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Controller of Estate Duty, Gujarat I Vs. Kantilal Bhailal Dave - Court Judgment

SooperKanoon Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberEstate Duty Reference No. 1 of 1971
Judge
Reported in[1975]100ITR577(Guj)
ActsEstate Duty Act, 1953 - Sections 10
AppellantController of Estate Duty, Gujarat I
RespondentKantilal Bhailal Dave
Appellant Advocate J.M. Thakore, Adv.
Respondent Advocate K.H. Kaji, Adv.
Cases ReferredS. M. Ananda Rao v. Commissioner of Income
Excerpt:
.....applicable if the other requirements of the section are..........about the partition, then the antecedent step such as blending his self-acquired property with the family property by the deceased should be presumed to have come into existence. in order to show that such a partition had, in fact, taken place, shri kaji has placed reliance upon five circumstances, namely, (i) equal amount was disbursed by the deceased to each of his five sons; (ii) this amount was distributed in a single transaction and on the same day; (iii) that account entries which are posted in annexure 'c' do not reveal that the deceased intended to make any gift, and on the contrary the wordings of these entries show that the amounts in question were distributed 'on equal share basis' amongst all the five sons; (iv) the last entry of the amount of rs. 3,673 is the entry setting.....
Judgment:

T.U. Mehta, J.

1. The point involved in this reference is whether the disbursement of the amount of Rs. 90,005 made by the deceased amongst his five sons amounts to gift so as to attract the provisions of section 10 of the Estate Duty Act, 1953, which is hereinafter referred to as 'the Act'.

2. Short facts of the case are that in the Samvat year 2009 which is equivalent to the year 1952-53, the deceased, Bhailal Harjivandas Dave, was running a proprietary business known as 'M/s. Bhailal Harjivan'. At that time the deceased had five sons and one daughter. On 6th January, 1953, he made the disbursement of the amount of Rs. 90,005 equally between his five sons, each getting an amount of Rs. 18,001. At the same time, he set apart a further amount of Rs. 3,673 for the marriage expenses of his daughter, Jayagauri, crediting the same amount to her personal name. A further amount of Rs. 6,001 was set apart by him on his own personal name. He further put the havala entry for the amount of Rs. 29,020 which was due from him to a partnership concern named 'Dhrangadhra Ginning & Pressing Factory' in which he himself was a partner. In the account books of M/s. Bhailal Harjivan which was at that time his proprietary concern, the deceased maintained his own personal account he posted the entries evidencing the above disbursement totaling to Rs. 1,28,699. At annexure 'C' we find the above referred entries evidencing this disbursement. By reference to these entries it becomes apparent that they were made on Aso Vad 30th which was the last day of Samvat year 2009.

3. In the beginning of the next Samvat year 2010 the business in the name of M/s. Bhailal Harjivan ceased to be a proprietary business because the same was converted by the deceased into a partnership with two of his major sons. It is an admitted position that, therefore, in Samvat year 2018, one of the remaining sons became major and, therefore, he was also taken as a partner in this newly formed partnership firm. Ultimately, in Samvat year 2022 the deceased, Bhailal, retired from this partnership and about three months thereafter, i.e., on January 9, 1966, he died. The respondent, Kantilal, who is one of the sons of the deceased, is the accountable person for the purpose of estate duty. During the course of the assessment the Assistant Controller of Estate Duty found that the disbursement of the amount of Rs. 90,005 made by the deceased as between his five sons by the end of Samvat year 2009 amounted to gift and, therefore, the provisions contained in section 10 of the Estate Duty Act were attracted. The contention raised by the accountable person was that this disbursement did not amount of gift but amounted to partition during the course of which the deceased had thrown his self-acquired property amounting to Rs. 90,005 in the common stock of the family. According to the accountable person, therefore, the transaction did not amount to gift and hence there was no scope for attracting the provisions of section 10 of the Act. The Assistant Controller of Estate Duty rejected this contention of the accountable person with the result that the matter went in appeal before the Appellate Controller of Estate Duty who confirmed the view taken by the Assistant Controller. Ultimately, the matter went to the Appellate Tribunal. The Appellate Tribunal relied upon the decision given by the High Court of Bombay in Kisansing Mohansing Balwar v. Vishnu Balkrishna Jogalekar and held that the disbursement in question amounted to partition and, therefore, it did not amount to a gift contemplated by section 10 of the Estate Duty Act. The Tribunal, therefore, concluded that so far as this amount of Rs. 90,005 is concerned, it did not form a part of the principal value of the assets held by the deceased. Being aggrieved by this decision of the Tribunal, the department has preferred this reference in which the following question is referred to us by the Tribunal for our opinion :

'Whether, on the facts and in the circumstances of the case, the finding that the deceased did not make the gift of Rs. 90,005 is in law justified ?'

4. From the above summary of facts, it is evident that the real controversy between the parties is whether the disbursement of the amount of Rs. 90,005 amounts to gift or to a partition of that property amongst the members of the Hindu undivided family. The question which is referred to us does not specifically pinpoint this controversy but the controversy is quite evident from the facts of the case.

5. It is not in dispute that the provisions 10 of the Act would apply to the facts of this case only if distribution of the disputed amount by the deceased amongst his five sons amounts to gift. The contention of the accountable person is that this distribution does not amount to a gift because, when a father distributes his self-acquired property amongst his sons what he actually does is to throw his property into the family hotchpot and then to partition it notionally amongst his sons. Shri Kail, on behalf of the accountable person, contended that if the account entry which is posted by the deceased in his personal account furnishes satisfactory evidence about the partition, then the antecedent step such as blending his self-acquired property with the family property by the deceased should be presumed to have come into existence. In order to show that such a partition had, in fact, taken place, Shri Kaji has placed reliance upon five circumstances, namely, (i) equal amount was disbursed by the deceased to each of his five sons; (ii) this amount was distributed in a single transaction and on the same day; (iii) that account entries which are posted in annexure 'C' do not reveal that the deceased intended to make any gift, and on the contrary the wordings of these entries show that the amounts in question were distributed 'on equal share basis' amongst all the five sons; (iv) the last entry of the amount of Rs. 3,673 is the entry setting apart this amount for the marriage expenses for Jayagauri, the daughter of the deceased. Setting apart of this amount for the marriage expenses of an unmarried daughter shows the intention to partition; (v) the fact that another amount of Rs. 6,001 was set apart by the deceased for himself also shows that what the deceased has really done is to partition the amount which at his disposal. Relying upon these five circumstances Shri Kaji contended that what was actually done by the deceased was to throw the total amount of Rs. 99,005 into the common stock and then to divide the same in the manner set out in the account entries, annexure 'C'.

6. As against this, the contention which was raised on behalf of the revenue by the Advocate-General was that the doctrine of blending of separate property with the family property presupposes a clear and unequivocal intention to do so and such an intention should be positively proved through the evidence found in the record, and there cannot be any presumption that such an intention ever existed. The learned Advocate-General further contended that the decision given by the High Court of Bombay in Kisansing Mohansing Balwar v. Vishnu Balkrishna Jogalekar is not in conformity with the principle enunciated by the Supreme Court in C. N. Arunachala Mudaliar v. C. A. Muruganatha Mudaliar, according to which the question whether the donor, who is the karta of the joint Hindu family, intended to confer a bounty upon his sons or intended to effect a partition is a question which should be answered primarily from the facts of each case and there is no scope for making any presumption as regards such an intention without clear evidence on the point.

7. Before referring to the above referred Bombay decision, on which reliance is placed by the accountable person, it would be proper to refer to same basic principles involved in the doctrine of blending of self-acquired property of a Hindu coparcener with the property of the family to which be belongs. Hindu law permits every member of an undivided family to throw his self-acquired into the common stock of the family with the intention of abandoning all his separate claims upon it. But whenever such a blending is alleged a clear intention of such member to waive his personal claims and exclusive rights over such property must be established. The intention to blend his self-acquired property with the family property cannot, therefore, be presumed from the mere fact that the property was distributed amongst the other members of the family. Therefore, the question is whether is any evidence in the record of the case to show that the deceased in this case had entertained any such intention. The only evidence on this case had entertained any such intention. The only evidence on this point is the account entries from the personal account of the deceased for Samvat year 2009, in the account books of the business running in the name of M/s. Bhailal Harjivan. Reference these entries does not show anything which would give support to the contention of the accountable person that the deceased wanted to throw his self-acquired property into the common stock of the family. It is of course true that out of the total amount of Rs. 99,679 an amount of Rs. 90,005 has been distributed by the deceased equally amongst his been distributed by the deceased equally amongst his five sons but the mere fact that there was an equal distribution amongst all the five sons does not carry the matter further because that fact is equally consistent with the theory of gift.

8. Mr. Kaji put much emphasis on the fact that this distribution was made in a single transaction on the same day. Even here we do not find anything with would go to suggest that the transaction amounted to partition and not to gift. The facts of the case show that up to the end of Samvat year 2009 the business in question was the proprietary concern of the deceased. From the next year, i.e., from the beginning of Samvat year 2010 it was converted into a partnership business. Therefore, before the business could be converted into a partnership business, if the deceased wanted to make the gift of the amount of Rs. 90,005 equally to each of his five sons so as to bind the firm which was to come into existence on the next day, the transaction would necessarily be a single transaction which would be entered into on the same day. Under the circumstances, the fact that the distribution constituted a single transaction on the same day, is also not potent enough to exclude the theory of gift.

9. Another aspect on which Shri Kaji has placed reliance was that the account entries make no mention about the gift. But, in order to ascertain the real nature of the transaction, it is not always necessary to confine one's attention merely to the actual wordings which are used by the parties at the relevant time. It is the real substance of the transaction which should be taken into account. If the deceased wanted to distribute the amount of Rs. 90,005 equally amongst his five sons by conferring a gift on them, he would describe the transaction as a transaction distributing the amount in equal shares. Therefore, the absence of the word 'gift' and use of the word 'shares' in the account entries would not be inconsistent with the gift itself.

10. It was then contended that, if it was not a partition, it was not necessary for the deceased to set apart two amounts of Rs. 3,673 and Rs. 6,000, respectively, for the purposes of marriage of Jayagauri and for the deceased himself. Now if we refer to the account entries, what we find is that both these amounts are taken to the credit, respectively, of Jayagauri and of the deceased himself. In other words, so far as the amount of Rs. 3,673 is concerned, the same was credited to the personal account of Jayagauri and so far as the amount of Rs. 6,000 is concerned, it was credited to the personal account of the deceased himself. In effect, therefore, both these amounts were intended to be treated as personal credit of Jayagauri and the deceased. The deceased was required to adopt this course of action because, from the next year, the business was to be converted into a partnership business and the intention of the deceased was to see that the partnership business which was to come into existence from the next year should be saddled with the liabilities of these two amounts. Under these circumstances, even the setting apart of these two amounts is not found inconsistent with the theory of gift.

11. From the above analysis of the evidence which is found on the record, it becomes clear that the account entries on which reliance is placed by Shri Kaji are, in no manner, inconsistent with the theory of gift. It is for the accountable person to who that at a particular time the deceased entertained an intention to blend his self-acquired property with the common stock of the family and, therefore, so long as the recorded evidence cannot support such intention, the mere fact that the amount of Rs. 90,005 was equally distributed amongst the five sons would not furnish any evidence about the partition.

12. It is context of these facts that we have now to consider the decision of the Bombay High Court in Kisansing Mohansing Balwar v. Vishnu Balkrishna Jogalekar, on which the Tribunal has put reliance. In this case the High Court has held that the transaction by which a father makes a division of his self-acquired property between his sons is a transaction by which, in the first instance, he effects a severance of status between his sons; in the second instance, he nationally throws into the hotchpot his self-acquired property, and then divides it between his sons, whether equally or unequally in accordance with his pleasure. In such a case, observes the High Court, the transaction does not amount to a gift. Actually the question which arose before the High Court for determination was whether such a transaction could be effected without a registered instrument. It was with reference to this question that the High Court came to the conclusion that such a transaction did not amount to a gift. The reported judgment shows that when the matter was argued before the High Court it was presumed that the High Court is found to have made the following observations which are relevant to this reference :

'Now, there are two ways in which we can regard the transaction, if a father effects a partition between his sons and gives them a share in his self-acquired property, whether there is at the same time ancestral property available for division or not. We can regard it, in the first instance, as a partition in status accompanied by two transactions of gifts. But there is another way also in which we can look at the transaction, and that is, that we can say that the father at such time throws the property into the hotchpot and makes a division. In order that he should do so it is not necessary that there must be, as a matter of fact, other joint family properties available for partition. We fail to understand that, in order that the father should throw his own property into the hotchpot, meaning thereby to treat it was joint family property, it is necessary that there should be other joint family property. The learned advocate, who appears on behalf of the plaintiffs, as a matter of fact conceded that, if the father had executed a document saying that he proposed to make a division of his property between his sons and with that object in view was throwing the self-acquired property into the hotchpot, he could not possibly have contended that, as a matter of fact, any further gift deed is necessary; but he says that in this case there has never been raised any contention that the father threw his self acquired property in the hotchpot, and consequently such a contention should not be allowed to be taken up by the mortgage. Now, we can see that in this case is mortgagee at no time raised a contention that the father threw his self acquired property into the hotchpot; but we are not considering the questions to whether in the particular circumstances of this case the father can be regarded to have thrown the property into the hotchpot; the question which are considering is a genre alone, namely, whether in every case in which a father makes a division of his self-acquired property between his sons, whether at the same time he makes a division of joint family property, or, there being no joint family property available for such distribution is confined to his self-acquired property it would be correct to say that he throws the property into the hotchpot, and in our opinion there is no reason whatsoever why it should not be said that he does so.'

13. It is clear from these observations that the decision proceeds on two presumptions, namely, (1) that the father threw his self-acquired property in the common stock of the family, (2) that after doing so, he partitioned this property amongst his sons. In view of these two presumptions the question which arise to be considered is whether they are permissible from the mere fact that a father makes a division of his self-acquired property between his sons. Obviously, the Bombay High Court has answered this question in the above referred decision in the affirmative and we would have left bound by this decision but for the contrary view expressed by the Supreme Court in Arunachala Mudaliar v. Muruganatha Mudliar. The Supreme Court has in this case considered at length the rights of the Mitakshara father to dispose of his self-acquired property and the legal consequence ensuing therefrom. while discussing this question the Supreme Court is found to have made the following observations which are very pertinent to the question involved in this case. The Supreme Court says :

'The material question which the court would have to decide in such cases is, whether taking the document and all the relevant facts into consideration, it could be said that the donor intended to confer a bounty upon his son exclusively for his benefit and capable of being dealt with by him at his pleasure or that the apparent gift was an intergral part of a scheme for partition and what was given to the son was really the share of the property which would normally be allotted to him and in his branch of the family on partition. In other words, the question would be whether the grantor really wanted to make gift of his properties or to partition the same. As it is open to the father to make a gift or partition of his properties as he himself chooses, there is, strictly speaking, no presumption that he intended either the one or the other.'

14. These observation make it abundantly clear that the question whether a particular transaction amounts to a gift or a partition is essentially one which should be answered by reference to the intention of the grantor and without any finding of such intention from the fact of the case, there would not be any scope for raising any presumption as to its existence. In other words, it is the intention which would makes the difference and not the transaction itself. To put it differently the proof of transaction would, by itself not amount to the proof of intention. In our view, the presumption made by the Bombay decision on which reliance is placed by the Tribunal, is based merely on the fact that there was a transaction which purported to be transaction of partition. The Supreme Court has ruled out any such presumption in Arunachala' case and, therefore, the ratio of the decision given in the Bombay case, would no supply to us a correct position in law. We are, therefore, of the opinion that the accountable person cannot rely upon this Bombay decision to induce us to raise a presumption about the intention of the deceased simply because the deceased distributed the amount of Rs. 90,005 equally amongst his five sons.

15. We find that the High Court of Mysore has taken a similar view in S. M. Ananda Rao v. Commissioner of Income-tax. But that case stand on its own facts, because there were some recitals in the settlement deed which the High Court considered and it was principally on the construction of these recitals that the High Court came to a conclusion that the transaction amounted to partition. In view, therefore, this decision of the Mysore High Court is not of any help to the accountable person so far as the facts of this case are concerned.

16. Since we find that the record of the case fails in showing an unequivocal intention on the part of the deceased to throw his self-acquired property in the common stock of the family and then to partition of the same amongst his five sons, the transaction in question cannot in law amount to partition. The said transaction obviously amounts to gift and, therefore, the provisions of section 10 of the Estate Duty Act would be applicable if the other requirements of the section are satisfied.

17. We, therefore, answer the question which is referred to us in the negative and hold that the finding that the deceased did not make a gift of Rs. 90,005 is not justified in law. Reference is accordingly disposed of in favour of the revenue. The respondent-accountable person shall bear the costs of the Controller of Estate Duty in this reference.


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