Estate duty and adoption custom: contingent policy proceeds fall outside the estate, while proved custom can preserve coparcenary interest.

Estate duty is attracted only where property passes on death or is deemed to pass because the deceased had a lifetime property interest or disposing capacity. On a personal accident policy, the assured sum arises only on the contingency of accident and death, so the nomination does not amount to a transfer of existing property and the amount is not includible in the principal value of the estate. The text also notes that adoption normally severs ties with the natural family, but a proved custom or binding arrangement may preserve the adopted son's interest; on that basis, the deceased's coparcenary share was treated as one-third rather than one-half.

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Issues: (i) Whether the amount payable under the personal accident policy was property which passed on the deceased's death or was deemed to pass under the Estate Duty Act, 1953. (ii) Whether, on the facts proved, the deceased's share in the joint family property was one-half or one-third in view of the adoption arrangement and the family custom.

Issue (i): Whether the amount payable under the personal accident policy was property which passed on the deceased's death or was deemed to pass under the Estate Duty Act, 1953.

Analysis: Estate duty under the Act is attracted only when property passes on death or is deemed to pass because the deceased was competent to dispose of it. A personal accident policy of this kind does not create in the insured a present or contingent property interest in the assured sum during lifetime; the right to receive the money arises only on the happening of the accident and death during the currency of the policy. The nomination facility did not amount to a disposition of existing property by the deceased, and the amount payable came into existence only on the specified contingency. The sum therefore did not pass through the deceased's estate.

Conclusion: The amount payable under the personal accident policy was not includible in the principal value of the estate and was not chargeable to estate duty under this head.

Issue (ii): Whether, on the facts proved, the deceased's share in the joint family property was one-half or one-third in view of the adoption arrangement and the family custom.

Analysis: Adoption normally severs the adopted son from the natural family, but a contrary result can follow only if a valid custom or binding arrangement is established. On the evidence, the agreement and the muri were treated as part of the adoption arrangement, and the claimed customary form of dwyamushyayana adoption was accepted for the community in question. On that basis, the adopted son retained his interest in the family of birth, so the deceased's coparcenary share was only one-third. The Revenue's alternative position was not accepted.

Conclusion: The deceased's share in the joint family property was one-third and not one-half.

Final Conclusion: The appeal concerning the accident policy succeeded, while the appeal on the family property issue failed, leaving the estate duty assessment modified accordingly.

Ratio Decidendi: Property is not deemed to pass on death under the Estate Duty Act unless the deceased had a recognizable property interest or disposing capacity in that property during lifetime; a right that arises only upon the contingency of death is not enough, and a proved customary adoption arrangement may preserve the adopted son's interest in the natural family.

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