on the point with which we are concerned. I am, therefore, of the view that the respondent No. 1 was not justified in not taking into consideration the 1/9th share of Satyanarayan's wife for the purpose of aggregation under section 34(1)(c). The shares of the lineal descendants which are to be aggregated with the shares of the deceased in the joint family property are 1/9th + 1/9th = 2/9ths, as stated already.

    7. Before I part with this case, I may dispose of one technical objection raised on behalf of the respondents. It is contended that there was an alternative remedy for challenging the propriety of the order of the respondent No. 1 under section 64 of the Act, and as the petitioner has not availed himself of that remedy, the writ petition was not maintainable at his instance. It is now well settled that though the existence of an alternative remedy is a bar to the granting of reliefs under article 226 of the Constitution, yet it is not an absolute bar. It depends on the facts and circumstances of each case whether this court should exercise its jurisdiction under article 226 when there is an alternative remedy available to the petitioner. In the instant case, the petitioner admittedly challenged the propriety of the order of the respondent No. 1 passed under section 61 before the Appellate Controller and thereafter before the Appellate Tribunal, but he failed on the ground that no appeal lay against such an order. It is said on behalf of the respondents that the petitioner could make an application to the Appellate Tribunal requiring it to refer to this court the point of law, namely, whether an appeal lay from an order under section 61. In my opinion, the provision for reference to the High Court under section 64 of the Act is not an alternative remedy which could give to the petitioner the same relief as he may have in a proceeding under article 226. In the case of such a reference the High Court might or might not have decided the point in favour of the petitioner. If the point had been decided against the petitioner, he would have to move this court under article 226 challenging the order of the respondent No. 1 under section 61. The point involved is a point of law simpliciter. The petitioner, as stated before, made his best endeavour to assail the order of the respondent No. 1. There was no negligence on the part of the petitioner and he came to this court within a reasonable time. In those circumstances, I am of the view that there is no substance in the contention of the respondents that the existence of the alternative remedy is a bar to the present writ petition under article 226 of the Constitution. The facts and circumstances of the decision of the Supreme Court in Gita Devi Aggarwal v. Commissioner of Income-tax, [1970] 76 ITR 496, relied on by Mr. Pal, are different from those in the present case. The petitioner in that case, instead of preferring an appeal against an order under section 33B of the Indian Income-tax Act, 1922, took recourse to the special jurisdiction under article 226 of the Constitution without any explanation justifying the same. In the present case, both the Tribunals held that no appeal lay against an order passed under section 61 and that is also the contention of the respondents. The said decision, in my opinion, is not applicable to the present case. The contention of the respondent is accordingly, rejected.

    8. It may be recorded that Mr. Bhabra, appearing for the petitioner, has expressly abandoned the additional grounds taken by the petitioner by an amendment of the writ petition challenging the vires and constitutionality of section 34(1)(c).

    9. For the foregoing reasons, the rule must succeed. It is, accordingly, directed that a writ in the nature of certiorari issue quashing the impugned order of the respondent No. 1 dated January 7, 1965 (annexure “C” to the writ petition) only in so far as he has taken into consideration the 1/9th share of the wife of the petitioner for the purpose of aggregation under section 34(1)(c) of the Act. Further, it is directed that a writ in the nature of mandamus issue commanding the respondent No. 1 to take into consideration only 1/9th + 1/9ths = 2/9th shares of Satyanarayan and his son for the purpose of aggregation and reassess the estate duty accordingly, and refund such sum to the petitioner as may be found due to him on such reassessment. The rule is made absolute to the extent indicated above. There will be no order as to costs.

    10. As prayed for on behalf of the opposite parties, let the operation of this judgment remain stayed for a period of four weeks from date so as to enable them to prefer an appeal against the same.

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    Comments

    Satyanarayan Saraf v. Assistant Controller, A-Ward, Estate Duty-Cum-Income-Tax Circle
    (Jun 16, 1976)