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Shantabai Jadhav v. Controller Of Estate Duty

Andhra Pradesh High Court

Jul 31, 1963

Judgment

CaseIQ

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Factual and Procedural Background

The Central Board of Revenue referred two questions of law to the Court under section 64(1) of the Estate Duty Act concerning the estate of Shankar Rao Jadhav, a deceased Civil Surgeon. The deceased passed away on 9th October 1956, survived by his widow Shantabai and eight children. The widow and some children, as accountable persons under section 53(1) of the Act, filed an account of the estate declaring its principal value at Rs. 88,115. The Assistant Controller of Estate Duty, Hyderabad, however, determined the principal value at Rs. 2,10,002 by including two contested assets: Rs. 10,000 as the value of jewellery allegedly possessed by the deceased at death, and Rs. 35,000 as the value of a garden at Tooli Chowki, which was registered in the widow's name but claimed to belong to the deceased.

The widow disputed these additions, asserting that the jewellery was minimal and belonged to female family members, and that the garden was purchased with her own funds or, alternatively, gifted to her by the deceased. The Assistant Controller rejected these claims and included both items in the estate value, prompting the legal reference.

Legal Issues Presented

Whether, on the facts and circumstances, there was evidence to justify the addition of Rs. 10,000 as the value of jewellery in the estate of the deceased.
Whether, on the facts and circumstances, there was evidence to justify the inclusion of the garden at Tooli Chowki in the estate of the deceased.

Arguments of the Parties

Applicant (Widow Shantabai)'s Arguments

The jewellery was very little and belonged to the ladies in the family, not the deceased.
The garden property was purchased with her own money and stood in her name.
If the garden was purchased with the deceased's money, it should be deemed a gift to her.

Assistant Controller of Estate Duty's Arguments

The jewellery valued at Rs. 10,000 was admitted by the deceased in wealth statements filed before the Income-tax Officer and should be included in the estate.
The garden purchase consideration was furnished by the deceased, and he treated the property as his own in wealth statements.
The claim of gift was rejected due to lack of evidence showing intention to gift the property or purchase money.

Central Board of Revenue's Position

Did not dispute that the Assistant Controller must decide if the jewellery existed as the deceased's property at death.
Relied on section 3(1)(b) of the Estate Duty Act to argue that dispositions taking effect out of the deceased's interest are deemed made by him.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

Regarding the jewellery, the Court noted that although the deceased had admitted possession of jewellery valued at Rs. 10,000 in earlier wealth statements, it was not established that he continued to own this jewellery at the time of his death. The Court emphasized that the question must be considered as of the date of death, and thus remanded the issue for fresh decision in light of this principle.

Concerning the garden property, the Court acknowledged that while the sale deed was in the widow’s name, the Assistant Controller found that the deceased furnished the purchase consideration and treated the property as his own. However, the Court held that mere payment by the husband does not establish beneficial ownership if the property stands in the wife’s name. The Court explained that under section 6 of the Estate Duty Act, only property the deceased was competent to dispose of at death is liable to estate duty. Since the property was registered in the wife’s name, the deceased could not dispose of it as his own without a declaration of beneficial ownership, which was not established. The Court rejected the Central Board of Revenue’s reliance on section 3(1)(b) of the Act, noting that the sale deed was executed more than two years before death, and section 9 of the Act did not assist the Revenue.

Therefore, the Court concluded that the garden’s value could not be included in the deceased’s estate.

Holding and Implications

The Court answered the reference accordingly, holding:

The inclusion of Rs. 10,000 as the value of the jewellery in the estate requires further determination as to whether the jewellery existed as the deceased’s property at the time of death.
The inclusion of Rs. 35,000 as the value of the garden at Tooli Chowki in the estate of the deceased is not justified and must be excluded.

The applicant was awarded costs for the reference, including an advocate's fee of Rs. 100. The decision affects the valuation of the estate for estate duty purposes but does not set any new legal precedent beyond the application of existing statutory provisions.

Show all summary ...

Chandra Reddy, C.J:— The two questions of law that are referred to this Court under section 64(1) of the Estate Duty Act by the Central Board of Revenue are:

(1) Whether on the facts and in the circumstances of the case, there was evidence to justify the addition of Rs. 10,000 as the value of jewellery in the estate of the deceased? and

(2) Whether on the facts and in the circumstances of the case, there was evidence to justify the inclusion of the garden at Tooli Chowki in the estate of the deceased?

2. The facts giving rise to this reference are these. One Shankar Rao Jadhav who was a Civil Surgeon under the Government of Hyderabad, died on 9th October, 1956, survived by his widow Shantabai, the applicant in the present reference, and eight children and considerable property. The widow and some of her children, who were accountable persons within the terms of sub-section (1) of section 53 of the Act, filed an account of the estate before the Assistant Controller of Estate Duty, Hyderabad, declaring the principal value thereon at Rs. 88,115. The Assistant Controller, however, determined the principal value of the estate at Rs. 2,10,002. In arriving at the principal value of the estate, he included the following two items of assets:

(i) Rs. 10,000 as the value of the jewellery in the possession of the deceased at the time of his death; and

(ii) Rs. 35,000 as the value of the garden at Tooli Chowki belonging to the deceased, but standing in the name of the wife, Smt. Shantabai.

3. As regards the first item, the applicant had not disclosed any amount towards the value of jewellery left by the deceased in the account of the estate filed by her, The Assistant Controller thought that the first item should be added to the estate of the deceased as it was liable to estate duty in view of the fact that the deceased had admitted possession of jewellery of the value of Rs. 10,000 in the statements of wealth as on 1st April, 1954 and 31st March, 1955, filed by him before the Income-tax Officer in connection with his income-tax assesment. Regarding this item, the widow stated that there was very little jewellery and that too belonged to the ladies in the family. The Assistant Controller refused to accept the statement, and added a sum of Rs. 10,000 as the value of the jewellery.

4. As regards the second item, indisputably the sale deed stands in the name of Shantabai. The finding of the authorities concerned in this behalf was that the consideration was furnished by Shankar Rao, and he also treated it as his own in the statement of wealth by including it in his assets. The case of the widow Shantabai is that she purchased the property with money belonging to her, and that at any rate, if for any reason it was found that she had no stridhana property which could be utilised for the acquisition of the property in dispute the husband should be demed to have made a gift of it to her. This claim was rejected by the Assistant Controller, as the case of gift was quite contrary to the purchase of the property, and that there was absolutely nothing to show that the deceased intended either the purchase money or the property itself as a gift to the applicant.

5. The two questions that arise for consideration are: (1) Whether the Assistant Controller was justified in adding Rs. 10,000 as the value of the jewellery to the estate of the deceased? and (2) Whether the inclusion of Rs. 35,000 being the value of the garden, in the estate of the deceased is justified?

6. As regards the first asset, it is proved that the jewellery was comprehended in the wealth statements of Shankar Rao which were filed by him on 1st, April, 1954 and 31st, March, 1955 before the Income-tax Officer. Then the question remains whether Shankar Rao died possessed of jewellery valued at Rs. 10,000. It is not disputed by the counsel for the Central Board of Revenue that the Assistant Controller has to decide whether these jewellery were in existence as the property of the deceased Shankar Rao at the time of his death. The fact that a year and a half before his demise, jewellery of the value of Rs. 10,000 existed does not by itself establish that the continued to be the owner of these jewellery at the time of his death. So, the question has to be considered as on the date of the death of Shankar Rao. So, this has to go back for a decision in the light of what is stated above.

7. Coming now to the second item, in the opinion of the Assistant Controller, Shantabai, the widow, failed to establish that the sale price came out of her stridhana property and that the had no ostensible resources for the purchase of the property, and that her husband treated this property as his own in the statements of wealth. But, that is not conclusive of the matter when the property stands in the name of his wife. Even assuming that the money for the purchase was found by her husband, it does not mean that the had beneficial interest in the property. Normally, a husband takes a sale in the name of his wife either to make a provision for her or to screen the property from creditors, i.e, to keep it beyond the reach of the creditors. Whatever might be the motive, so long as the deed stands in the name of another person, it could not be said that it was competent for the deceased to dispose of the property. Section 6 of the Estate Duty Act enacts that property which the deceased was at the time of his death competent to dispose of shall be deemed to pass on his death. It is thus manifest from the section that estate duty could be levied in respect of properties which could be disposed of by the deceased at the time of his death.

8. Mr. Kondiah urged that the wife herself could not have alienated the properties by herself and that any disposition by her would not pass title to such purchaser having regard to the fact that it was open to the husband to impeach the sale sometime later on the grond that the beneficial interest always vested in him, the consideration having been paid by him. This argument ignores the provision of section 41 of the Transfer of Property Act.

9. Be that as it may, so long as the document stands in the name of his wife, he could not dispose of the property. It is true it was open to him to have obtained a declaration that he was the beneficial owner thereof notwithstanding the fact tha his wife was the ostensible owner. But, so long as the husband does not have any recourse to those proceedings for obtaining such a relief, he would not have been in a position to dispose of the property standing in the name of a third persons as his own. This proposition is not contested on behalf of the Central Board of Revenue.

10. But Mr. Kondiah relies upon section section 3(1)(b) of the Estate Duty Act which says:

“Fur the purposes of this Act,—

(b) a disposition taking effect out of the interest of the deceased shall be deemed to have been made by him, whether concurrence of any other person was or was not required”.

11. We do not think this section comes to the rescue of the Central Board of Revenue. It is to be borne in mind that the sale deed was taken more than two years before his death. That being so, even section 9 of the Act does not render any assistance to the Central Board of Revenue.

12. It follows that the sum of Rs. 35,000 representing the value of the garden could not be added to the estate of Shankar Rao.

13. The reference is answered accordingly. The applicant will get costs of this reference. Advocate's fee Rs. 100.

14. Answered accordingly.