CONTROLLER OF ESTATE DUTY, MADRAS versus N. SHANKARAN ETC.

Citation: [1991] SUPP. 2 S.C.R. 167 · Decided: 01-11-1991 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed

Judgment (excerpt)

CONTROLLER OF ESTATE DUTY, MADRAS 
v. 
N. SHANKARAN ETC. 
NOVEMBER 1, 1991 
[S. RANGANATHAN, M. FATHIMA BEEVI 
AND N.D. OJHA, JJ.] 
Estate Duty Act, 1953--Sections 21(5); 9, 27--,'Blending'-
'Partition '-Whether 'disposition'. 
A 
B 
A common question of l~w that arises for determination in 
C 
these appeals by special leave is whether the act of a member of a 
joint family by which he impresses his individual property with the 
_character of joint family property or "throws" it into the botch 
potch of the joint family or "blends" it with the joint family prop-
erty is a 'disposition' within the meaning of the Estate ·Duty Act, 
1953. In Civil Appeal No. 1204 of 1979 the facts are : One Natesan 
D 
Chetty who died on 1.3.1972, was the Karta of a Hindu Undivided 
Family, consisting of himself and his four sons. He owned five house 
properties in Madras, On 18.6.70 and 16.9.1970, he made declara-
tions by which he impressed the properties with the character of 
joint family properties and further declared that they would there-
after belong to HUF of which be was the Karta. Thereafter a parti-
E 
tion was effected in the family in March 1971 in which two of the 
properties came to bis share. Sri Chetty had also borrowed Rs. 
46,800 from HUF out of the rental income. from the properties for 
his business purposes. These borritwing.s were duly repaid in 
April, 1971. 
In completing the assessment to estate duty of the estate pass-
ing on the death of Natesan Chetty, the Assistant Controller of Es-
tate Duty held that the declaratio~s made by the deceased on 18.6.70 
F 
and 16.9.70 were "dispositions" within the meaning of the said ex-
pression as defined in the second explanation to section 2(15) of the 
Estate Duty Act. He further held that since the declarations were G 
made without consideration, they amounted to gift which had been 
made within two years of the date of death and hence 'liable to be 
assessed as part of the estate passing on death under section 9 of the 
Act. The two properties which had fallen to the _s!aJlre of the de-
ceased passed on the death of the deceased. Be· accordingly in-
cluded Rs. 1,22,SOO the value of the other three properties als9 in H 
167 
A 
B 
c 
D 
E 
F 
G 
H 
168 
SUPREME COURT REPORTS 
(1991) SUPP.2 S.C.R 
the principal value of the estate. The Asstt. Controller further held 
that a sum of Rs. 46,800 being the loan taken and discharged by the 
deceased should also be added back in computing the principal value 
of the estate by virtue of section 46(2) of the Act. 
Dissatisfied with the conclusion of the· Asstt. Controller, the 
accountable person preferred an appeal to the Appellate Controller 
of Estate Duty which was successful. Thereupon the Department 
preferred an appeal to the Tribunal which, following the decision of 
the Madras High Court in Rajamani Ammal v. Controller of Estate 
Duty, (1972) 84 I.T.R. 790 held that the sum of Rs. 1,22,SOO could 
not be i~cluded in the value of the estate passing on the death and 
consequently, that the add back of Rs. 46,800 was also not justified. 
Thereupon the Controller of Estate Duty applied under Section 64 
(1) of the Act for a reference to the Madras High Court for its 
opinion on the two questions. The Madras High Court was of the 
opinion that the basic question at issue was covered by the earlier 
decisions of the Court in Rajamani Ammal v. Controller of Estate 
Duty and Controller of Estate Duty v. Smt. Mookammal, (1978) 110 
I.T.R. 581. The High Court declined to call for a reference.and 
dismissed the application for reference. Hence the appeals by the 
Department. 
Dismissing the appeals, this Court, 
HELD : "Blending" or "partition" will no~ be a 'disposition' 
within the ordinary connotation of the expression but will be one if 
either of the Explanations to Section 2(1S) are attracted. [179 G] 
Unlike an unequal partition, the act of blending will not amount 
to a 'disposition' attracting Ss. 9 and.27 of the Act. [179 H -1.80 A] 
Tbe High Court was right in holding that the acts of blending 
did not result in the 'gift' of immovable properties within the mean-
ing of the statute. [180 CJ 
Though a declaration 9f blending does not amount to a 'gift' 
where the act of blending is followed up by a subsequent partition, 
the two transactions taken together do result in the extinguishment, 
at the expense :of the deceased, of his rights in the properties which 
go to the share of other coparceners at the subsequent parti

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