Holding over creates a heritable month-to-month tenancy and can attract estate duty on death.

When a lessee remains in possession after expiry of the lease and the lessor assents by accepting rent, section 116 of the Transfer of Property Act creates a month-to-month tenancy by holding over. The tenancy interest is treated as transferable and heritable, so it can form property passing on death for estate duty purposes under section 64(1) of the Estate Duty Act. The Crown Grants Act, 1895 does not exclude the operation of section 116 on these facts, and section 2(c) of the Transfer of Property Act is not controlling where the tenancy arises independently after the lease ends.

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Issues: Whether, after expiry of the lease and continued acceptance of rent by the lessor, the deceased became a tenant holding over under section 116 of the Transfer of Property Act, 1882; and whether that tenancy interest was heritable and therefore property passing on death for the purposes of estate duty under section 64(1) of the Estate Duty Act, 1953.

Analysis: The lease had expired, yet the deceased remained in possession and the Collector accepted rent without any finding that such acceptance was merely provisional. In these circumstances, the deceased was treated as having held over under section 116 of the Transfer of Property Act, 1882, the tenancy being from month to month because the property was not leased for agricultural or manufacturing purposes. The argument based on the Crown Grants Act, 1895, did not exclude the operation of section 116, and section 2(c) of the Transfer of Property Act, 1882, was held to be irrelevant because the tenancy arose under the independent operation of section 116 after the lease had ended. Authorities on monthly tenancy and holding over supported the view that such an interest is transferable and heritable.

Conclusion: The deceased had a heritable tenancy interest at the time of death, and that interest passed to his heirs and was competent to be disposed of by him; accordingly, the property was rightly treated as passing on death and estate duty was chargeable.

Ratio Decidendi: Where a lessee remains in possession after expiry of the lease and the lessor assents by accepting rent, section 116 of the Transfer of Property Act, 1882 creates a month-to-month tenancy that is heritable and forms property passing on death for estate duty purposes.

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