1986 (1) TMI 98 - SC - Income Tax

Estate duty not payable on entire property when deceased lacked disposing power over wife's share under mutual will section 29

The SC held that estate duty was not payable on the entire property upon the deceased's death. The court determined that the deceased had no disposing ... Whether estate duty was payable on the whole of the property or not would depend on whether the deceased, Kamlashankar Gopalshankar, had ' disposing power ' over the share of Mahendraba inherited by him on her death or not? Held that:- This was mutual will. The husband, Kamlashankar Gopalshankar, received the benefit under the will after the death of Mahendraba. It became irrevocable by him after her death. Therefore, he had no disposing power over the share of Mahendraba in the property. In the premises being a ' settled property', estate duty having been paid on the death of one of the parties, the accountable person was entitled to exemption under section 29 of the Act. In the premises, the High Court was not right in its conclusion. The appeal is accordingly allowed and the judgment under appeal is set aside and the question is answered in the affirmative and in favour of the accountable person 1. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this judgment was whether the estate duty was payable on the entire property or only on the deceased's share, in light of the joint will executed by Kamlashankar Gopalshankar and his wife, Mahendraba. Specifically, the court examined whether the property was 'settled property' under section 29 of the Estate Duty Act, 1953, which would exempt it from estate duty upon the death of the second spouse. The key questions included:Whether the joint will was merely a joint will or a joint and mutual will, indicating an agreement not to revoke the will after the death of one of the executants.Whether Kamlashankar Gopalshankar had the disposing power over the share of Mahendraba after her death.Whether section 29 of the Estate Duty Act applied to exempt the estate from duty.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Nature of the Joint WillRelevant Legal Framework and Precedents: The court examined the definitions and distinctions between joint wills and mutual wills. A joint will is a single testamentary document executed by two or more persons, while mutual wills are separate documents with reciprocal provisions, often indicating an agreement not to revoke.Court's Interpretation and Reasoning: The court analyzed whether the joint will executed by Kamlashankar and Mahendraba was also mutual, implying an agreement not to revoke after one's death. The court highlighted the language of the will, which suggested a clear intention to keep the property intact for the grandchildren.Key Evidence and Findings: The will contained provisions for the property to be divided among the grandchildren in specific portions, without any provision for compensation in case of diminution, indicating an intention to preserve the property for the ultimate beneficiaries.Application of Law to Facts: The court concluded that the will was a joint and mutual will, as it implied an agreement not to revoke after the death of one executant, thereby creating a trust for the grandchildren.Treatment of Competing Arguments: The Revenue argued that the will was merely joint and not mutual, allowing the survivor to revoke. However, the court found sufficient evidence in the will's language to establish mutuality.Conclusions: The court concluded that the will was mutual, and Kamlashankar did not have the disposing power over Mahendraba's share after her death.Issue 2: Applicability of Section 29 of the Estate Duty ActRelevant Legal Framework and Precedents: Section 29 of the Estate Duty Act exempts settled property from estate duty if duty has already been paid on the death of one spouse, provided the survivor was not competent to dispose of the property.Court's Interpretation and Reasoning: The court interpreted 'settled property' as property that was subject to an agreement not to revoke the will after the death of one executant. The court emphasized the intention to avoid double duty and preserve the property for the grandchildren.Key Evidence and Findings: The court found that estate duty had been paid on Mahendraba's share upon her death, and Kamlashankar did not have the power to dispose of it, thus qualifying the property as 'settled' under section 29.Application of Law to Facts: The court applied section 29, concluding that the property was exempt from estate duty upon Kamlashankar's death, as it was settled property with duty already paid on Mahendraba's death.Treatment of Competing Arguments: The Revenue contended that the property was not settled, as Kamlashankar treated it as his own in wealth-tax returns. The court dismissed this, focusing on the will's terms and the absence of disposing power.Conclusions: The court held that section 29 applied, exempting the property from estate duty.3. SIGNIFICANT HOLDINGSThe court established that a joint will can be considered mutual if it implies an agreement not to revoke after one executant's death, creating a trust for the ultimate beneficiaries.The court emphasized that the intention to preserve property for specific beneficiaries, as demonstrated in the will, supports the classification of the will as mutual.The court affirmed that section 29 of the Estate Duty Act exempts settled property from estate duty if the survivor lacks disposing power, as evidenced by the will's terms.The final determination was that the property was exempt from estate duty under section 29, as it was settled property with duty already paid on Mahendraba's death.The appeal was allowed, and the judgment of the High Court was set aside, with costs awarded to the accountable person.