Judgment:
S.A. Hakeem, J.
1. In this reference at the instance of the Revenue, under section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as 'the Act'), the following two questions of law are referred for the opinion of the court :
'(1) Whether the Appellate Tribunal was right in concluding that the provisions of section 9 of the Estate Duty Act are not applicable and there was no element of gift of the share of the assessee in the properties of the Hindu undivided family in the unequal distribution of assets in the partial partition effected on June 9, 1977, even though there was no specific clause in the deed of partial partition to the effect that the deficiency of the share of the deceased would be made up in subsequent partition ?'
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that section 9(1) read with section 27(1) and section 2(15) and Explanation 2 thereof, of the Estate Duty Act are not applicable to the facts of the present case ?'
2. The facts as found in the statement of case are as follows :
The proceeding related to the estate duty assessment of the assets left by the deceased, S. Narayanappa. Narayanappa died on August 18, 1978. He and his two brothers constituted a Hindu joint family. The Hindu undivided family possessed both immovable and movable properties and the total value thereof was Rs. 5,95,000 as per the wealth-tax assessment for the assessment year 1977-78. There was a partial partition among the three brothers in respect of the immovable properties effected by a deed dated June 9, 1977, under which the deceased got a share of the value of Rs. 60,000 whereas his two brothers were allotted assets of the value of Rs. 2,50,000 and Rs. 2,00,000, respectively. The Assistant Controller was of the view that, since the deceased had received only properties of the value of Rs. 60,000 as against his total share in the Hindu undivided family property valued at Rs. 1,81,666, there was a deemed gift of the balance of Rs. 1,21,666 within the purview of section 2(15) read with sections 9 and 27(1) of the Act and included the sum of Rs. 1,21,666 in the principal value of the estate. On appeal by the accountable person, the Appellate Controller sustained the inclusion. On further appeal, the Tribunal held that the facts of the case do not attract the application of section 9. The Tribunal has found that the partition dated June 9, 1977, was only a partial partition and since the Hindu undivided family had other assets also, it could not be said that there was an unequal partition and since the deceased had rights over the other undivided properties, there could not be any gift of any share of the deceased in the properties of the Hindu undivided family. For these reasons, the addition of Rs. 1,21,666 was deleted by the Tribunal.
3. The first appellate authority had affirmed the inclusion of the deemed gift on the ground that no distinction as such can be made between a complete partition and a partial partition for the purpose of Explanation 2 to section 2(15) of the Act which reads thus :
'The extinguishment at the expense of the deceased of a debt or other right shall be deemed to have been a disposition made by the deceased in favour of the person for whose benefit the debt or right was extinguished, and in relation to such a disposition the expression 'property' shall include the benefit conferred by the extinguishment of the debt or right.'
4. In this case, we are concerned with the right of the deceased which, to the extent stated in the assessment order, was extinguished. In this connection, a reference may be made to the partition deed which does not indicate reservation of any right by the deceased to claim adjustment of his right to be reimbursed on the partition of the remaining properties of the Hindu undivided family. On the contrary, the specific recital in the partition deed is to the effect that there is a complete partition of the properties included therein and each of the parties will not have any claim in respect thereof, notwithstanding the disparity in the value of the shares allotted to each one of them in the partitioned property. In this background, we may refer to the ruling of the Supreme Court in CED v. Kantilal Trikamlal : [1976]105ITR92(SC) , in which it is observed thus (head-note) :
'Where on a partition of a Hindu undivided family property, a coparcener takes less than his share, there is a 'disposition' within the meaning of Explanation 2 to section 2(15) of the Estate Duty Act, 1953, by him of that part of his share which he relinquishes and on his death within two years of the partition that part of his share would be property deemed to pass under section 9(1) read with section 27(1) and Explanation 2 to section 2(15).'
5. The intention of the section appears to be to take within its fold whatever share is relinquished by virtue of the transaction which is held to come within the ambit of the term 'disposition' irrespective of the fact whether the partition is partial or complete, in view of the fact that there has been a relinquishment of a right to a certain extent in so far as the specific property is concerned. Hence, in the facts and circumstances of the case, the Tribunal was not right in holding that since there was no complete distribution of the properties of the family, the lesser share received by the deceased in the unequal partition can be made up at a future date when the remaining properties are further partitioned. In that view of the matter, it is not possible to uphold the order of the Appellate Tribunal.
6. In the view we have taken above, the answer to both the questions is in the negative and in favour of the Revenue.