SAKARCHAND CHHAGANLAL Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THIS reference under the Estate Duty Act raises a question of considerable importance affecting transactions relating to buildings constructed by members of co -operative housing societies. The society with which we are concerned in this reference is Jain Merchants Co -operative Housing Society Ltd. One Chhaganlal Laxmichand (hereinafter referred to as the deceased) was member of this society and he held certain shares in its share capital. Plot No. 1 was allotted to his as a member out of the land owned by the society and on the plot so allotted to him, he constructed a superstructure at his own cost. He had two sons by the name of Sakarchand and Ramanlal. On 8th March, 1951, and thereafter, he took certain steps in regard to the plot and the superstructure on it and the question is as to the true legal effect of what he did. First, on 8th March, 1951, he divided the plot into two parts, one marked plot No. 1 and the other marked plots Nos. 1 -A and 1 -B. It appear that the latter part was given two plot numbers as there was a private Jain temple on a portion of it and that portion was given plot No. 1 -B. He 'gifted' plot No. 1 to Sakarchand and plots Nos. 1 -A and 1 -B to Ramanlal. Since under the bye -laws of the society no plot could be held by a person who was not a member of the society, Sakarchand agreed to subscribe to the necessary shares from the society and so far as Ramanlal was concerned, the deceased agreed to transfer his shares to Ramanlal. The deceased also handed over possession of the respective plots to Sakarchand and Ramanlal. These facts were recorded by the deceased in a declaration made by him on the same day, namely, 8th May, 1951. The deceased then made an application dated 27th May, 1951, to the secretary to the society stating that he had divided his plot into two plots, plot No. 1 admeasuring about 1109 square yards and plots Nos. 1 -A and 1 -B admeasuring about 1341 square yards and 'made a gift' of plot No. 1 to Sakarchand and plots Nos. 1 -A and 1 -B to Ramanlal and adding :

(2.) ON the application of the deceased the society passed a resolution dated 27the May, 1951, transferring plot No. 1 admeasuring 1109 square yards to the name of Sakarchand and plots Nos. 1 -A and 1 -B admeasuring 1341 square yards to the name of Ramanlal, and necessary entries to that effect were made in the register of the society, annexure IV to the statement of the case. The shares held by the deceased were also transferred to the name of Ramanlal, and Sakarchand and Ramanlal remained in possession and enjoyment of the respective plots Nos. 1 and 1 -A and 1 -B as their own properties.

(3.) THE question we are asked to determine is; whether the value of the superstructure built by the deceased on the land of the society was rightly included in the principal value of the estate of the deceased ? The only ground on which the revenue claimed to include it was that there was no valid gift of the superstructure to Sakarchand and Ramanlal and the superstructure therefore continued to belong to the deceased and was at the time of his death his property which passed on his death under section 5. The point which therefore arises for determination is whether the superstructure came to be owned by Sakarchand and Ramanlal as claimed by the accountable person or continued to belong to the deceased at the time of his death as contended by the revenue. To determine this point it is necessary to analyse the true nature of the transaction entered into by the deceased. We must ask ourselves the question : What was the interest of the deceased in the land ? What was his interest in the superstructure and what change in judicial relationship was brought about as a result of the steps taken by the deceased ? The question is one of great importance having far -reaching consequences, as it is a matter of common knowledge that in this city where co -operative housing societies have flourished to an extent unknown and unprecedented in other parts of India, hundreds of transactions of sales and gifts of plots with superstructures have taken place without any registered documents, merely by transfers of plots being recognised and transfers being entered as holders of plots by the societies and if the contention of the revenue were correct that the ownership of the superstructures cannot pass in such cases except by registered instrument, all such transience would be invalidated. That is a consideration which we cannot totally banish from our mind and if the law permits, we should certainly strive to avoid such a consequence.