Partition within two years of death can amount to a deemed disposition, making the beneficiary's gain liable to estate duty.

A partition or relinquishment by a coparcener within two years of death, where he accepts less than his due share and the other coparcener gains the benefit, falls within the extended meaning of "disposition" under the Estate Duty Act. The deeming provisions enlarge "property" and "disposition" to cover extinguishment of rights to the extent of the benefit conferred, even without a conventional transfer under Hindu law. Bona fides are relevant to dispositions outside the two-year window, but dispositions within that period are caught by the charging scheme. The resulting benefit to the relative is therefore liable to estate duty.

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Issues: Whether a partition or relinquishment by a coparcener within two years of death, under which he takes less than his due share and the other coparcener benefits, amounts to a "disposition" of property within Explanation 2 to section 2(15) of the Estate Duty Act, 1953 so as to attract estate duty under sections 5, 9(1) and 27(1).

Analysis: The statutory scheme treats estate duty as a levy on property passing on death and uses inclusive definitions and deeming provisions to enlarge the concept of "property" and "disposition". Explanation 2 to section 2(15) deems the extinguishment at the expense of the deceased of a debt or other right to be a disposition in favour of the beneficiary, and section 27 treats dispositions made in favour of relatives as gifts unless made for full consideration. In the case of a bona fide partition, although no transfer occurs in the ordinary sense of Hindu law, the deceased's voluntary acceptance of a substantially smaller share than his entitlement results in an extinguishment of his right to the extent of the benefit conferred on the other coparcener. The Court held that this is covered by the wide language of the deeming provision and is not excluded by the absence of a conventional transfer. The requirement of bona fides in section 9 concerns dispositions outside the two-year window, while dispositions within two years of death are caught by the charging scheme irrespective of bona fides.

Conclusion: Such a partition or relinquishment is a disposition within the extended meaning of the Act and the resulting benefit to the relative is liable to estate duty.

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