Dilharshankar C. Bhachecha VS. The Controller Of Estate Duty, Ahmedabad

Reporting JudgeMukharji

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Summary

The appellant Dilharshankar C. Bhachech being one of the grand-sons of the deceased Kamlashankar Gopalshankar and a legatee under a joint will of his grand parents is the accountable person under the Estate Duty Act, 1953. The deceased and his wife Mahendraba each possessed certain properties which were of their own individual ownership.

They were also jointly possessed of certain properties including a bungalow known as "Dilhar Dwar" - situated in the Ellisbridge area of Ahmedabad. On 24th December, 1950 the deceased and his wife had made a joint will in respect of the said bungalow. Mahendraba, one of the executants of the joint will died on 3rd January, 1954. On the death of Mahendraba, estate duty on her share of the property which passed on her death to her husband Kamlashankar has been duly paid. Kamlashankar the other executant to the joint will died, thereafter on 25th October, 1964. Upon his death, the appellant-cum-accountable person-cum-sole executor and trustee paid estate duty to the remaining extent of 50% on the properties as mentioned in the joint will of the deceased Mahendraba and Kamlashankar. The appellant accountable persons in the returns filed contended; (i) since the property in question was settled by the joint will in favour of the grandsons and since duty had been paid on the death of one of the joint executants to the will, duty on the second death of the deceased was not payable on the whole estate by virtue of the provisions of section 29 of the Estate Duty Act; (ii) that on a true construction of the will, the deceased was neither at the time of his death nor any time during the continuance of the settlement, the full owner of the share of the property of Mahendraba because he had only a 95

life interest therein to receive rents and profits from that share, and therefore, exemption contemplated by section 29 of the Act came into force and hence no etate duty with regard to the share of Mahendraba on the death of the deceased Kamlashankar arose for the second time. The Revenue was of the opinion that on the death of Mahendraba, the wife, her husband had become the sole owner of the property in question, as is evident from the wealth tax returns filed by him and therefore, exemptions under section 29 of the Act cannot be claimed.

Both the Assistant Controller of Estate Duty Ahmedabad as well as the Appellate Controller held against the accountable person, taking the view that section 29 of the Estate Duty Act was not applicable. Full amount of the Estate Duty was collected from the accountable person. In an appeal before the Tribunal, the Tribunal on the construction of the will held in favour of the accountable person, for the reason that Kamlashankar did not become the full owner of the share of the property of Mahendraba on her death.

At the instance of the Revenue the Tribunal referred the matter to the High Court of Gujarat. While refusing to interpret the word "since" narrowly as contended by the Revenue, the High Court, however, answered on the construction of the will in its favour holding that "there was no agreement of irrevocability and the survivor took an absolute interest in the whole of the property and as such section 29 would have no application to the facts of the case. Hence the appeal by certificate.

Allowing the appeal by certificate.

Allowing the appeal, the Court.

HELD: 1 The interpretation sought for by the Revenue was highly artificial and against the spirit of section 29.

Looking at the language and the spirit of section 29 of the Estate Duty Act, 1953, it was clear that the expression "If the estate duty has already been paid --- since the date of the settlement", occurring in the first part thereof, meant

"if the estate duty has become payable or has been paid either simultaneously with the creation of the settlement or at any time thereafter." The dictionary meaning of the word

"since" is wide enough. Section 29 comes into operation only on the death of the surviving spouse, the obvious intention of

96 the Legislature in framing the section being to avoid double duty. Even if the word "paid" was used in wider context and not in the literal sense, it could not be interpreted as excluding its literal meaning, namely, the actual fact of payment having already been made. Here, on the facts, the duty had been "paid" since the date of the settlement. [104

A-E]

Coutts & Co. v. Inland Revenue Commissioner [1962] 2 All E.R. 521 at 527 quoted with approval.

1.2 Whether a person in "competent to dispose of" of the property and within the meaning of section 6 of the Estate Duty Act, 1953, would naturally depend on the terms and conditions under which the property is either acquired or inherited. The expression "competent to dispose of" must bear the ordinary meaning in the English language. A person shall be deemed to be competent to dispose of the property if he has every power or authority enabling the donee or other holder thereof to appoint or dispose of the property as he thinks fit. [118 D]

1.3 The question of strict construction of the taxing statute and the principle that one who claims exemption must strictly come within the purview is not relevant in the instant case because the exemption follows on the interpretation of the will. In the instant case whether the deceased Kamlashankar had the disposing power over the share of the property of Mahendraba, his wife, acquired by him would depend not on how he has treated it but the true effect of the will. There is no question of contemporaneous conduct because the conduct of one of the parties subsequent to the death of one of the executants long after the execution of the will cannot be described as contemporaneous conduct. The question of "contemporaneous exposition" by conduct of the parties in the facts of this case does not arise. [119 E; 116 B-C]

2.1 A joint will is a single testamentary instrument containing the wills of two or more persons and jointly executed by them, while mutual wills are separate wills of two or more persons which are reciprocal in their provisions and executed in pursuance of contract or agreement between two or more persons to dispose of their property to each other or to third persons in particular mode or manner.

Mutual wills as distinguished from joint wills are sometimes described as reciprocal wills. In order to render mutual will irrevocable, 97

both the conditions must be concurrently satisfied: (a) that the surviving testator must have received benefits from the deceased under the mutual will; (b) the mutual wills should have been executed in pursuance of an agreement that the testator shall not revoke the mutual wills. Such an agreement not to revoke the wills may either appear from the wills themselves or may be proved outside the wills, but that is not established by the mere fact that the wills are in identical terms. If such an agreement is shown, each party remain bound. [113 D-F; 114 A-C]

A different and separate agreement must be spelled out not to revoke the will after the death of one of the executants. That agreement must be clear, though need not be by a separate writing but must follow as a necessary implication which would tantamount to an express agreement.

[118 H; 119 A]

2.2 In the instant case it is clear;

(a) The will in question was a mutual will; [108 B]

(b) Reading the different clauses of the said will it was manifest that the intention was to keep the property as it was at the time of execution of the will so that the ultimate beneficiaries and the grandsons might enjoy the property with such modifications as the contingencies of time and situation might require; [108 A-B]

(c) Before the death of the first of the executants, the agreement remained contractual one in consideration of mutual promises. It could have been at that stage revoked by mutual agreement or even by unilateral breach, giving rise at the most to an action for damages. But after the death of first one without revoking his or her own will makes the joint will irrevocable by the survivor. But there must be an agreement that the wills would not be revoked after the death of one of the executants or disposition will not be made contrary to the will after the death of one of the executants; [109 C-D, E]

(d) The predominant intention of the executants at the time of the execution, after the acceptance of the benefit of the execution makes the will in this case irrevocable by the survivor of the executants; [119 A-B]

(e) In the facts and circumstances of this case, because of the specific clause that it was intended that the grandsons 98

would receive the benefit in species and there being no provision for making up the deficiency or diminution if any, it must follow that there was mutuality and Kamlashankar was not competent to dispose of the property in any manner contrary to the ultimate disposition; [119 B-C]

(f) The fact that estate duty was paid is non sequitur;

[119 D]

(g) The payment of wealth-tax by Kamlashankar Gopalshankar on the whole estate after the death of Mahendraba is no relevant; and [119 D]

(h) The husband Kamalshankar received the benefit under the will after the death of Mahendraba. It became irrevocable by him after her death with the result that he had no disposing power over the share of Mahendraba in the property. In the premises being a "settled property" estate duty having been paid on the death of one of the parties, the accountable person was entitled to exemption under section 29 of the Act. [119 F-G]

Dufour v. Pereira, [1769] 21 E.R. 332; In re: Oldham, 1925 Ch.75; Gray v. Perpetual Trustee Co. Ltd. [1928] A.C.

391 at 399 & 400; Re Parsons, Parsons v. Attorney-General,

[1942] 2 All E.R. 496; and Bhawani Prasad v. Smt. Surendra Bala W/o Subodh Chandra and Anr. A.I.R. 1960 Allahabad 126 discussed and distinguished.

Kuppuswami Raja v. Perumal Raja A.I.R. 1964 Madras 291 approved.

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Extract

Dilharshankar C. Bhachecha VS. The Controller Of Estate Duty, Ahmedabad

PETITIONER: DILHARSHANKAR C. BHACHECHA Vs.

RESPONDENT: THE CONTROLLER OF ESTATE DUTY, AHMEDABAD

DATE OF JUDGMENT08/01/1986

BENCH: MUKHARJI, SABYASACHI (J)

TULZAPURKAR, V.D.

CITATION: 1986 AIR 1707 1986 SCR (1) 94 1986 SCC (1) 701 1986 SCALE (1)6

ACT: Estate Duty Act, 1953 sections 2(15), 2(16), 2(19), 6 and 29 - Interpretation of the words "paid" and "since" in section 29 - Joint will and mutual will - Conditions necessary to render mutual will irrevocable - The theory of contemporaneous exposition and construction of the will in question.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 679 (NT) of 1974.

From the Judgment and order dated 19/20-12-73 of the Gujarat High Court in Estate Duty Reference No.2 of 1972.

V.S. Desai, Dilhar C. Bhachech, Naunit Lal, Kailash Vasudev and Mrs. Vinod Arya for the Appellant.

S.C. Manchanda, C.M. Lodha and Miss. A. Subhashini for the Respondent.

The Judgment of the Court was delivered by

SABYASACHI MUKHARJI, J. In this appeal by certificate by the High Court under article 133(1) of the Constitution 99

against the judgment and order of the High Court of Gujarat dated 19/20th December, 1973 in Estate Duty Reference No. 2 of 1972, the question involved is regarding exemption from estate duty under section 29 of the Estate Duty Act, 1953 (hereinafter called the `Act'),which contemplates exemption from duty in cases where estate duty has been paid on settled property on the death of one of the parties to a marriage.

The appellant is the accountable person and he is related to the deceased Shri Kamlashankar Gopalshankar Bhachech as one of his grand sons. Deceaed Kamlashankar Gopalshankar died on 25th October, 1964. The deceased had a wife named Mahendraba Kamlashankar Bhachech. The deceased and a his wife each possessed certain properties which were of their own individual ownership. They were also jointly possessed of certain properties including a bungalow known as 'Dilhar Dwar' - situated in the Ellisbridge area of Ahmedabad. The dispute in the reference out of which this appeal arose was with regard to estate duty leviable on 1/2 share of the wife of the deceased in the said bungalow and the land appertaining thereto.

On 24th December, 1950, the deceased and his wife had made a joint will in respect of the said bungalow. They also made separate wills with regard to their individually owned properties on the same date with which this appeal is not concern...

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