Estate duty and vested interest: a valid adoption barred deemed passing on the life tenant's death.

Estate duty under sections 6 and 7 of the Estate Duty Act, 1953 depends on whether property passes, or is deemed to pass, on death by reason of a cesser of interest or a disposing power in the deceased. On the stated facts, a valid adoption had already vested the beneficiary's interest before the death of the life tenant, with the adoption relating back to the adoptive father's death. As no fresh transfer, change of hands, or cesser of interest arose on the life tenant's death, the property was not brought within estate duty. The commentary states that the assessment could not be sustained because no passing or deemed passing occurred.

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Issues: Whether estate duty was exigible on the death of the life tenant where the beneficiary had been validly adopted earlier and had already acquired a vested interest in the estate.

Analysis: The estate duty scheme requires a passing or deemed passing of property on death, and the relevant enquiry is whether the deceased had a disposing power over the property or whether an interest ceased on death so as to bring the property within sections 6 and 7 of the Estate Duty Act, 1953. On the facts, the adoption had the effect of relating back to the date of the adoptive father's death, and the petitioner's interest in the bequest had already vested before the death of the life tenant. In that situation, the life tenant's death did not produce a fresh transfer, change of hands, or cesser of interest giving rise to a deemed passing under the Act.

Conclusion: The property was not liable to estate duty in the hands of the petitioner, because no passing or deemed passing occurred on the death of the life tenant.

Final Conclusion: The assessment order could not be sustained and the writ petition succeeded.

Ratio Decidendi: Where a valid adoption gives the beneficiary a vested interest before the death of a life tenant, the subsequent death of the life tenant does not cause a passing or deemed passing of property for estate duty purposes under sections 6 and 7 of the Estate Duty Act, 1953.

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