Deemed disposition in estate duty applies to unequal partition shares and gifts from HUF funds under the Act.

For estate duty purposes, an unequal partition within two years before death can amount to a deemed disposition where the deceased takes less than the share to which he was entitled and a corresponding benefit accrues to a relative. The fact that the partition was only partial did not prevent application of the deeming provisions under the Estate Duty Act. A cash gift made out of HUF funds was also treated as includible in the principal estate because estate duty can attach to property over which the deceased had disposing power, even if it formed part of joint family assets.

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Issues: (i) Whether the difference between the deceased's rightful share and the lesser share taken by him in a partition effected within two years prior to death was liable to estate duty under section 9(1) read with Explanation 2 to section 2(15) and section 27 of the Estate Duty Act, 1953; (ii) Whether the same liability arose because the partition was only a partial partition; (iii) Whether the cash gift of Rs. 10,000 made out of HUF funds was includible in the principal estate under section 9 of the Estate Duty Act, 1953.

Issue (i): Whether the difference between the deceased's rightful share and the lesser share taken by him in a partition effected within two years prior to death was liable to estate duty under section 9(1) read with Explanation 2 to section 2(15) and section 27 of the Estate Duty Act, 1953.

Analysis: The unequal partition resulted in the deceased taking less than the share to which he was entitled, and the statutory definition of disposition in Explanation 2 to section 2(15) treated extinguishment of a right and the corresponding creation of benefit in favour of a relative as a disposition. Section 27 brought such disposition within the gift machinery for purposes of section 9. The earlier Madras view treating the differential on such a partition as dutiable was followed, and the contrary view was not accepted.

Conclusion: The difference was liable to estate duty and the assessee's contention was rejected.

Issue (ii): Whether the estate duty liability failed because the partition was only a partial partition.

Analysis: The character of the partition as partial did not alter the legal effect where the deceased's right stood extinguished and a corresponding benefit accrued to his relative. The statutory provisions did not confine the deeming fiction to total partitions alone.

Conclusion: The contention based on partial partition was rejected.

Issue (iii): Whether the cash gift of Rs. 10,000 made out of HUF funds was includible in the principal estate under section 9 of the Estate Duty Act, 1953.

Analysis: A disposition attracting estate duty need not be of property owned absolutely by the deceased; it is enough if it is property over which he was competent to dispose. The gift was made within the statutory period and fell within the deeming provisions governing gifts out of the deceased's interest.

Conclusion: The sum of Rs. 10,000 was rightly includible in the principal estate.

Final Conclusion: The Revenue succeeded on all substantial issues, and the additions made by the Assistant Controller of Estate Duty were restored.

Ratio Decidendi: For estate duty purposes, a lesser share taken by the deceased in a partition within the statutory period can amount to a deemed disposition where the deceased's right is extinguished and a corresponding benefit accrues to a relative, and a gift made out of property over which the deceased had disposing power is includible even if it was part of joint family assets.

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