Capital or revenue character of estate duty refund interest turns on pre- and post-disruption status of the joint family estate.

Refund of estate duty with interest was not to be classified by reference only to the decree for interest or the accounting entries, but by the legal character of the estate during the relevant period. While the property remained coparcenary before the disruption in status, the receipt attributable to that period retained the character of capital under the partition principles applicable to joint family assets. After the compromise caused disruption on 17 February 1947, the coparcenary ended and the estate was held by the adopted sons as tenants-in-common, so each sharer's entitlement to principal and accruing interest thereafter had to be treated according to that separate interest. The receipt was therefore capital for the pre-disruption period and revenue for the post-disruption period.

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Issues: Whether the receipt arising from refund of estate duty with interest was to be treated wholly as capital or revenue, and how its character was affected by the disruption in the joint Hindu family and the subsequent partition between the sharers.

Analysis: The receipt could not be characterised solely by reference either to the decree directing payment of interest or to the book entries in the estate accounts. Prior to the disruption in status, the estate was held as coparcenary property, and the principle governing partition of joint family assets applied so that what was allotted to a sharer partook of the character of capital. After the compromise brought about disruption in status on 17 February 1947, the family ceased to exist as a coparcenary and the common estate was thereafter held by the adopted sons as tenants-in-common. In that altered legal setting, each member acquired a distinct interest in the principal as well as in the interest accruing thereafter, so the character of the receipt had to be determined by reference to the period to which it related.

Conclusion: The receipt was capital to the extent attributable to the period before 17 February 1947 and revenue to the extent attributable to the period after that date.

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