Blending separate property into HUF hotchpot does not attract estate duty under section 10; only the notional share passes

Property acquired under a father's will was treated as the deceased's separate property because the will did not show an intention to create ancestral property in the sons' hands, and the same character continued in assets purchased from the sale proceeds unless validly converted. However, the deceased's consistent treatment of the income as HUF income supported blending of the properties with the family estate by throwing them into the hotchpot, so the properties became HUF property. That unilateral blending did not amount to a disposition attracting section 10 of the Estate Duty Act; only the deceased's notional half share passed on death under section 7.

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Issues: (i) Whether properties acquired by the deceased under his father's will and later purchased from sale proceeds were his absolute properties or belonged to the Hindu undivided family. (ii) Whether the deceased's act of returning income from the properties as HUF income amounted to throwing them into the family hotchpot, and if so, whether section 10 of the Estate Duty Act applied.

Issue (i): Whether properties acquired by the deceased under his father's will and later purchased from sale proceeds were his absolute properties or belonged to the Hindu undivided family.

Analysis: The will did not show that the father intended the bequest to take effect as ancestral property in the hands of the sons. The properties obtained under the will were therefore taken by the deceased as his individual properties. The immovable properties in question were acquired from the sale proceeds of those properties and retained the same character unless validly impressed with joint family character.

Conclusion: The properties were initially the deceased's separate properties and not ancestral properties in his hands.

Issue (ii): Whether the deceased's act of returning income from the properties as HUF income amounted to throwing them into the family hotchpot, and if so, whether section 10 of the Estate Duty Act applied.

Analysis: Consistent return of income as HUF income supported the inference that the deceased had blended the properties with the family estate and impressed them with joint family character. The authorities on blending and hotchpot showed that such a unilateral act does not constitute a disposition involving extinguishment of rights in the sense required by the Act. On that basis, the properties belonged to the HUF, and only the deceased's notional half share could be treated as passing on death under section 7. Section 10 was inapplicable because the deceased was not excluded from possession and enjoyment in the manner contemplated by that provision.

Conclusion: The properties were thrown into the family hotchpot and section 10 of the Estate Duty Act did not apply; only the deceased's half share passed on death under section 7.

Final Conclusion: The assessment was to be modified on the footing that the properties formed part of the HUF estate, and the Department's challenge failed.

Ratio Decidendi: A Hindu coparcener's act of blending separate property with joint family property by throwing it into the family hotchpot does not amount to a disposition attracting section 10 of the Estate Duty Act, and the property so impressed retains the character of HUF property for estate duty purposes.

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