039-NLR-NLR-V-51-THE-ATTONEY-GENERAL-Appellantand-VALLIAMMA-ATCHIE-Respondent.pdf
GRATIAEN J.—The Attorney-General v. VaUiamtna Atchie
160
Present: Wijeyewardene C.J. and Gratiaen J.
THE ATTORNEY-GENERAL, Appellant, and VALLIAMMAATCHIE, Respondent
S. C. 512—D. C. Colombo Special 10fTesty. Case No. 8,802
Estate duty—Hindu undivided family—Recognition in Ceylon—Joint business—
Not an ordinary commercial partnership—Overpayment of estate duty—
Power of District Court to order repayment—Estate Duty Ordinance
(Cap. 187), sections 34, 40, 54 (2), 73.
A business carried on jointly by the members of a Hindu undividedfamily is presumed to be joint family property and not. an ordinarycommercial partnership.
For purposes of exemption from payment of estate duty, section 73of the Estate Duty Ordinance, as amended by section 5 of OrdinanceNo. 76 of 1036, gives recognition in Coylon to the law of South Indiaby whichaHindu undivided family, as a legal persona, may own andpossess movable or immovable property.
Upon an appeal to the District Court under section 34 of the EstateDuty Ordinance, the District Court has jurisdiction to enter a decreefor the repayment of money, together with legal interest, against theCrown where the assessee has been compelled to pay as estate dutya sum which he was not liable to pay.
jA-PPEAL from a judgment of the District Court-, Colombo.
OneK. M. N.Natchiappa Chettiar died on December 30, 1038. Theexecutrix of his estate was required by the Commissioner of Estate Dutyto pay as estate duty the sum of Rs. 285,308*48. The District Judge,on an appeal under section 34 of the Estate Duty Ordinance, entereddecree in favour of the executrix on the basis that tho doceased was amember of a Hindu undivided family and, therefore, under section 73of the Estate Duty Ordinance, no estate duty was payable; he held,however, that he had no jurisdiction to enter decree against the Crownfor the return of the sum overpaid to the Commissioner of Estate Duty.The Crown, theroupon, appealed to the Supreme Court, and the executrixfiled cross-objections.
M.F. S. Pulle, K.C., Acting Attorney-General, with H. W. if. Wetra-sooriya, Crown Counsel, for the Crown.
V. Pever a, K.G., with V. A. Kandiah and N. M. de Silva, for theexecutrix respondent.
Cur. adv. vult.
June 24,1949. Gratiaen J.—
K. M. N. Natchiappa Chettiar died on December 30, 1938. Theamount of duty payable in respect of his estate under the Estate DutyOrdinance (Chapter 187) was assessed at Rs. 290,78412. Notice ofobjection to this assessment was forwarded to the Commissioner of
8——LI-
1J . N. A 94670-1,040 (1/60)
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GRATIAEN J.—The Attomey-Oeneral v. VaUiammu Atchit
Estate Duty who, however, affirmed the assessment under Seotion 37.A petition of appeal was accordingly died on behalf of the executrixof the estate in the District Court of Colombo, and in terms of Section 40of the Ordinance the appeal was proceeded writh as an action betweenthe executrix and the Crown. Pending the hearing of the appeal theexecutrix was required to pay to the Commissioner of Estate Duty thefull amount of duty claimed from the estate, and it is common groundthat, certain adjustments having subsequently been made, the balancesum paid by the executrix and not since repaid to her amounts tofts. 285,308-48.
The executrix olaimed total exemption from estate duty by virtueof the provisions of Seotion 73 of the Ordinance, as amended by Section 5of Ordinance No. 76 of 1938, on the ground that the deceased was amember of a Hindu undivided family, and that the property in respectof which estate duty has been assessed was not his separate propertybut the joint property of the undivided family of which he was a member.It was claimed in the alternative that, apart from the operation of Section73, the property of a Hindu undivided family could not be regarded ashaving “ passed on the death ” of one of its individual members withinthe meaning of the Ordinance. In tho view which I have taken, thisalternative proposition does not require to be considered.
Certain preliminary legal objections wore unsuccessfully raised onbehalf of the Crown in the lower Court and in an interlocutory appealto this Court. Hence the delay in the final determination of the pro*coedings. When the trial was eventually resumed the loaraed DistrictJudge entered a declaratory decree in favour of the executrix on thebasis that the property belonged to a Hindu undivided family of whichthe deceased was a member, and that the exemption conferred bySection 73 of tho Ordinance accordingly applied. He held, however,that, although no estate duty was in fact payable under the Ordinance,he had no jurisdiction under the Ordinance to enter a docree against theCrown for the return of the sum of Rs. 285,308*48 which, on the basisof his judgment, had been overpaid to the Commissioner of Estate Duty.The Crown now appeals to this Court from the judgment of the learnedJudge. The executrix has filed cross-objections against that part ofthe judgment which refuses her a decree for the return of the sum paidby her undor protest in terms of Section 44 (2) of the Ordinance.
The main question which calls for decision is whether the propertyin Ceylon in respect of which the assessment was made has been provedto be the property of a Hindu undivided family and not the separateproperty of the deceased. The learned Judge held on the evidence(a)t-hat the deceased was amemberofaHmduundividedfamily,(6)thatthis family owned on the relevant date certain joint property in India,tc) that the property in Ceylon in respect of which estate duty has beenclaimed by the Commissioner was similarly joint property belongingto the family. At the proceedings in the lower Court the Crown hadstrenuously contested each of these facts, but the teamed Attorney-Genoral frankly, and I think very properly, conceded before us that theevidence on points (a) and (6) which I have enumerated could not
(JRATIAEtf J.—The Attorney•Qe>xer<xl v. Valliannw Atchie
171
reasonably be challenged. la view of this admission, the only issue of{act which remains for our decision is whether the learned Judge wascorrect in holding that the property in Ceylon was not separate propertywhioh the deoeased possessed to the exclusion of the undivided familyto which he belonged. It is, of course, well settled law that “ a memberof a Hindu undivided family can make separate acquisition of propertyfor his own benefit which would remain free and separate in his handsunless it oan be shown that the business grew from joint family propertyor that the earnings were blended with joint family estate. ”—per LordBuckmaster in Annamalai Cketty v. Subramaniam Cketty l.
As the Crown now accepts the position that the deceased did belongto a Hindu undivided family which possessed joint property in Tndia,it is perhaps convenient at this stage to set out the relevant factswhioh have been clearly proved and are no longer in dispute. Thedeceased belonged to a South Indian trading family of NattucottaiChotti&rs whose male members for at least three successive generationshad also been engaged in business in Ceylon. His grandfather wasK. At. N. Natch iappa (who for convenience will be called “ Natchinppa 1”).Natchiappa 1 had two sons, K. M, N. Suppramaniam (the deceased’sfather) and K. M, N. Natchiappa (who for convenience will be called“Natchiappa 2”). Natchiappa 1 and his two sons lived, after thefashion of a Hindu undivided family, in a common home with commonworship and a oommon mess, and the family, as an undivided unit, ownedproperty which, in India at any rate, admittedly possessed all thecharacteristics of “ joint property ” as understood in the system of lawobtaining iu that country. After Natchiappa l’s death, his two sonsand their respective families continued to live in the ancestral home asan undivided family and to possess the Indian property belonging to thefamily as joint property. (As the position with regard to the propertyin Geylon remains controversial, I shall for the time being leave thefacts relating to it out of my narrative.) After some years the brothersS uppratnaniam and Natchiappa 2 agreed that there should be a separationof the respective branches of their family, and in accordance with therecognised usage in such cases a deed of partition—A8 of 1912—wasdrawn up by arbitrators selected for the purpose. The legal effect ofsuch a partition is not in dispute. The severance of the two branchesfrom the original undivided family becomes final and complete, but theancestral property which passes to each branch under the partitionremains joint property in the hands of that branch which now assumesas a fresh unit the character of a Hindu undivided family. So it was withthe family of the deceased’s father Suppramaniam and the ancestralproperty which it received under A8. The contention for the Crownin the Court below was that A8 operated only as a division betweenSuppramaniam and Natchiappa 2 of the assets of a commercial partnershipas opposed to the assets of a Hindu undivided family. This positionhas now been abandoned as far as the Indian assets arc concerned, butit is still adhered to with some show of tenacity in respect of the Ceylonassets which were dealt with by A8. The issue must therefore beexamined. The Crown no longer argues that A8 must be regarded as1 A. I. Ji. (imjP.V. J.
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GRAT1AEN J.—The Attorney-General v. VaUiomma Atchie
effecting either a partition of the onsets of a commercial partnershipand of nothing else or (as the oxecutrix has consistently claimed) thepartition simplicitor of the joint property of a Hindu undivided family.No suggestion was made at the trial to any witness who claimed to speakwith personal knowledge of the execution of Aft that it was intendedto operate partly as a division of ono species of property and partlyas a division of the other. Nor is there any evidence that it is customary tocomplicate the formal separation of the branches of a Hindu family and the< onsequent division of their ancestral property, involving as it does certainspecial legal consequences, by introducing into the partition other assetsseparately owned by individual members to the exclusion of the undividedfamily. The language in A8 certainly appears to treat- the Ceylon assetsas being in no way different from the Indian assets.
The property in Ceylon which was dealt with by A8 consisted of theassets of a money-lending business which had admittedly been jointlycarried on until 1912 by the brothers Natchiappa 2 and Suppramaniam(I shall assume that it has not been conclusively proved to be identical,with the original business of Natchiappa 1, although I agree with thelearned Judge that on the evidence this was very probably the case).Thore is no evidence that there was any deed of partnership betweenthe brothers regulating the terms of this business enterprise on a strictlycommercial basis, nor do the books of the business disclose any distri-bution of profits such as one would cxpoct in the case of a commercialventure as opposed to a joint family business. The learned trial Judgeenjoys the advantage of professional experience of the usages of Chcttytraders in Ceylon and after an exhaustive analysis of the oral and docu-mentary evidence in the case he arrived at the conclusion that the Ceylonassets dealt with by A8 were the joint property of a Hindu undividedfamily in exactly the same way as the Indian assets admittedly had been.I find the reasons for arriving at this conclusion irresist ible, and I donot consider it necessary to refer in detail to the evidence which admittedlytends to support the case for the executrix. It is no doubt true thatas against this evidenoe, certain documents relied on by tho Crown, mightseem to point to a different conclusion unless an attempt be made to under-stand them with reference to the business methods of C'hetty money-lenders whioh are matters of common knowledge. For instance, the ideaof a Hindu undivided family which owns property as a unit, or associationdistinct from its individual members has for many years been acknow-ledged and has received both statutory and judicial recognition in thiscountry, but it is well known that members of such families in thetransaction of their business have invariably encountered difficultiesin seeking to adjust to the requirements of our local laws the specialfeatures attaching to the personal laws of their country of domicile. Itis in relation to this background that one must interpret the endeavoursof Suppramaniam to comply with the provisions of the Business NamesRegistration Ordinance of 1918. Similarly, it is in this light that oneshould seek to understand hisattempts, before finally retiring from Ceylon,to leave the joint property of his undivided family in the hands of hisson, the deceased, who succeeded him in tho management of the familybusiness. So it is again that I find nothing specially sinister in the
GRATIAEN J.—The Attorney-General v. VaUiatnmn Atchie
173
behaviour o! the deceased when the time was approaching for him to retirein his turn from the management of the business. The same motivewhich influenced Suppramaniam when he purported first to admit hisson as a “ partner ” of the business and then to transfer to him entirelyhis interest in the so-called “ partnership " for a patently fictitious consi-deration, is to my mind the explanation for the later devices of the deceasedwho, in anticipation of death, purported by a last will to “ dispose ”not only of the Ceylon assets but also of what was admittedly joint pro-perty in India belonging to the undivided family. That motive was topreserve the joint property of the undivided family in the hands ofsucceeding generations of its male members in such a way that, so faras business acumen and legal ingenuity could achieve the desired end,the laws of Ceylon should in no way prevent the joint property of aHindu undivided family from remaining within the family by survival.
I am in complete agreement with the learned Judge that the evidencein the case convincingly establishes that the business carried on in Ceylonby Natchiappa 2 and Suppramaniam under the viiasam “ K. L. M. "was the joint property of the undivided family of which they were bothmembers, and that after the division in 1912 of the property by thedeed AS, Suppramaniam continued to carry on the identical businessunder the new viiasam “ K. L. M. S. P. ” not on his own account but asthe joint property of the new undivided family of which he was now thehead. When Suppramaniam retired to India and later died, thebusiness remained in the hands of his son, the deceased, as joint familyproperty and not as separate property possessed by him for his ownbenefit to the exclusion of the family.
It was argued by the Crown that, on the authority of Bhuru Mai V-Jaganath1, the onus was on the executrix to prove affirmatively that thebusiness of K, L. M. oarried on by Suppramaniam and Natchiappa 2,and the later business of K. L. M. S. P. were in fact the joint propertyof an undivided family. Even if this be so, the burden has been amplydischarged. Moreover, in the present case we have clear evidence thatthere was a Hindu undivided family possessed of some property at leastwhich was admittedly joint. The Ceylon property was also possessedjointly by the male members of the undivided family, and in the absenceof any evidence of a commercial partnership the terms of which wereinconsistent with the incidence of joint family property, 1 think that theonly reasonable inference which can be drawn from the proved factsis that the business was joint family property and not the separate assetof any individual member of the family. The facts of the present casesoem to approximate to those which were considered by the PrivyCouncil in Bampershad Tewarry v. ShMchum Doss 3 when it was held thata business carried on jointly by the members of a Hindu undivided familyis presumed to be joint family property and not an ordinary commercialpartnership. The position would no doubt be different in the case of abusiness separately acquired and carriod on by a single member of thefamily. In that event the principles laid down in Annamalai ChHty v.Subramaniam Chetty (supra) and Bhuru Mai v. Jaganath (supra) would
no doubt apply.
1 A. I. R. (1942) F. C. 13.
* 10 Moore's Indian Ajrpeals, 490.
174
GKA'flAEN J.—The Attorney-General t Valliamm'i Atchie
As far as the appeal of the Crown is concerned, it remains only toconsider a legal submission made by the learned Attorney-General whichI hope I have not misunderstood. The substance of his argumentappears to be that even though the Legislature may have intended bySection 73 of the Estate Duty Ordinance, both in its original and itsamended form, to give recognition to the law of South India by whicha Hindu family, as a legal persona which is distinct from its individualmembers, may own and possess movable or immovable property, thef aot remains that no such Hindu law has in fact been introduced by expresslegislation as part of the law of Ceylon. In the circumstances, it isurged, Section 73 of the Ordinance is wholly inoperative. With thegreatest respect, I think that the argument—or at least the argumentas I have understood it—is fallacious. We have not been referred toany doctrine of our common law to which the concept of a familycapable of owning property as a legal persona is inherently repugnant,fn practice, however, the oontinued ownership of property by an unin-corporated association the identity of whose members changes from timeto time must inevitably create problems. It is an essential feature ofthe law of South India relating to the joint property of a Hindu undividedfamily that on the death of any member of the family the remainingmembers take not by survivorship but by survival. In the case ofmovable property situated in Ceylon and belonging to a Hindu undividedfamily, no difficulties arise on the death of a member of the family,because the law applicable would be the law of the deceased’s countryof domicile. In the case of immovable property, however, the laws ofthe country of domicil would not govern the case. It was therefore feltthat the original language of Soction 73 of the Estate Duty Ordinanceexempting “ any ” joint property of a Hindu undivided family from theoperation of the Ordinance might create some difficulty in the case ofimmovable property (vide the observations of Fernando J. and theadmissions of Counsel on this point in Periakaruppan Cheltiar v. Com-missioner of Stamps *). It was for this reason that Section 73 was in myopinion amended by Ordinance No. 76 of 1938 to read as follows:—“ Where a member of a Hindu undivided family dies, no estate dutyshall be payable—
(a) on any movable property which is proved …. ♦ to have
been the joint property of that family ;
(h) on any immovable property when it is proved …. thatsuch property, if it had been movable property, would have beenthe joint property of that family.”
The intention was to resort to a fiction which would remove in theease of immovable property the difficulties which do not attach to themovable property belonging to a Hindu undivided family. In rejectingthe submission made by the learned Attorney-General, I am comfortedby the knowledge that a Hindu family is, for income-tax purposes,taxed by the Crown as a “ body of persons ” capable of owning propertyin this country and deriving income therefrom. Tn that respect atleast no anxiety seems to exist as to whether the dear intention of the1 (1936) 38 N. L. R. 201.
GRAT1AEN J.—The Attorney-General v. ValUamma Atchfc
176
Legislature to regard a Hindu family as an owner of property has beepfrustrated. It is on behalf of the same “ body of persons ” for whosebenefit exemption from the payment of estate duty is claimed. TheCrown cannot have it both ways. In my opinion the appeal of theCrown against the judgment of the learned District Judge should hedismissed with costs, and I would make order accordingly.
I now proceed to consider the cross-appeal of the executrix. Onvarious dates between May 30, 1940, and February 22, 1941, theCommissioner of Estate Duty has, pending the appeal, recovered from herin terniB of Section 44 (2) sums aggregating Rs. 293,330*89. On May5, 1941, a sum of Rs. 8,022*41 was repaid to the executrix. In theresult the nett amount overpaid to the Commissioner as estate duty,on the basis of the learned District Judge’s judgment with which I amin agreement, amounts to Rs. 285,308*48. The estate has been deprivedof the use of this money for a period which already exceeds eight years.The question is whether the learned District Judge lias correctly decidedthat the provisions of the Ordinance give him no jurisdiction to enter adecree ordering the Crown to refund the money to the executrix. Inmy opinion he is vested with such jurisdiction, and this is certainly a casein which it should be exercised. I can find nothing in the Ordinancewhich compels me to hold that an assessee who has been required to payas estate duty a sum of money on the basis of an erroneous assessmentmust rest content with the cold comfort of a declaratory decree to theeffect that the assessment was wrong.
Section 34 of the Ordinance entitles a person aggrieved by the amountof any assessment of estate duty to appeal to the appropriate DistrictCourt against the assessment. The jurisdiction conferred on the Courtis not a purely appellate jurisdiction such as is vested in this Court, forexample, when a case is stated by the Board of Review under the provi-sions of the Income Tax Ordinance (Chapter 188). Once a petition ofappeal has been filed and a copy thereof served on the Attorney-Generalas required by Section 38, the appeal proceeds not merely as a contestbetween tho assessee and the Commissioner but “ as an action betweenthe appellant as plaintiff and the Crown as defendant ” (Section 40). Theprovisions of the Civil Procedure Code are brought into operation, and,where an action lies against the Crown, the relief claimed by the plaintiff1need not be restricted to a mere declaratory decree. The second provisoto Section 40 makes express reference to the decree which shall be enteredin the “ action Under this proviso the decree is required to contain adeclaration as to the amount if any, which the assessee is liable to payaa estate duty, but it does not state that the relief granted in the actionmust necessarily bo confined to such a declaration. Indeed, the learnedAttorney-General concedes that theso decrees invariably order thepayment of costs in favour of the successful party, and there is a veryclear indication that the language of Section 54 (2) contemplates thepossibility of a decree capable of execution for the payment of moneyto the Crown (should the Crown succeed). I do not find any provisionwhich precludes, in appropriate cases, the entering of a decree for therepayment of money against the Crown where an assessee has beencompelled to pay as estate duty a sum which he was not liable to pay .
170
Kuhafu v. Vairavan Chettiar
In such cases the extent of the assessee's grievance must be the measureof the relief which he has a right to claim in the action which is proceededwith under Section 40 against the Crown. It is for this reason that ata certain stage the Crown, represented by the Atfcorney-Genoral, stepsin and the Commissioner of Estate Duty drops out as a party to thelitigation. The appeal proceeds as an “ action ” so that, in the interestsof finality, a decree capable of execution may be entered either in favourof the Crown or against it as the case may be. In the present caseI would enter a decree in favour of the executrix against the Crown forthe payment of u sum of Rs. 285,308‘42 overpaid by her as estate duty,together with legal interest at 5 per cent, in terms of Section 192 of theCivil Procedure Code from the date of action until the date of thisdecree, and thereafter on the aggregate amount of the docroe untilpayment in full. The executrix is entitled to hor costs of this appealand in the Court below.
Wijeykwardvnb C.J.—I agree.
♦
Appeal dismissed.Cross-appeal allowed.