Estate duty on sthanam property is governed by the full interest passing on death, not a notional partition share.

Estate duty is assessed by reference to the interest that ceases on death, and section 7(3) of the Hindu Succession Act does not alter that charge under the Estate Duty Act. The text explains that the statutory fiction in section 7(3) is confined to post-death distribution among heirs and cannot be extended to create a lifetime notional partition of sthanam property. On that basis, the deceased's full interest in the sthanam property is treated as passing on death for estate duty purposes, rather than only a fractional notional share.

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Issues: (i) Whether section 7(3) of the Hindu Succession Act, 1956 affects the levy of estate duty under the Estate Duty Act, 1953; (ii) Whether section 7(3) creates a notional partition of the sthanam property during the lifetime of the sthanamdar so that only his per capita share passes on death; (iii) Whether estate duty is chargeable on the entire sthanam property or only on the deceased's notional share.

Issue (i): Whether section 7(3) of the Hindu Succession Act, 1956 affects the levy of estate duty under the Estate Duty Act, 1953.

Analysis: For estate duty, the relevant inquiry is the interest in property that ceases on death and the benefit accruing by such cesser. The law governing succession may be looked at to ascertain the deceased's interest, but the estate duty charge remains governed by the Estate Duty Act, 1953. Section 7(3) of the Hindu Succession Act, 1956 operates only to regulate devolution after death and does not, by itself, alter the nature of the property that passed on death under the estate duty law.

Conclusion: Section 7(3) does not reduce the chargeable property under the Estate Duty Act, 1953.

Issue (ii): Whether section 7(3) creates a notional partition of the sthanam property during the lifetime of the sthanamdar so that only his per capita share passes on death.

Analysis: The provision uses a legal fiction that the property had been divided per capita immediately before death, but the fiction is confined to the purpose for which it was created, namely distribution among the family members and the personal heirs. It does not extend to treating the sthanamdar as having been partitioned out of the property during life. Such an extended construction would risk constitutional difficulty, and the provision should be read in a manner that avoids invalidity.

Conclusion: No notional partition during the lifetime of the sthanamdar is created for estate duty purposes.

Issue (iii): Whether estate duty is chargeable on the entire sthanam property or only on the deceased's notional share.

Analysis: The sthanam property belonged to the sthanamdar during his lifetime, subject to restrictions on alienation. On his death, the whole of that property ceased to be held by him and passed within the meaning of the estate duty law. The statutory fiction in section 7(3) governs only the mode of distribution after death and does not cut down the property deemed to pass to a fractional share.

Conclusion: Estate duty is chargeable on the entire sthanam property and not merely on 1/114th share.

Final Conclusion: The statutory fiction in section 7(3) of the Hindu Succession Act, 1956 does not limit the estate duty charge to a notional share of the deceased; the entire sthanam property is treated as passing on death and the appeal fails.

Ratio Decidendi: A legal fiction created for post-death distribution cannot be extended to alter the property deemed to pass on death for purposes of estate duty, and the whole interest held by the deceased continues to be the chargeable property unless the statute clearly provides otherwise.

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