V. RAMASWAMI IYENGAR et al. (Administrators of the Estate in Ceylon of Rm. A

140-NLR-NLR-V-55-V.-RAMASWAMI-IYENGAR-et-al.-Administrators-of-the-Estate-in-Ceylon-of-Rm.-A.pdf

496
Ramaswami Iyengar v. Attorney-General
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1953Present: Gratiaen J. and Gunasekara J.■'V, RAMASWAMI IYENGAR el al. (Administrators of the Estate inCeylon of Rm. At. At. Rm. Arunachalam Chettiar, deceased), andATTORNEY-GENERAL, Respondent.
S. G. 236—D. C. Colombo 38 (Special)
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JSstate Duty—Hindu undivided family—Death of sole surviving “ co-parcenary member ”—Liability of estate for estate duty—Estate Duty Ordinance {Cap. 187), ss. 6and 73, as amended by Ordinance No. 76 of 1938, s. 5.
The sole surviving “ oo-parcenary member ” of a Mitakshara Hindu undividedfamily died in February, 1938, leaving no male issue in existence. His sonhad predeceased him, and the actual survivors of the lamily were all femalesand included his widow.
GRATIAEX J.—Hamaswami Iyengar v. Attorney-General
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Adopting the ratio decidendi in Attorney-General v. Hamaswami Iyengar(55 X. L. R. 481) and following it to its logical conclusion—
Held, tinat all the property which was in the possession of the deceased atthe time of his death was the joint property of the undivided family. Althoughthe deceased had been “ competent to dispose ” of the joint property after hisson’s death, and although the joint property would, for that reason, normallybe deemed to have “passed” on his death within the meaning of section 6of the Estate Duty Ordinance so as to attract estate duty, the exemptingprovisions of section 73 protected the property from taxation.
A '
ZjLPPEAL from a judgment of the District Court, Colombo.
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H. V. Perera, Q.G., with S. J. V. Ghelvanayakam, Q.G., Peri Sunderam-and S. Sharvananda, for the appellants.
Walter Jayatvardena, Crown Counsel, with V. Tennelcoon and G. F.Sethukavaler, Grown Counsel, for the respondent.
>> »»Cur. adv. vult.
October 12, 1953. Gratiaf.n J.—
This is an appeal against a judgment of the District Judge of Colomboupholding an assessment made by the Commissioner of Estate Dutyunder the provisions of the Estate Duty Ordinance (Cap. 187) in respectof the estate of a person who has been conveniently described throughoutthe proceedings as “ Arunachalam Chettiar (snr.) ”. He died on 23rdFebruary 1938 shortly after the Ordinance came into operation, andwas the father*of Arunachalam Chettiar (jnr.) in connection with whoseestate a separate assessment had been made under the provisions of theearlier Ordinance, No. 8 of 1919 (vide the proceedings in S. G. 235 of1951 /D. C. Colombo 37 Special*). The assessees in each case were theadministrators of the estate of Arunachalam Chettiar (snr.). Theyappealed against both assessments and, by agreement of parties, therelevant evidence, which overlapped to a considerable extent, wasrecorded in consolidated proceedings in the Court below.
Dining Arunachalam (jnr.)’s lifetime, i.e., until 9th July 1934, he andhis father were the only “ co-parcenary members ” of an undivided familywhich, regarded as an entity, owned considerable “ joint property ”in various countries including Ceylon. We have already* held that nopart of that property had actually or even notionally “ passed •” uponthe son’s death to his father so as to attract duty under the provisions ofOrdinance, No» 8 of 1919. The basis of our decision, shortly stated,was that, under the Mitakshara law, the joint property belonged to theentire family group to the exclusion of its individual members.
The earlier Ordinance did not make express provision for the case ofjoint property belonging to a Hindu undivided family in relation to the'
** See page 481 (supra).—Ed.
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GRATIAEIST J.—Ramaswami Iyengar v. Attorney-General
-question whether estate duty is payable upon the death of one of itsmembers. In the Ordinance passed in 1938 (Cap. 187), however, whichis concerned with the estates of persons dying on and after 1st April1937, section 73, as originally enacted, declared as follows :
“ Where a member of a Hindu undivided family dies, no estate duty
shall be payable on any property proved to the satisfaction, of the
Commissioner to be the joint property of that Hindu undivided family.”
Shortly afterwards, a declaratory amendment to section 73 was passedby section 5 of Ordinance No. 76 of 1938, so as to remove doubts and-difficulties which might exist in the case of immovables belonging to anundivided family—vide A. G. v. Vallicvmmai Atchie (1949) 51 N. L.<- R.169 at 174, which was upheld by the Privy Council in (1952) 53 N. L. R..505. Section 73, as amended, now reads as follows :
“ Where a member of a Hindu undivided family dies, no estate duty
shall be payable—
on any movable property which is proved …. to have
been the joint property of that family ;
on any immovable property when it is proved 4.. ‘ .. that
such property, if it had been movable property, would have
been the movable property of that family. ”
Upon the death of Arurachalam Chettiar (jnr.), what had previouslybeen the entire “ joint property ” of the undivided family to which bothhe and his father had belonged as “co-parcenary members” came into the'hands of the father by survivorship (and not by succession) as “ thesole surviving co-parcener ”. It so remained throughout the period9th July 1934 to 23rd February 1938, when the father died leaving nomale issue in existence to continue the line. The actual survivors of-the family were all females—namely, his step-mother, his widow, hisunmarried daughter, and his daughter-in-law.
The assessees claim exemption under section 73 from duty in respectof the deceased’s estate on the ground that they have ’established thefollowing facts :
(а)that he continued, until he died, to be a member of a Hindu
undivided family ;1
(б)that all the property in his possession at that time was the joint
property of the undivided family.
If both these propositions be established, section 73 admittedly operates-even if, but for the statutory exemption, the property would be deemed to have“ passed on his death ” within the meaning of section 6 of thz Ordinance.
It is beyond argument that, under the Mitakshara law which governsthe case, Arunachalam Chettiar (snr.) did continue until the time of hisdeath to be‘a “ member of a Hindu undivided family ”. That familyhad been undivided in status during the lifetime of his son, and the son’s-death did not operate to disrupt the family, Indeed, the undivided
GRATIAEX J.—Ramaswami Iyengar v. Attorney-General499
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status of the family continued even after the death of ArunachalamChettiar (snr.) himself. “ Hindu lawyers do not regard the male lineto be extinct or a Hindu to have died without male issue until the deathof his widow renders the continuation of the line by adoption impossible ”.—A. I. R. 1918 P. G. 192. In other words, “ A Hindu undivided familycannot be brought finally to an end while it is possible in nature and inlaw to add a male member to it ”—A. I. R. 1943 P. C. 196. The HighCourt of Nagpur has held that a right of a widow to adopt a son to herdeceased (co-parcenary) husband is preserved even if no single co-parcenerExists, that is to say, even if at the time of adoption the Hindu undividedfamily “ has been reduced to a female, i.e., the adopting mother ”—A. f. R. 1942 Nag. 19 at 23, the ratio decidendi of which was approvedby the Privy Council in A. I. R. 1943 P. C. .196.
The learned District Judge accepted the contention that this firstqualification for exemption under section 73 was fulfilled. He took theview, however, that the death of Arunachalam Chettiar (jnr.) operatedto divest the family of the joint property which it had previously owned,and that the property thereafter became vested (albeit provisionally)in Arunachalam Chettiar (snr.) as absolute owner. He accepted theopinion of Mr. ’Rajah Aiyar, the expert witness called by the Crown,that the term “ joint property ” is synonymous with “ co-parcenaryproperty ”, and that “ until the contingency of an addition of a malemember, whether in nature or in law, arises ” a sole surviving co-parcenerbecomes the “ full owner ” of what had previously been joint propertybelonging to the undivided family.
Mr. Bhashyam, who was called as an expert by the assessees, disagreedwith Mr. Rajah Aiyar’s opinion on thi3 vital issue. He took the viewthat the fortuitous circumstance that the “ co-parcenary unit ”, so tospeak, of an urSlivided family has at any point of time been reduced to asingle individual does not divest the family of its “ joint property ” ;the undivided status of the family continues, and so does its joint estate.
We are once again confronted with the du'-y of deciding for ourselvesupon the conflicting evidence of two distinguished lawyers in regardto a question of foreign law with which we are unfamiliar. I
I have arrived at the conclusion that Mr. Rajah Aiyar’s opinion, andthe learned Judge’s acceptance of his view upon this question, cannot beaccepted. I must assume, for the purposes of this appeal, that ourdecision in the connected case* correctly explains the concept of “ jointproperty ” belonging to a Hindu undivided family. An undivided family,being an entity consisting not merely of its co-parcenary members butalso of others, must be regarded as “ the true owner ” of the jointproperty; the co-parceners for the time being collectively constitute,so to speak, “ the holding members ” of the larger entity ; and the kartafor the time being is the “ managing member ”. To what extent,if any, can the temporary reduction of the “ co-parcenary unit ” to asingle individual affect the ownership of what had previously been thejoint property belonging to the entire undivided family whose corporate
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* See page 481 (supra).—Ed.
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GRATIAE3ST J.—Ramaswami Iyengar v. Attorney-General
existence has admittedly not been brought to an end 1 It seems to methat we can only answer this question by adopting the ratio decidendiof our earlier decision and following it to its logical conclusion.
If it be correct to say that, when two or more co-parceners exist, theydo not oum the joint property in undivided shares, I do not see how itcan logically be concluded that, when only one of them ^remains,he automatically becomes the owner of the entire property which heand his co-parceners had previously held for the benefit of the true owner,namely, the undivided family. On the contrary, it seems to me that,so long as the co-parcenary unit (irrespective of the number of personswho comprise it at any point of time) continues to hold that property,there can be no change of ownership until the family, as a corporate eidity,has itself finally ceased to exist.
It is important to bear in mind that a person’s rights of ownershipmay well be subject to very wide powers vested in someone else. Forexample, all the co-parceners, acting collectively, possess unfetteredpowers of alienation over the joint property which is owned by the un-divided family (i.e., an entity including but not confined to theco-parceners themselves.) They may alienate the entire joint propertyby collective action, or they may gift it away. If they so prefer, theymay dispose only of some part of the joint property, in which eventwhat remains in their hands continues to belong to the family whoseundivided status is still preserved.
In the same way, if there is only a single co-parcener for the time being(as there was in the present case after 9th September 1934) all the un-fettered powers of alienation previously vested in the co-parcenary groupbecome centred in the individual. He too is free to defeat the existingproperty rights of the undivided family, wholly or partiajly, by exercisingthose powers in any way he pleases : (1905) I. L. R. 39 Mad. 437 ; somuch so that even a male who subsequently enters the family (by birthor by adoption) may well find his “ birthright ” to have been diminishedor even extinguished in toto. In other words, there is nothing exceptthe dictates of his own conscience to prevent a single co-parcener fromfrittering away the joint estate, to the detriment of the other membersof the family (be they alive or yet unborn).
Some of the authorities referred to by the experts, in discussing asingle co-parcener’s extensive powers of alienation, certainly use wordssuggesting that he is, in a certain sense and for all practical purposes,regarded as “ the owner of the joint property ” or as “ in the position offull owner ”—A. I. R. 1929 Mad. 296. But this does not mean that heis in truth the absolute owner of the joint property to the exclusion of thequasi-corporation to which an undivided family is often equated. Hisresponsibilities and obligations as manager or harta of the property inhis possession are not extinguished, and female members still enjoy theright, based on their continued membership of the undivided family, to bemaintained by him out of the common fund. A. I. R. 1940 Mad. 664 ;A. I. R. 1953 Mad. 159:So again, a widow of a deceased co-parcener—
e.g.j in this case, the widow of Arunachalam 'Ohettiar (jnr.)—could
GRATLAEN J.—Hamaswami Iyengar v. Attorney-General501
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enforce against him her claim to maintenance quoad what would havebeen her husband’s share upon a partition if he were still alive. A. I. R.1947 P. C. 143. I have not been referred to any authority whichsuggests that the position of an “ inferior ” member of an undividedfamily is (so long as the joint property is in the hands of a singleco-parcener) any different to what it had previously been when theproperty fvas in the hands of a larger co-parcenary unit.
From all these circumstances, I cannot but conclude that, so long asp single surviving co-parcener refrains from exercising his power to placethe property beyond the reach of the undivided family by alienation,the property continues to belong to the entire family. Although, there-fore,*Arunachalam Chettiar (snr.) at the time of his death was “ competentto dispose ” of the j’oint property throughout the relevant period followinghis son’s death, and although the joint property would, for that reason,normally be deemed to have “ passed ” on his death within the meaningof section 6 of the Ordinance so as to attract estate duty, the exemptingprovisions of section 73 protect the property from taxation.
I concede that if at any time (before a Hindu undivided family capableas such of owning joint property to the exclusion of its individual membershas been established) a man governed by the Mitakshara law enjoysfull dominium over even ancestral property which has come into his hands,he continues to hold it “ as his very own ” until a son is born to him so asto diminish his individual interest in the property.—because it is onlythen that such ancestral property would be brought by operation of lawinto the joint ownership of the newly-established Hindu undivided family—A. I. R. 1937 P. C. 36. I also agree that “ the mere existence of awife or daughter ” is not sufficient to create an undivided family andthereby convert a man’s individual property into “ joint ” property.But the converse proposition does not automatically follow, and, to mymind, it would make a mockery of the undivided family system if thetemporary reduction of the co-parcenary unit to a single individualwere to convert what was previously joint property belonging to an undivided
family into the separate property of the surviving co-parcener.
• >
By enacting section 73, the legislature has now given formal recognitionto the concept of an undivided family (in spite of constant fluctuationsin its composition) as an entity capable of owning property. The term“ of an undivided family ” in section 73 means “ belonging to an undividedfamily ”. Nevertheless, it has been argued for the Crown, the phrase“joint property ” implies that there should always be at least two co-parceners actually alive to hold the property in “ community of interestand unity of possession ”. I disagree. The word “ joint ” in thiscontext merely emphasises the concept of unity attaching to the entireundivided family which is the true owner of the property concerned.
Bor these reasons, I have come to the conclusion that the learnedDistrict Judge was wrong in deciding that section 73 does not applyto this case. I would therefore set aside the order under appeal, andsubstitute a decree (a) declaring that no estate duty was payable underthe Estate Duty Ordinance (Cap. 187) in respect of the estate of Aruna-chalam Chettiar (snr.), and (b) ordering the Crown to refund to the
502
Charles Silva v. The Queen
appellants the sum of Rs. 700,402’ 65 with legal interest thereon from thedate on which these proceedings were instituted in the District Court.The appellants are also entitled to their costs in this CouA and in theCourt below.'
It is unnecessary to express an opinion on certain subsidiary issueswhich would only have arisen for consideration if the principle of theCommissioner’s assessment had been affirmed.
Gtjnasekara J.—I agree.
Appeal allowed.