TaxTMI 
TaxTMI 
1976 (7) TMI 61
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....now be made. We begin with the facts in the Gujarat appeal (Kantilal Trikamlal) since the Madras appeal (Ranganayaki Ammal) raises virtually the same question, is plainer on the facts and may conveniently be narrated immediately after. To appreciate the complex of facts we choose to enunciate the principal proposition of law canvassed before us by the revenue in the two appeals. Does a relinquishment by a decedent of a slice of a share on a partition of joint property in such manner that he takes less than his due effected within two years of his death with a view to relieve himself of a part of his wealth and pro tanto to benefit the accountable person, a near relation have to suffer estate duty under the Estate Duty Act, 1953 (for brevity, the Act)? One Trikamlal Vadilal (hereinafter referred to as the deceased) and his son, Kantilal (referred to later as the accountable person) constituted a Hindu undivided family. They continued as members of a joint and undivided Hindu family until November 16, 1953, when an instrument styled "release deed" was executed by and between the deceased and Kantilal. Considerable controversy between the parties turns on the interpretation of this....
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....vour of Kantilal for partial consideration and it was therefore by reason of section 27, sub-section (1), liable to be treated as a gift for the purpose of section 9, sub-section (1), another argument also appealed to the Central Board and that was one based on section 2(15), Explanation 2. The Board held that, in any event, under the instrument there was extinguishment at the expense of the deceased of his interest in the joint family properties and there was therefore a deemed disposition by the deceased of the benefit which accrued to Kantilal as a result of such extinguishment and the charge to estate duty was accordingly attracted under section 9, sub-section (1), read with section 27, sub-section (1). On reference, the High Court held in favour of the assessee and the revenue has appealed hopefully, relying on a ruling of the Madras High Court which itself is the subject-matter of the sister appeal. Here the tables were turned but the assessee has contested the argument of the High Court as contrary to the ratio of this court's pronouncements. Were it so, it were bad; but judgments, even of the summit court, are not scriptural absolutes but relative reasonings and there is....
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....the eve of death or within the pragmatic line of nearness to death, such transactions or manoeuvres, though sincere, being manifestly likely to defeat death duties posthumously flowing from properties covered thereby. The fiscal policy is dual: (i) the collection of revenue; and (ii) reduction of the quantum of inheritance on a progressive basis directed towards a gentle process of equalisation. The draftsman's efforts have been exerted to use words of the widest import and, where the traditional use of words is likely to limit, to use legal fictions, by deeming devices, to expand the semantics thereof and to rope in all kinds of dealings with property for inadequate or no consideration within the statutory proximity of death. The sweep of the sections which will be presently set out must, therefore, be informed by the language actually used by the legislature. Of course, if the words cannot apply to any recondite species of property, courts cannot supply new logos or invent unnatural sense to words to fulfil the unexpressed and unsatisfied wishes of the legislature. Law, to a large extent, lives in the language even if it expands with the spirit of the statute. It is good to re....
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....eals deal with deceased persons who are members of joint Hindu families and the subject-matter of the disposition was linked up with their share in the Hindu undivided family (acronymically speaking). For this reason our attention has to be rivetted to sections 7 and 39 which resolve a likely difficulty in ascertaining the interest in property which passes on the death of a deceased coparcener in the joint family property, the pristine rule of Hindu law being his share lapses in favour of the survivors and is not a descendible estate or a predicable fraction. Sections 7 and 39, by a deeming process, circumvent this contretemps and crystallize a clear share in the coparcener at the point immediately before death. Had the properties of the coparcener been partitioned immediately before the death what share in the joint family property would have been allowed to the deceased represents the principal value of such share for the purposes of computation of death duty. Section 27 is a strategic provision which deems as a gift all dispositions made by the deceased person in favour of his relations unless such disposition was made for full consideration or the deceased was concerned in a fi....
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.... set out the seven propositions formulated by Shri Desai for pinpointing the discussion. They are: "1. Partition is merely a process in and by which joint enjoyment is transferred into an enjoyment in severalty. Since in such case each one of the coparceners had an antecedent title which extended to the whole of the joint family properties and had, therefore, full interest in the specific property which ultimately went to his share, no creation of right or interest in such specific property takes place in his favour nor does any extinguishment of any right or interest in the other property take place to his detriment. 2. Sections 9(1) and 27(1) form part of a single scheme. The word 'disposition' in section 27(1) cannot be treated in isolation and must take its colour and meaning from the sense in which the word has been used in section 9(1). 3. 'Disposition' means 'giving away or giving up by a person of something which was his own (Commissioner of Gift-tax v. Getty Chettiar ). No meaning howsoever wide and comprehensive of the expression 'disposition' can possibly take in its ambit or coverage, partition (Controller of Estate Duty v. Kancharla Kesava Rao). 4. The mere....
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....ly lower in value than would be his legal entitlement, thus gladly suffering a diminution which would to that extent benefit the accountable person by giving him a larger slice of the joint cake than was his due. We assume, for the purpose of argument, that the division in status and the partition made by metes and bounds have taken place simultaneonsly on the execution of the deed in question. We also take it that the release, relinquishment or division in the cases on hand has been bona fide made in the sense that one sharer has not over-reached the other or played fraud or together the sharers have not gone through a mere simulacrum of a partition or exercise in colourable division. We proceed on the further footing-and that is law well established now-that "partition is really a process in and by which a joint enjoyment is transformed into an enjoyment in severalty. Each one of the sharers had an antecedent title and, therefore, no conveyance is involved in the process, as a conferment of a new title is not necessary ". Now to the 7 points of Shri Desai. The 6th point is a shade platitudinous and the other side does not dispute its soundness. Certainly the definition of "....
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.... question which has been agitated before us is as to whether a willing, albeit bona fide, arrangement whereby a substantially reduced share is taken by the decedent consequentially vesting a proportionately larger estate in the recipient is a disposition falling within Explanation 2 to section 2(15) and, therefore, "property" within the substantive definition. In this context we may have to read sections 9 and 27, for property taken under a disposition made by the deceased may be deemed to be a gift in favour of the accountable person in the circumstances mentioned in section 9. Similarly, section 27 also tracks down certain dispositions made by deceased persons in favour of relatives by treating them as "gifts". The basic concept of disposition looms important in such circumstances. This introductory statement of the law takes us to the other points of Shri Desai which we will tackle together, guided by the text of the sections aforesaid read in the light of the citations, aplenty, of cases, Indian and English. We may compendiously state, forgetting for a moment the complication in the Gujarat case of the release deed executed by the decedent being either a relinquishment or a ....
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.... the benefit of another coparcener, can be called "disposition" in law. Undoubtedly this operation, to use a neutral expression, is made up of simple jural facts that modify and extinguish jural relations and create in their place new rights whereby one gives or gives up and another gains. This legal result, produced by voluntary action, is "disposition" within the scope of Explanation 2 to section 2(15). The assessee's contention, effectively presented by counsel, takes a legalistic course, ignoring the purpose, language and amplitude of Explanation 2. Argues Shri Desai, in a partition, equal or unequal, there is no element whatsoever of consideration, partial or full, since in a partition there is only an adjustment of rights and substitution of joint enjoyment by enjoyment in severalty. In his view it is a confusion to mix up unequal partition with inadequate consideration and it is a worse confusion to talk in terms of bona fide and mala fide partition where the shares are merely unequal by choice. What is forgotten in this chain of reasoning is the office of Explanation 2 which is deliberately, designed to take into its embrace what otherwise may not be "disposition". Once ....
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....ld that the expression "disposition" used in that provision should be read in the context and setting of the given statute. The very fact that "disposition" is treated as a mode of transfer takes the legal concept along a different street, if one may use such a phrase, from the one along which that word in the Estate Duty Act is travelling. Mr. Justice Hegde rightly observed, if we may say so with respect, that : " Words in the section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose that they are intended to serve." The word "transaction" in section 2(24) of the Gift-tax Act takes its colour from the main clause, that is, it must be a "transfer" of property in some way. Since a partition is not a "transfer" in the ordinary sense of law, the court reached the conclusion that a mere partition with unequal allotments not being a transfer, cannot be covered by section 2(xxiv). A close reading of that provision and the judgment will dissolve the mist of misunderstanding and disclo....
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.... disposition which is in the nature of a transfer." This line of reasoning has our general approval. From what we have said, the bold lines of opposing views emerge and they hinge on the connotation of "disposition". The High Courts, in their divergent stands, have lined up before both strands of reasoning. Madras, a Full Bench of the Punjab High Court, and the classic observation in In re Stratton's Disclaimer support the point of view championed in Ranganayaki Ammal . The contrary thinking finds support in Andhra Pradesh and Punjab as well as in Gujarat (Kantilal). The sense of our statutes, modelled as they are on a series of English Acts, is best expressed so far as the concept of "disposition" is concerned, by Jenkins L.J. in In re Stratton's Disclaimer relating to section 45 of the Finance Act, 1940 (which runs similar in strain to section 2(15)). Noting the strength of the sweeping and unparticularized reference to "a debt or other right", Jenkins L.J. repelled the application of the ejusdem generis rule and imparted to the word "right" the widest import: " Mr. Russel did not seek to limit the effect of the words 'debt or other right' by an application of the ejusde....
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....on 2(15). The peculiar definition of "disposition" injecting a triple hypothesis and fictional expansion covers the diminution in the share taken by the coparcener and augmentation of the share taken by the other and impresses the stamp of property on this process by the "deeming" provision. Sections 9 and 27 strengthen this conclusion. We were confronted by Shri Desai with Kancharla Kesava Rao for contending that giving away or giving up could not in all cases be disposition where the transaction is a partition. This court, in the above ruling, held that a partition in a coparcenary was just an adjustment of rights, not a transfer in the strict sense. Shri Justice Hegde, speaking for the court, placed on section 24 of the Act more or less the same interpretation as was put in Getti Chettiar by this court. Whatever might be the interpretation of "disposition" in section 24 of the Act, we are satisfied that the only straight-forward construction of that expression in section 27 is as we have explained at length above. Section 9, dealing with gifts, takes in property under a disposition made by a deceased, throwing up the question "what is a gift" ? Section 27 supplies the answer:....
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.... stated to erase misapprehension. What the provision declares is that if the disposition made by the deceased is more than two years before death, the property covered thereby shall not pass on the death unless it shall not have been bona fide. That is to say, even if the transaction were more than two years before the death, if it were entered into in bad faith, estate duty may still attach to that property. So far as dispositions made within two years of the death of the deceased are concerned, there is no question of mala fides or bona fides. All such transactions are caught within the coils of section 5 read with sections 9 and 27. The requirement of "bona fides" has nothing to do with dispositions within 2 years and has much to do with those beyond 2 years. The marginal obscurity in section 9 is due perhaps to compressed draftsmanship. Now to costs. We have already indicated how serious arguments have appealed in contrary ways to several judges of the High Courts and certain observations of this court have themselves been capable of different shades of sense from what we have read into them. Indeed, the point involved in the case is of general public importance which, on ac....