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PETITIONER: M.CT. MUTHIAH & ANOTHER ETC.

       Vs.

RESPONDENT: THE CONTROLLER OF ESTATE DUTY, MADRAS ETC.(AND VICE VERSA)

DATE OF JUDGMENT17/07/1986

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) PATHAK, R.S.

CITATION:  1986 AIR 1863            1986 SCR  (3) 315  1986 SCC  Supl.  375     1986 SCALE  (2)54

ACT:      Estate Duty  Act 1953-Sections  2(15), 5, 6, 15, 34(3)- Estate duty-Property liable to estate duty-Personal accident Insurance policy-Money  received by  heirs of deceased under the policy-Whether  forms part of estate of deceased, passes on  death-Accident   policy  and   life   policy-Distinction between.      Jurisprudence-Custom-Prevalence of-Matter  of evidence- ’Dwyanamanushyana’ form  of adoption-Prevalence of in Madras State.

HEADNOTE:      The deceased was the Karta of a Hindu undivided family. He had  two sons.  He gave  his first son in adoption to his divided paternal  uncle. He  was joint  with his  second son throughout  his  life.  He  took  out  a  personal  accident insurance policy  with the  Insurance Company and effected a nomination in  favour of  his first son. During the currency of the  policy, the deceased died following the crash of the airliner in  which  he  had  travelled,  and  the  Insurance Company paid  the nominee  a sum  of Rs.2 lakhs, the benefit stipulated under the terms of the policy. At the time of his death, the  deceased had other properties and interests. one was his  interest as  an undivided  copartner in  his  joint family which consisted of himself and his second son.      In the assessment proceedings under the Estate Duty Act 1953,  the  accountable  persons  urged  before  the  Deputy Controller of Estate Duty: (i) that the amount of Rs.2 lakhs could not be aggregated with the rest of the properties, but must be brought to charge independently as a separate estate in itself,  because the  deceased had  no interest at all in the insurance  money, and (ii) that the adoption in 1931 was on the  basis that  notwithstanding  adoption  into  another family, the  adoptee must continue to retain his interest in the properties  belonging to  the family  of his  birth and, therefore, he was entitled, as on the date of the de- 316 ceased’s death,  to an  equal  interest  in  the  deceased’s family properties,  so that  the quantum  of the  deceased’s coparcenary interest  was not one-half but only one third of the total  value of the family properties. A "Muri" (deed of adoption) that was executed was produced in this regard.

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    The Deputy  Controller rejected  these contentions  and held: (i) that the personal accident insurance money of Rs.2 lakhs paid  by the  Insurance Company  should be  charged to estate duty and it had to be aggregated with the rest of the properties passing  on the  deceased’s death;  (ii) that the insurance  money  of  Rs.2  lakhs  was  property  which  the deceased was competent to dispose of by will; (iii) that the deceased did  have an  interest in the insurance money; (iv) that the  deceased’s interest  in the  coparcenary property, which had to be included in the dutiable estate, extended to one half share of the joint properties on the basis that the deceased  and   his  second   son  were  alone  entitled  as coparceners to  the said  properties; (v)  that the document produced in  support of the plea of adoption was not genuine and even  otherwise it  had no legal effect on the continued rights of  the adopted  son  in  the  family  of  his  birth subsequent to  his adoption.  He, therefore, included in the dutiable estate,  one-half of the joint family properties as being the measure of the deceased’s coparcenary interest.      The accountable  persons  appealed  against  the  above assessment to  the Central Board of Revenue. The Board held: (i) that the insurance money of Rs.2 lakhs was chargeable to estate duty  under s. 6; (ii) that the deceased had interest in the insurance money; (iii) that the deceased did have the power of  disposition over  the insurance  money both by the exercise of  power of  nomination under  the policy and also independently by  the exercise  of any  testamentary  power; (iv) that  the Hindu  law of  adoption makes the adopted son lose his  property interests  in the family of his birth and that  the  "dwyamanushyana"  form  of  adoption  had  become obsolete in Madras, and no such custom was prevailing in the Nattukottai Chettiar  community, under which the adopted son never loses  his property  rights in the family of his birth and, therefore,  upheld the  assessment of  one-half of  the value of  the whole  of the  joint family  property  as  the measure of the deceased’s dutiable interest.      On reference,  the High Court held that as the deceased was competent  to dispose  of the  monies payable  under the accident policy, the sum of Rs.2 lakhs was includible in the principal value of the estate but the same was not liable to be aggregated with the other properties and 317 had to  be assessed as an estate by itself and that the type of adoption pleaded by the accountable person was recognised by the  custom of  the Nattukottai  Chettiar community,  the terms of  the ’muri’  formed part  of the  adoption and  the adoption could  not be  considered de hors the agreement and hence the  deceased had  only one-third  share in  the joint family properties at the time of his death. R      In  the   appeal  to  this  Court,  on  behalf  of  the accountable persons  it was  contended: (i)  that it  was  a condition precedent  for the attraction of the duty that (a) the estate  holder must  have had  possessed  or  enjoyed  a property or  an interest  in property; (b) the interest in a property might  be either vested or contingent; (c) but that interest should  be  with  regard  to  either  an  immovable property or  a movable  property which  was capable of being ascertained during  the lifetime or at the time of the death of the  estate holder;  (d) a contingent interest could fall within the  purview of  the Act  only if  the interest  of a tangible nature  and was  capable of  being ascertained (ii) that there  had to  be a  passing of property or interest as contemplated by  s. 2(16).  There has also to be a change in the beneficial  possession and  enjoyment of property of the interest in  that property; (iii) that an accident insurance

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policy could not be construed as a movable property unlike a life insurance  policy or  an annuity  since  a  person  who possessed it  could not  also be  said to  have a contingent interest because there was every possibility of the accident policy getting extinguished or rendered worthless during his lifetime; (iv)  that in the case of a life insurance policy, there is always a tangible continuing interest only that the value of that interest might be subjected to a change at the time of  passing of  the  property;  (v)  that  it  was  not necessary that  during the  lifetime  of  the  deceased  the property in  question should  have ’attained’ the full value e.g. ’Annuity’.  Only a  future  interest  that  crystalised after the  death of  the estate  holder; (vi) that since the benefit in accident policy could only accrue after the death of the  estate holder, it became property for the first time after the demise of the estate holder.      Allowing the  appeal by  the  accountable  persons  and dismissing the appeal of the Revenue, the Court, G ^      HELD: 1.1. Under the personal accident insurance policy in question  the insurance  money became  property  only  on happening of a specified contingency. That property arose on the death  of the  deceased during  the subsistence  of  the accident policy. The property is the sum of Rs.2 lakhs which became receivable by the nominee or the legal rep- 318 resentative of  the deceased  because of  the death  of  the deceased in  the air  accident during the subsistence of the policy. That right to the sum arose because (a) the deceased died; (b) in air accident; (c) during the subsistence of the policy. The  property came  into being  on that  contingency after death.  No property  can, therefore, be deemed to pass on the R death of the deceased. [342D-F]      1.2 During  the lifetime  of the  deceased, an interest was vested  totally and  irretrievably in  the hands  of the beneficiary or the legatee or the nominee. The death did not cause property  to change  hands. The fact that a person can nominate a  beneficiary will not tantamount to a disposition of the property. [342F-G]      1.3  Whether   a  particular   custom  prevails   in  a particular community or not is a matter of evidence. [343C]      2.1 Section  5 of  the Estate  Duty Act,  1953 provides that there shall be levied and paid upon the principal value ascertained in  the manner  provided of all properties which passes  on   the  death  of  a  person.  Three  factors  are important: (1)  there must  be passing  (2) of such property and (3)  such passing  on must  be on the death of a person. [326F]      2.2 Section  3(1)(a), (b)  & (c)  provides for  certain situations in  which a person is deemed competent to dispose of property.  Section 6 deals with property within disposing capacity and  provides that  property which the deceased was at the  time of  his death  competent to dispose of shall be deemed to pass on his death. [327A-B]      3.1 It was a condition precedent for the application of the Act  that the  estate  holder  must  have  possessed  or enjoyed the  property or  interest in property, the interest in  property  might  be  either  vested  or  contingent  but interest  should   be  that  with  regard  to  which  either immovable property  or movable  which was  capable of  being ascertained during  the lifetime or at the time of the death of the estate holder. The property vested or contingent must be one which was capable of being ascertained. Even if these tests were  satisfied then there has to be a passing of that property or  interest as  contemplated under s. 2(16) of the

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Act. Even  if a  person might  have power  to dispose  of  a property or  interest in  property, he  cannot or his estate cannot be  brought within  the purview  of  the  Act  solely because of  that factor. In order for an estate to be liable to estate duty, the power of disposition must be with regard to a  property capable  of being  ascertainable  during  the lifetime 319 of the deceased or at the time of his death. There had to be a change in A the beneficial possession and enjoyment of the property or  the interest  in that property. In other words, the property  or interest which is liable to estate duty has to pass through the estate of the deceased. [340B-E]      3.2  Though   the  deceased   might  have  a  right  of disposition as  and when  the property would be available in case the  contingency happens,  namely,  the  death  of  the deceased in  an accident,  but that  right is different from the right  to the  money accruing  or arising because of the death due to accident. [340E-F]      3.3 An accident insurance policy cannot be construed as a movable  property unlike  a life  insurance policy  or  an annuity because  as laid  down in  s. 2(15) of the Act it is not only  necessary for  the  person  to  have  property  or interest in  property but that interest must be in regard to a movable  property and  his interest should also be capable of being ascertainable during his lifetime or at the time of his death  in that f movable property. Secondly, an accident insurance policy  could not be construed as a property or an interest in  property since a person who possessed it cannot also be said to have a contingent interest because there was every   possibility   of   the   accident   policy   getting extinguished or  rendered worthless  during his lifetime; on the other  hand, in  the case  of a  life insurance  policy, there was  always a  tangible continuing  interest only that the value  of that  interest might be subjected to change at the time of passing of the property. [340H; 341A-C]      3.4 A contingent interest which did not get crystalised during the  lifetime of  the  deceased  but  which  interest would, with certainty, accrue after the demise of the estate holder will  be caught  by s.  6 of  the Act.  The  accident policy could  only accrue  after the  death  of  the  estate holder. It  became property  for the  first time  after  the demise of  the  estate  holder.  There  was  no  element  of property during the lifetime of the estate holder. [341C-D]      3.5 The  interest in  an accident  insurance policy did not pass  through the  estate of the deceased as in the case of a  life insurance  policy or  annuity and  in the instant case, the interest directly went to the beneficiaries in the case of death by accident of the estate holder. [341E]      3.6 In the instant case, the property is really born on the death  of the  deceased in  an accident. The sum of Rs.2 lakhs was  non-existent before  the death.  There might have been some right of disposition in 320 respect of  the property  which might accrue on the death of the deceased.  That right is different from the right to the movable property  of Rs.2 lakhs that is taking place. [340F- G]      Attorney-General v.  Quixley, 1929  All England Reports Reprint 636  and Controller  of Estate  Duty v. A.T. Sohani, New Delhi, 78 I.T.R. 508, distinguished.      Controller of  Estate Duty  v.  Kasturi  Lal  Jain,  93 I.T.R. 435  and Controller  of Estate  Duty, Patiala v. Smt. Motia Rani Malhotra, I.T.R. 42, approved.      Bharatkumar Manilal Dalal v. Controller of Estate Duty,

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Gujarat, 99 I.T.R. 179, over-ruled.      Westminster Bank  Ltd. v.  Inland Revenue Commissioners [1957] 2  All E.R. 745 = 16 I.T.R. (ED) 3, Smit. Amy F. Anti v. Assistant  Controller of  Estate Duty, Bombay 142 ITR 57, P. Indrasena  Reddy & Pingle Madhusudhan Reddy v. Controller of Estate Duty, 156 ITR 45, Shri H. Anraj etc. v. Government of Tamil  Nadu etc. [1986] (1) SCC 414, Smt. Sarabati Devi & Anr. v.  Smt. Usha  Devi, 1984(1) SCR 992 and Public Trustee v. Inland  Revenue Commissioners,  [1960] A.C.398,  referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil appeal No. 2086 of 1974 and 67 of 1975      From the  Judgment and order dated 20th September, 1973 of the Madras High Court in Tax Case No . 310 of 1967.      C. Rarnakrishna,  Mohan Parasaran  and Mrs. Janaki Rama chandran. for  the Appellants  in C.A.  No. 2086 of 1971 and for the Respondent in C.A. No. 67 of 1975.      S.C. Manchande,  Dr. Gauri  Shankar, K.P. Bhatnagar and Miss A. Subhashini, for the Appellant in C.A. No. 67 of 1975 and for the Respondent in C.A. No. 2086 of 1974.       The Judgment of the Court was delivered by      SABYASACHI MUKHARJI,  J. These two appeals are from the judgment and  order of  the Madras  High  Court  dated  2oth September, 321 1973 by  certificates of  fitness granted  by the High Court under section A 65 of the Estate Duty Act, 1953, hereinafter called the Act.      Civil Appeal No. 2086 of 1974 is by accountable persons and Civil  Appeal No.  67 of  1975 is  by the  revenue.  The judgment under appeal is reported in 94 I.T.R. at page 323.      The accountable  persons are  the sons  of one  late M. Chindermbara Chettiar  hereinafter called  the deceased. The deceased was  the Karta of a Hindu undivided family. He gave his first  son Muthiah,  in adoption to his divided paternal uncle Pethachi  Chettiar, and  adoption ceremony was held on 7th June,  1931. Subsequently  his second  son, also  called Pethachi, was born in 1933, with whom the deceased was joint throughout his life.      On 21  February, 1954, prior to proceeding to Malaya by air, the  deceased took  out a  personal accident  insurance policy with  the United  India Fire  and  General  Insurance Company Ltd.  (hereinafter cal-  led the Insurance Company). Under the  terms of the said policy which was to be in force for one  month, the  Insurance Company had agreed that if at any time  during  the  currency  of  the  said  policy,  the deceased should sustain any accident resulting in any injury or injury  leading to his death, then, the Insurance Company undertook  to   pay  to   the  assured   or  to   the  legal representative of  the assured  in  case  of  the  assured’s death, such  sum as  might be  appropriate in  the Table  of Benefits appended  to the  Policy.  The  Table  of  Benefits mentioned that  in case  of death  or total  disablement the benefit payable  was R.S..  2  lakhs,  in  case  of  partial disablement,  R.S..   1  lakh.,   in   case   of   temporary disablement, a weekly payment of Rs.1200 or Rs.300 according to the  nature of  the disablement.  The policy, inter alia, provided that  "the policy  is unassignable  and the company shall not be affected by notice of any trust or purported to be imposed  upon assignment  of or  of any  charge  or  lien imposed or  purported or any dealing with the policy and the

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receipt of the insured or the executors or administrators of the insured  for any  moneys payable thereunder shall in all cases be  any effectual  discharge to the company". A sum of Rs.250 was  paid or  credited as paid by the deceased as and towards the  premium and  other charges  for  the  aforesaid personal accident insurance policy. It also appeared that in the proposal  Form dated  20th February,  1954 filed  by the deceased  with  the  Insurance  Company,  the  deceased  had effected a  nomination in  favour of his son M. Ct. Muthiah. On the  13th March,  1954, the  deceased died  following the crash of the airliner in 322 which he  had travelled.  On his death the Insurance Company paid the  nominee, the appellant No. 1 herein a sum of R.S.. 2 lakh  which was the benefit stipulated to be paid, in such an event,  under the terms of the policy. At the time of his death the  deceased had  other properties and interests. One was his  interest as  an undivided  coparcener in  his joint family which consisted (after the adoption away of his first son A. Muthiah) of the deceased and his second son Pethachi.      In the  assessment under  the  Estate  Duty  Act,  1953 (hereinafter called  the ’Act’),  the Deputy  Controller  of Estate Duty  was of  the view  that  the  personal  accident insurance money  of R.S..  2 lakhs  paid  by  the  Insurance Company should be charged to estate duty and further that it had to be aggregated with the rest of the properties passing on the  deceased’s death. He held further that the insurance money of  R.S.. 2  lakhs was property which the deceased was competent  to   dispose  of   by  will.  Before  the  Deputy Controller, it  was urged  that the  amount of R.S.. 2 lakhs could not,  in any  case, be aggregated with the rest of the properties, but must be brought to charge independently as a separate estate  in itself,  the contention  being that  the deceased had no interest at all in the said insurance money. The Deputy Controller rejected this contention as untenable, holding that  the deceased  did  have  an  interest  in  the insurance money. As in respect of the deceased’s interest in the coparcenary  property, which  had to  be included in the dutiable estate,  the Deputy  Controller took  the view that such interest  extended to 1/2 share of the joint properties on the  basis that  the deceased and his second son Pethachi were alone  entitled as  coparceners to the said properties. He rejected  the contention that M. Ct. Muthiah who had been adopted away  from this  family  in  1931  was  nevertheless entitled, as  on the  date of  the deceased’s  death, to  an equal interest  in the deceased’s family properties, so that the quantum  of the  deceased’s coparcenary  interest was no one-half but only-one-third of the total value of the family properties. It  was urged  before the Deputy Controller that the adoption of M. Ct. Muthiah in 1931 was on the basis that notwithstanding his  adoption into  another family,  M.  Ct. Muthiah  must   continue  to  retain  his  interest  in  the properties belonging to the family of his birth. A "Muri" in Tasil in  curdgeon-leaf purported  to have  been executed on 7th June,  1931 was produced before the Deputy Controller in support of  the above  plea. The  Deputy Controller  did not accept the  genuineness  of  the  said  document.  But  even otherwise, the  Deputy Controller proceeded to hold that the "Muri" had  no legal  effect  on  the  continued  rights  of adopted son  in the  family of  his birth  subsequent to his adoption. He accord 323 ingly included,  in the  dutiable estate,  one-half  of  the joint  family   properties  as  being  the  measure  of  the deceased’s coparcenary interest.

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    The accountable  persons  appealed  against  the  above assessment to the Appellate authority which at that time, as the law then was, the Central Board of Revenue.      The Central  Board held  that the  insurance  money  of R.S.. 2  lakh was  chargeable to estate duty under section 6 of the  Act. The Board took the view that under the terms of the policy,  the deceased had the right to nominate a person to take  the moneys  on the  deceased’s death  and also  the capacity  to   dispose  of   the  amount   by   testamentary disposition.      On the  question as  to whether  the amount  of R.S.. 2 lakhs must, in any event, be charged as a separate estate in itself, segregated  from the  rest of  the  properties,  the Central Board  rejected the  accountable persons’ contention that the  deceased  never  had  any  interest  in  the  said insurance money.  On the  terms of  the accident policy, the Board was  of the  view that the deceased did have the power of disposition over the insurance money both by the exercise of the  power  of  nomination  under  the  policy  and  also independently by the exercise of any testamentary power.      On the  point relating  to the  exact  quantum  of  the deceased’s  interest  in  coparcenary  property,  the  Board accepted the genuineness of the "Muri". Before the Board, an Agreement in  writing dated  19th August,  1976  between  A. Muthiah and  Pethachi. the  two sons  of the  deceased,  was produced to  further support the claim that Muthiah retained his coparcenary  interest in the family of his birth despite his adoption into another family.      The Board  however held  that the  Hindu  law  adoption makes the  adopted son  lose his  property interests  in the family of  his birth  and that  the "dwamushayana"  form  of adoption pleaded  by  the  accountable  persons  had  become obsolete in  Madras. The Board rejected the claim that there was  a   custom  prevailing   in  the   Muttukttsi  Chettiar community, to  which the  deceased belonged, under which the adopted son never loses his property rights in the family of his  birth.   On  these   findings,  the  Board  upheld  the assessment of  one-half of  the value  of the  whole of  the joint family  property as  the  measure  of  the  deceased’s tiahle interest. 324      After  the   decision  of   the  Board,  the  following questions of law were referred to the High Court.           "1. Whether  the deceased was competent to dispose           of the  moneys payable  under the  accident policy           and whether  the sum  of Rs.2,00,000 is includible           in the principal value of the estate?           2. If  the sum  of R.S..  2 lakhs was liable to be           assessed to  duty whether the said amount could be           aggregated with  the other properties or should be           assessed as an estate by itself?           3. Whether  the share of the deceased Chindambaram           Chettiar in  the property  of the  joint family at           the time of his death was one half or one third of           the property?"      The High  Court by  the judgment  under appeal answered the first  question in favour of the revenue and against the accountable person  and the  second and third questions were answered  against   the  revenue   and  in   favour  of  the accountable person.      Being  aggrived   by  the   answer  against  the  first question, the  ac countable  person has preferred the appeal being appeal No. 2086 of 1974 and on the certificate granted by the  High Court  and on the subsequent two questions, the revenue obtained  the certificate  of fitness  to appeal  to

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this Court which is appeal No. 67 (NT) of 1975.      The High  Court in  the judgment under appeal held that under section  5 of  the Act, all properties which passed on the death  of the  person were  liable to estate duty. Under section 6 of the Act, property which the deceased was at the time of  his death  competent to dispose of should be deemed to pass on his death and under section 3(1)(a), a person was deemed competent  to dispose  of property  if he has such an estate or  interest therein  or such general power as would, if he  were suijuris,  enable him  to dispose it of. General power included  every power of authority enabling the holder thereof to appoint or dispose of property as he thought fit, whether exercisable  by instrument inter vivos or by will or both. A  personal accident  policy was  not  a  contract  of indemnity. The  amount payable  on death  of the insured was fixed in  the policy  itself. It was in the contemplation of the parties  even at  the time  of the  contract that in the case of death the amount would be 325 payable either  to the  nominee or  the legal representative and not  to A  the assured.  It was  thus in the nature of a provision made by the deceased for such person. The deceased had no  interest in the money as such because that came into existence the  moment after his death and was payable to the nominee or  legal representative.  But he had a right in the payment on  his death to his legal representatives. In other words, he  had interest over the payment of money and not in the money  itself. He had a right to take away that right of the legal  representatives to  receive the money and to vest it in  some other person by will. He could nominate a person to whom the amount should be paid. Nomination in such a case was in  the nature of a disposition by will and as such till he breathed  his last  he could  cancel such  nomination and nominate another.  The nominee,  unlike an  assignee of life policies, got  title to the money on death, for the property itself came  into existence  by reason  of the death and was payable to the nominee by virtue of the power of disposition by will  which deceased  had over  the sum.  The High  Court further held  that the  money paid on death was property and that was  clear. This property, according to the High Court, came into  existence at  the time  of death.  The High Court further held  that though  the property was not in existence before his death, since it came in at the time of his death, the deceased  was competent  to dispose of the same by will. It was  this power, according to the High Court, of disposal that attracted the provisions and made it property which was deemed to  pass on his death under section 6 of the Act. The beneficial interest  in the policy which accrued or arose on death was  the sum  paid  out  under  the  policy  and  this beneficial interest  having been  purchased by the deceased, the provisions of section 15 of the Act were also attracted. Further, the  estate had  been depleted to the extent of the premium paid  and the  beneficial interest purchased and the deceased not  having received  a full equivalent for what he has paid  and having regard to the nature of the policy, the intention from  the beginning  was to  make a provision. The principal value  of the estate that was deemed to pass under section 6  and which  accrued or  arose under section 15 was that sum  which was  paid out under the policy. As there was no devolution  of interest  from  the  deceased  to  another person and  from the  very inception  the amount was payable only to  the nominee  or legal  representative, section 5 of the Act was not applicable.      It was  further held by the High Court that in the case of a  personal accident  policy, the  property was  not  the

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policy but  the ultimate money that was paid and that should be deemed  to pass  on death  of the deceased because of his competency to dispose of the same by 326 will and  the holder  of the  policy had a light to have the amount paid  to his  legal representative  or  nominee.  The right was  with respect  to the  disposition  of  the  money payable under  the policy  and not  a  right  in  the  money itself. But  in case  of a  life insurance  policy, both the policy and  the money  payable thereon  was  property  which could be  settled during the lifetime of the insured. As the deceased never  had any  interest during his lifetime in the money paid  on death  under the  personal  accident  policy, though he  was competent to dispose of the same by will, the sum paid  under the  policy was  not aggregatable  with  the other estate  of the  deceased and  was to  be treated as an estate by  itself under  section 34(3)  of the Act. The High Court held  that though  as the  deceased was  competent  to dispose of  the moneys  payable under the policy, the sum of R.S.. 2  lakhs was  includible in the principle value of the estate but the same was not liable to be aggregated with the other properties  and had  to be  assessed as  an estate  by itself.      Regarding adoption, the High Court was of the view that the type  of adoption  set out by the accountable person was recognised  by   the  custom  of  the  Nattukottai  Chettiar community, the terms of the muri formed part of the adoption and the  adoption  could  not  be  considered  de  hors  the agreement and hence the deceased had only one-third share in the joint family properties at the time of his death.      In order  to appreciate  the question involved in Civil Appeal No. 2086 of 1974, it is necessary to bear in mind the scheme of the Act. Section 5 deals with levy of estate duty. It states  that there  shall be  levied and  paid  upon  the principal value  ascertained in  the manner  provided of all properties  which  passes  on  the  death  of  such  person. Therefore, three  factors are  important; (1)  there must be passing, (2)  of such  property and (3) such passing on must be on  the death  of a  person. Section  (2)(15) of  the Act defines ’property’  as inclusive of any interest in property movable or  immovable, the  proceeds of sale thereof and any money or  investment for  the time  being  representing  the proceeds of  sale and  also includes  any property converted from one  species into  another by any method. There are two Explanations which  are not  necessary  to  be  set  out  in detail.      Section 2(16)  deals  with  ’property  passing  on  the death’ and  includes any property passing either immediately on the  death or  after any  interval, either  certainly  or contingently,  and   either  originally   or   by   way   of substitutive limitation,  and ’on  the death’ includes ’at a period ascertainable only by reference to the death’. 327      Section 3(1)(a),  (b) &  (c), inter  alia, provides for certain situations  in which a person is deemed competent to dispose of property. Section 5 as we have noted before deals with the  levy of estate duty. Section 6 deals with property within disposing  capacity and  provides that property which the deceased  was at  the time  of his  death  competent  to dispose of shall be deemed to pass on his death.      Section 14  deals with policies kept up for a donee. It is not  necessary to  set out  the actual  terms of the said provisions. Section  15 deals with annuity or other interest purchased or  provided by the deceased and provides that any annuity or  other interest,  purchased or  provided  by  the

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deceased, either  by himself  alone  or  in  concert  or  by arrangement with any other person shall be deemed to pass on his death  to the extent of the beneficial interest accruing or arising, by survivorship or otherwise, on his death.      Section 34  of the  Act provides  for  aggregation  and stipulates that  for purposes of determining the rate of the estate duty  to be  paid or  D any  property passing  on the death of  the deceased,  what kinds  of property  should  be aggregated. Except sub-section (3) of section 34, nothing is material for our present purpose. Sub-section (3) of section 34 reads as follows:           "(3) Notwithstanding  anything contained  in  sub-           section  (1)  or  sub-section  (2),  any  property           passing  in   which  the  deceased  never  had  an           interest, not  being a  right or  debt or  benefit           that is  treated as  property  by  virtue  of  the           Explanation to clause (15) of section 2, shall not           be aggregated  with any  property, but shall be an           estate by  itself, and  the estate  duty shall  be           levied at  the rate or rates applicable in respect           of the principal value thereof."      Sree  C.   Ram  Krishan,   learned  counsel   for   the accountable persons  in the  first appeal  before us and who was the advocate who had appeared before the High Court made various submissions.  He submitted  that it  was a condition precedent for the attraction of the duty that (a) the estate holder must  have had  possessed or enjoyed a property or an interest in  property; (b)  the interest in a property might be either vested or contingent; (c) but that interest should be with  regard to either an immovable property or a movable property or  an interest  in immovable  or movable  property which was  capable of  being ascertained during the lifetime or at the time of the death of the estate 328 holder; (d)  a contingent  interest could  fall  within  the purview of  the Act  only if  the interest was of a tangible nature and was capable of being ascertained, that is to say, the estate  holder must  always be  having a  possibility to enjoy  or   possess  that   interest  either   actually   or constructively during  his lifetime  itself.  He  cited  the example of a life insurance policy.      According to counsel, if the above tests were satisfied then there  had to be a passing of that property or interest as contemplated  by section  2(16) of the Act. Even though a person might  have a  power to  dispose  of  a  property  or interest in  property, he  could not or his estate could not be brought  within the  purview of the Act solely because of the above factors. Because over and above this, in order for an estate  to  be  liable  for  estate  duty  the  power  of disposition must  be with  regard to  a property  capable of being ascertainable  during his  lifetime or  at the time of his death.  It was  urged that  a property  or  interest  in property has necessarily to change hands in order to attract estate duty. There has also to be a change in the beneficial possession and  enjoyment of the property or the interest in that  property.  In  other  words,  it  was  submitted,  the property of  interest which was liable for estate duty under the Act  has to  pass through  the estate  of the  deceased. According to  the counsel,  applying the above principles it could not  be said that an accident insurance policy had the characteristics of  a property  or interest  in property and therefore was not liable for estate duty because an accident insurance  policy  could  not  be  construed  as  a  movable property unlike  a  life  insurance  policy  or  an  annuity because as  laid down  in section  2(15)  it  was  not  only

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necessary for  a person  to have  property  or  interest  in property but  that interest  must be  in regard to a movable property and  his interest  should also  be capable of being ascertainable during  his lifetime  or at  the time  of  his death  in  that  movable  property.  An  accident  insurance policy, according  to him,  could  not  be  construed  as  a property or  an interest  in property  since  a  person  who possessed it  could not  also be  said to  have a contingent interest because there was every possibility of the accident policy getting extinguished or rendered worthless during his lifetime; on  the other hand in the case of a life insurance policy, there  is always a tangible continuing interest only that the  value of  that interest  might be  subjected to  a change at  the time  of passing  of the property. Further it was submitted  that it  was not  necessary that  during  the lifetime of  the deceased  the property  in question  should have ’attained’  the full  value e.g.  ’Annuity’. An annuity could mature  even after the death of the estate holder. But it must be noted that the 329 estate holder  in  the  case  of  an  annuity  deposit  knew precisely the  value of  the contingent  interest that would mature at  a future  date. Consequently  even  a  contingent interest which  did not  get crystalised during the lifetime of the  deceased but  which interest  would, with certainty, accrue after the demise of the estate. holder will be caught by section  6 as a property passing from the deceased to the beneficiary. Thus  though only  a future  interest that that crystalised after  the death  of the  estate holder would be deemed as  a property  of the estate holder. Learned counsel submitted that  an accident  policy is not property, because it lacks  the well  known characteristic of property namely, that it should be capable of being mortgaged or pledged as a security.  It   lacked  the  characterists  of  a  security. Consequently  an   accident  policy   was  not  a  property, according to counsel.      Since the  benefit in accident policy could only accrue after the death of the estate holder, it became property for the first  time after the demise of the estate holder. There was, according to the counsel for the accountable person, no element of  property  during  the  lifetime  of  the  estate holder.  Therefore,  there  could  not  be  any  passing  of property in  a case  like this.  A  possession  of  accident policy could  not be construed as a property in the hands of the estate holder. It was further submitted that in the case of an  accident insurance  policy, there  cannot be  passing because there  was no change in the beneficial possession or enjoyment of  the property  or interest  in the  policy. The interest in  accident insurance  policy did not pass through the estate  of the  deceased  as  in  the  case  of  a  life insurance policy  or annuity. But here the interest directly went to the beneficiary in the case of the death by accident of the  estate holder. It was in the premises submitted that it cannot  be accepted  that the  deceased had  any power of disposition over  the accident  policy during  his  lifetime because the interest in an accident policy could not also be elevated to  that of  a contingent  interest since  there is always the  chance for  the accident  policy being  rendered worthless during the lifetime of the deceased. There is also no chance  for the  deceased to  bear the  fruition  of  the policy during  his  lifetime  because  in  the  case  of  an accident policy  the condition  of the  policy itself was to the effect  that the  policy would bear fruition only if the estate holder  did not  die due  to natural causes but in an accident .

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    A large  number of  authorities both Indian and English and a large number of dictionaries relevant for this purpose were relied upon. 330      So far  as the first appeal is concerned, namely, Civil Appeal No.  2086 of  1974, the  question of assessability to estate duty  of the amount received as a result of the death of the  assured is involved. This question has been examined by various  authorities to  some of  which our attention was drawn.      Before we  do so,  it may be worthwhile to refer to the dictionary meaning  of certain  words to which our attention was drawn.      In  Words  and  Phrases  Legally  Defined-Vol.  1  1969 (second Edn.) at page 332, it has been said that "Contingent Liability" is  a phrase  with no  settled meaning in English law because Danckwerts, J. thought it necessary to resort to dictionary used. The Court of Appeal regarded its meaning as an open question. A conditional obligation, it has been said there, or  an obligation  granted under a condition which is uncertain, had  no obligatory  force till  the condition was purified. All  this was relied in aid of the submission that until  the   accident  happened   or  death   resulted,  the beneficiary of  the insurance  policy or  the nominee of the assured does  not get any benefit. In order words, the birth of the property and the right to get it accrues on the death of the  deceased. The  property which  the  legatee  or  the nominee receives  was property until the accident during the lifetime of the deceased.      In Words  and Phrases  Legally Defined-Vol.  4 at  page 200, "Property"  has been  defined as  to what  belongs to a person exclusively  of others  and can  be  the  subject  of bargain  and   sale.  It  includes  goodwill,  trade  marks, licences to  use a  patent, book debts, options to purchase, life policies  and other rights under a contract. An annuity secured only  by a  personal undertaking  was not,  however, treated as  property; nor was a revocable Licence, according to that dictionary.      The decision  in Attorney-General v. Quixely, 1929, All England Law  Reports, Reprint, 696, has coloured many of the decisions of  both English and our courts on this aspect. It is  necessary,   therefore,  to   appreciate  that  decision properly, if  possible. Briefly the facts in t-hat case were that on  11th April,  1927, a  school teacher  died and  her legal representative  became entitled  to receive  a  "death gratuity" under  the School  Teachers (Superannuation)  Act, 1925-section 5(1).  on 11th  August, 1927,  the gratuity was paid and  the estate  duty was  claimed in respect of it. It was held by the Court of Appeal in England that the gratuity was property of which the teacher was "competent to dispose" within the meaning of the Finance Act, 1894 of England and, 331 therefore, estate  duty was  exigible in  respect of  it  by virtue of section A 2(1)(a) of that Act.      The information filed on behalf of the Attorney-General alleged that  Margaret Louis  Quixley died intestate on 11th April, 1 1927. Letters of administration to her estate were 5th July, 1927 granted  to her  sister,  the  defendant,  out  of  the Principal Probate  Registry. The deceased was at the time of her death  in the  service of  the Girls’  Public Day School Trust as  a secondary  school teacher at the Blackheath High School and  had been in such service for a period of upwards of five  years. Such service was "recognised service" within the meaning  of the  School Teachers  (Superannuation) Acts,

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1918 to  1925, and "contributory service" within the meaning of the  Schools Teachers (Superannuation) Act, 1925, and the contributions   prescribed    by   the    School    Teachers (Superannuation) Acts, 1922, 1924 and 1925 were duly paid by and in  respect of  the deceased  down to  the time  of  her death. In  the above  circumstances a  death gratuity became payable by  the Board  of Education  to the defendant as the legal personal  representative of  the  deceased  under  the School Teachers  (Superannuation)  Act,  1925.  Rowlatt,  J. Observed that  the  question  involved  was  not  free  from difficulty. He  narrated the  facts as  such. The lady was a teacher under  circumstances which under the School Teachers (Superannuation) Act, 1918, entitled her to the prospect of- brought within  the  ambit  of  a  power  in  the  Board  of Education to  grant a  gratuity of  this kind  on her death. Rowlatt, J.  Observed that  she had  no right,  she made  no contribution, but  there was  a power conferring a gratuity. Then the  effect of the School Teacher (Superannuation) Act, 1922, was  that she  remained without  any further advantage than being in the category of persons who might receive such a grant, but she was compelled to make a contribution. Under the School Teachers (Superannuation) Act, 1925, matters were carried a  step further  because she  or  her  executors  or administrators were  given  in  return  for  the  compulsory contribution a  right to  receive the  gratuity. Considering sub-section (1)(a)  of the  relevant Act which is similar to our section 6 of the present Act reads as follows:           "Property which  the deceased  was at  the time of           his death  competent to dispose of shall be deemed           to pass on his death. "      Rowlatt, J.  gave judgment  for the Crown. There was an appeal and  the appeal  was dismissed.  Lord Hanworth,  M.R. after stating the H 332 facts and  analysing the provisions noted that in 1925 there came an  important  Act  under  which  the  gratuity  became payable to  the deceased’s  representatives. Master of Rolls further went on to observe that from and after the operation of the  Act of 1925 referred to in the judgment, there was a definite right  on  the  part  of  the  school  teacher  who fulfilled certain conditions-as the teacher before the Court of Appeal  did, by  dying at  the time when she was still in contributory service-to  be paid  a  sum  which  was  to  be estimated  and   calculated  under  the  provisions  of  the statute. Master  of Rolls  further  observed:  the  statute, therefore, gave  at once a right to the person who fulfilled the conditions  of service, and equally a right to the board to insist  on the  contributions being paid. Master of Rolls found as  a fact  that  all  the  conditions  required  were fulfilled, therefore,  the teacher  had an absolute right to be paid.  It is this significant factor that has to be borne in mind. Therefore, it was held that there was a right which the deceased  could dispose  of by  will, therefore,  it was property passing on the death of the deceased.      It was a comprehensive Act providing for superannuation benefit for  teachers on  retirement and  gratuity to  legal heirs in  the case  of death  in service. Section 5 provided that death  gratuity to  be paid  to legal  heirs if teacher died while  in service.  Section 9 provided for contribution compulsory at a certain fixed percentage both by the teacher and by  the employer.  Section 12  provided for repayment of contributions on  teacher creasing  to be  eligible. See  in this connection  Halsbury’s Statutes  of England,  2nd Edn., Vol. 8,  page 388.  In that  context, in  our opinion,  this question of  liability arising  on  the  death  of  accident

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policy has  to be  understood in a different perspective. In Quixley’s case,  there was  a vested  right in  the  teacher during her  lifetime and  the teacher  could dispose of that right in  the manner  she liked.  But in  case of  death  by accident in  aircrash, the  deceased had  only  a  right  of nomination for  his heirs  to get  the money  but the  money would arise  or the  property would  be  born  only  on  the contingency of  the death  happening. We  have examined  the nature of  the right-in  the light  of the submissions made. The interest  in accident  policy does  not pass through the estate of the deceased. It was always a chance so far as the deceased was  concerned in  the instant  case. Sankey,  C.J. found in  Quixley’s case  that the deceased had a right-only quantification was not there. But in the instant case before us the  deceased had  no right  in his lifetime. Undoubtedly the right  to nominate  and right  of the  nominee or  legal representative to get the money was there in case 333 of death  of the  deceased but  the deceased had no right to the money A which was dependent on happening of an uncertain event.      In Controller  of Estate  Duty v.  A.  T.  Sahani,  New Delhi, 78  I.T.R. 508,  the Delhi High Court had to consider slightly different  question. There  under Rule  159 of  the Indian Airlines  Corporation (Flying  Crew) Service Rules, a member of  the flying crew was entitled to a compensation at specific rates in the event of his death or an injury caused by an  accident  during  or  as  a  result  of  air  journey performed  as   such  in   the  Corporation’s  service.  The compensation payable  under the said rule was in addition to the compensation  which the  Corporation had  agreed to  pay under an agreement described as Pilot Agreement entered into with the  Corporation  whereby  it  was  provided  that  the Corporation shall  pay compensation for the death of a pilot a maximum  of 36  times his  monthly basic pay if such death occurred  in  the  circumstances  mentioned  in  the  above- mentioned service  rules, or  while travelling  on  duty  in surface  transport   provided  by  the  Corporation  or  its nominated agents.  In  accordance  with  the  terms  of  the aforesaid agreement between the deceased and his employer, a sum  of   R.S..  68,300   was  received   by  his  widow  as compensation. The  High Court  under reference  in that case held that  the right  to get  compensation as a condition of one’s service  was as  much an  interest in  property as any other interest  which a  person might  have  in  incorporeal property, such  as choses-in-action  etc. The  circumstances that the  occasion for the exercise of the right arose after the death of the person and was also conditional upon death, did not  in any  way detract from the existence of the right of the deceased’s interest therein during his lifetime.      The Court  noted that though in that case, the deceased was not required to make any contribution for the purpose of earning the  compensation as  in  Quixley’s  case,  yet  the compensation was  payable  as  a  reward  for  the  services rendered. Therefore, the deceased had interest in it and had also the  right to  appoint the  person to whom it should be paid. The distinction between pecuniary damages for the loss caused to  the estate  and pecuniary  loss sustained  by the membes of  his family through his death has no relevance for the purpose  of deciding whether the compensation payable in a case  like the present was property which should be deemed to pass  on the  death of deceased. The High Court felt that the case  came within the ratio of the decision of the Court of Appeal  in Quixley’s  case (supra).  But the facts of the instant appeal are different.

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334      Prior to  the judgment  under appeal  the problem arose before Jammu  & Kashmir High Court in the case of Controller of Estate Duty v. Kasturi Lal Jain, 93 I.T.R. 435. Ali, C.J. as the  learned judge  then was  of the Jammu & Kashmir High Court held that before a property could pass to the heirs of a deceased  person under  section 5  of the Estate Duty Act, 1953, it had to fulfil the following conditions:           "(i) The property must be in the power, possession                and control (actual, constructive or                beneficial) of the deceased;           (ii) The deceased must have an interest, whether                in praesenti or contingent, in the said                property;           (iii) The property must be in existence during the                life-time of  the deceased  or at the time of                his death; and             (iv) The deceased must have power of disposition                over the property."      The Court  was of  the view that where compensation was paid under  the Carriage by Air Act, 1934, to the heirs of a person dying  in an  air crash  by the Airlines Corporation, the deceased  had neither  any interest  in the property nor was he  in possession  of the  property either  actually  or constructively. The  property in  such a  case did  not  and could not  have come  into existence  during the lifetime of the deceased  but accrued for the first time after his death and that too because his death took place in a certain mode. It was  further  held  that  under  the  provisions  of  the Carriage by  Air Act, 1931, the compensation ensured for the benefit of  the members  of the  passenger’s family  and had nothing to  do with  the estate  of the deceased. As none of the above  said conditions  for the  passing of  property on death under  section 5  of the Act was fulfilled, the estate duty could  not be  levied on such compensation. The learned Chief Justice  observed that  the connotation  of the  words ’passes on  the death  of such  person’  was  important.  He referred to  Webster’s International Dictionary. He observed that ’passing’  involved some  actual change in the title or possession of  the property  which must result on death. The Division Bench therefore negatived the revenue’s contention.      The Punjab  and Haryana  High  Court  in  the  case  of Controller of  Estate  Duty,  Patiala  v.  Smt.  Motia  Rani Malhotra, 98 I.T.R. 42, had to deal with this problem though in a different context. It is held by the High Court in that case that the amount of compensation received by 335 the heirs  of a  person who  died in an air crash comes into being only  A after the death of the person. It exists at no point of  time either  contingently or  otherwise during the lifetime of  the deceased. The High Court was of the opinion that the  property which  was not in existence at all during the lifetime  of the  deceased cannot be said to pass on his death. The  provisions of  the Indian  Carriage by  Air Act, 1934 provided  compensation to  members of  the family  of a victim of  an air  crash. In  the very  nature of things the damages by  way of  compensation arose  after the person was dead. The Act definitely provided for whom it was available. If it  were part of his estate passing on his death it would pass on  to his heirs other than those specified in the Act, in case they were not in existence. But that did not happen. If the members of the family specified in the Act are not in existence, the  payment has  not  to  be  made.  Hence,  the compensation was  not property  capable of passing on death. The High  Court felt  that there  was a  lot  of  difference

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between compensation  received on  account of  permanent  or temporary injury  in an  air  crash,  and  the  compensation received by  the heirs of a person dying in an air crash. In the former  case the  amount received  by the  person formed part of  his estate  but where  compensation was received by his heirs  on his  death in air crash, according to the High Court, it  cannot partake  of  his  estate.  When  a  person boarded a  plane he could not, at that time, be said to have created an  estate or  interest capable of passing after his death.      Section 15 of the Act provided for those types of cases where the  owner of property tried to dissipate his property in such  a way  that it  passed  on  to  his  heirs  without suffering  estate   duty.  It   did  not   bring  to  charge compensation received  by the  heirs of  a victim  of an air crash. Therefore  the sum  of money  received in such a case was not  liable to  estate duty,  according  to  Punjab  and Haryana High Court. The problem there was, however, slightly different, from  the present but the basic position was that the property  came into  existence only  on the death of the passenger in the plane.      In Bharatkumar  Manilal Dalal  v. Controller  of Estate Duty, Gujarat,  99 I.T.R.  179, it  is  necessary  to  refer briefly to  the facts. One M, the deceased, in that case had purchased on  8th  August,  1965,  a  limited  non-renewable policy covering  certain travel  accidents from  A  insuring himself against  risk of  air travel  for his  journey  from U.S.A. to  India and  back for  a maximum  sum of  f 75,000. Similarly, the  deceased had  purchased  in  July,  1965,  a personal accident policy from company insuring himself for a maximum of R.S.. 1,00,000 against risk 336 of loss  of life  or limb arising as a result of accident in the course  of one  year. The  deceased had  paid  only  one premium of R.S.. 255 under the said policy to the company B. The father  of the  deceased, the  accountable  person,  was nominated as  the beneficiary  in both  the  insurances  for receiving the  claim amount  payable under  the policies  in case of  death of the insured. M died on 24th January, 1966, in a  plane accident on his way to the U.S.A. R.S.. 1,00,000 and R.S..  3,57,808 were received from company and Company A respectively by  the accountable  person as  a sequel to the accident. The Appellate Tribunal held that the said two sums were liable  to be  included in  the dutiable  estate of the deceased, M, under section 15 of the Estate Duty Act but not under any  other section.  On a reference at the instance of both the  accountable person  and the  revenue, the question was whether  the amounts  were liable  to estate  duty under sections 5, 6, 14 or 15 of the Act.      The High  Court held that section 14 of the Act was not attracted on  a plain reading of the section. The High Court held further  that section  14 imposed  liability of duty on money received  under a  policy of insurance effected by any person on  his life  and would  not, therefore,  take in its sweep the cases of moneys paid under an accident policy, the connotation of  which was  well known as contradistinguished from that  of life policy. It was contended for the assessee that the  purchase of  an accident  policy by  the  deceased could not be held to be an interest purchased or provided by him within the meaning of section 15 of the Act and that the words "other interest" in section 15 should be understood in the cognate  sense of the word "annuity" on the principle of noscitur a  sociis. The  term "other interest" was of widest amplitude and  there was no warrant in the section itself or in any  other  provision  of  the  Act  to  infer  that  the

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legislature wanted to restrict the meaning and import of the term "other interest". The contention that the import of the term "other  interest" should  be  restricted  and  that  it should take colour from the word "annuity" and should bear a cognate meaning  must be rejected. If the legislative intent as outlined in the Statement of objects and Reasons given in the Bill  legislature wanted to cover all kinds of interests which have been purchased or provided by the deceased in the nature of  annuities or  policies other  than life insurance policy as passing on his death to the extent of a beneficial interest accruing  or arising  as a result of the death. The High Court referred to the decision in Westminster Bank Ltd. v. Inland  Revenue Commissioners. [1957] 2 All E.R. 745 = 36 I.T.R. (ED)  3. It  could  not  be  successfully  contended, according to  the High  Court,  that  the  deceased  had  no interest in his lifetime in the 337 relevant policies.  In the two personal accident policies in that case,  the A  subject matter  of the  insurance was the person of  the deceased  in case  of its  being  exposed  to certain perils  of travelling  and the assured would clearly be prejudiced by the loss of life or limb as a result of the accident and,  therefore,  had  an  insurable  interest  for purposes of personal accident. To contend that death did not generate a new beneficial interest, the High Court felt, was beside the  point for  the time  being. The  deceased had an interest in  the contractual  right under  the two  relevant policies of insurance to exact a particular sum, if and when there was  loss of  life or  limb arising  as  a  result  of accident. The  very fact  that deceased  had  a  contractual right to  exact a  particular sum in case of loss of life or limb was an interest in expectancy and it would have been in interest in  presenti the  moment the  accident  occur-  red resulting  in  loss  of  limb.  The  contract  of  insurance contained in  the two  relevant policies  conferred  on  the deceased the  benefit of  the policies, namely, the right to exact a particular amount of damage depending on the loss of limb or  life. as the case might be. The contention that the deceased had  no interest  in the policies, according to the High Court,  was not  well found  be upheld.  It was further held that  on the  death  of  the  insured,  the  beneficial interest of the accountable person was generated. Therefore, section 15 of the Act was applicable.      As regards the applicability of sections 5 and 6 of the Act, the  deceased had property in the nature of interest to receive the sums assured on the happening of the contingency of accident  resulting in  loss of  limb or  life under  the contracts  of  insurance  contained  in  the  aforesaid  two accident policies  and he  was competent  to dispose of that property by an act inter vivos or by a will. The property in nature of  interest was  in existence in the lifetime of the deceased which  passed on  his death  to  the  beneficiaries designated or to his legal representative in absence of such designation and  was, therefore  dutiable under section 5 of the Act.  In any  case, he had a right to property and under the said  policies which  he could  have disposed of by will and, therefore, it must be deemed to pass on his death under section 6  of the  Act. In  the view  we have  taken of  the policy involved  in the  instant case,  we are  unable, with respect, to  agree with the High Court that the deceased had right in  expectancy-the deceased  had no right, the nominee or the  beneficiary would  have the  right-the property does not pass through the deceased.      Relying on  section 34(3)  of the Act, it was contended by the

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338 accountable person  that the  aforsaid  sum  should  not  be aggregated with other property of the deceased and should be assessed as  an estate  by itself.  As we have noted before, this question  is a subject matter of Civil Appeal No. 67 of 1975. On  this aspect,  the judgment  under appeal  held  in favour of  the accountable  person while  the  Gujarat  High Court was  of the  view that  sub-section (3)  would not  be applicable because  it could  not be  said that the deceased had no  interest in  the contract  of insurance contained in the two  accident policies.  The High  Court held  that  the deceased had  property in  the nature of interest to receive payment in  case of  loss of  limb arising  as a  result  of accident or  the deceased  purchased  an  interest  for  the benefit of  his legal  representatives in  case of loss as a result of  accident. It,  therefore, could  not be said that the deceased  had never  any interest  in the  contracts  of insurance contained  in the  said  two  policies  and  money payable thereunder.  To this  extent, the Gujarat High Court dissented from  the Madras High Court’s view. It was further held by  the  Gujarat  High  Court  that  it  could  not  be contended that the principal value of the property should be determined with reference to the death of the insured and at the time  of his death the property in question had only the value of  the premiums  which had been paid. It must be held that  the   valuation  must   be  ascertained  on  the  date immediately succeeding  the date of the death, which, in the present case  would be  aforesaid two  sums. Therefore,  the High Court  allowed two  sums received  from  the  insurance company to  be included  in the estate duty under section 5, section 6 and section 15 of the Act.      The Bombay High Court in Smt. Amy F. Antia v. Assistant Controller of  Estate  Duty,  Bombay,  142  I.T.R.  57,  was confronted  with  a  situation  where  an  engineer  in  the employment of  M.N. Destur & Company died in an air crash on 28th May,  1968. The  question which  arose in the course of estate duty  proceedings on  his death was whether an amount of Rs.68,400  which was payable on the death of the deceased in pursuance  of a  group insurance  policy taken out by the employer, Destur  & Co. was liable to be included as part of the property  which passed on the death of the deceased. The Bombay High  Court was  of the  view that  personal accident insurance was  one of the three main types of insurance. The object  of   personal  accident  insurance  was  to  make  a provision in  case an  accidental injury  happens which  may sometimes disable a person and affect his employment and his earning capacity  or in  some cases  it may result in death, and the  injured person  wants to  make  provision  for  his dependants in  case  untimely  accidental  death  occurs.  A personal accident policy was in the 339 nature of  a provision  for the legal representatives and in the case  of the death of the insured, the death benefit was payable to  the legal  representatives. The  proviso in  the insurance policy  in that case stated that the insured alone would have the sole and exclusive right of receiving payment or enforcing  any claim  under the  policy. &  Co. issued an office circular  which made  it clear  that the compensation payable by  the insurance  company in  each  case  would  be equivalent to  two years  salary of the individual concerned at the  time of  accident resulting  in a  claim  under  the policy. Clause  5 of  the circular  stated that the benefits enjoyed by  the staff  under the  scheme were  ex gratia  in character and  might be  withdrawn or  modified at  the sole discretion of  the company.  In pursurance  of the insurance

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policy a sum of R.S.. 68,400 was paid by & Co. to the estate of the  deceased. A sum of R.S.. 50,000 was also paid to the estate of  the deceased  by the  airlines in accordance with the provisions  of the  Indian  Carriage  by  Air  Act.  The Assistant Controller  and the Appellate Controller held that both the  amounts were  liable to  estate duty. The Tribunal held that  the amount  of R.S..  68,400 was liable to estate duty and out of the amount of R.S.. 50,000, R.S.. 43,846 was not liable  to estate  duty. The Bombay High Court held that with regard  to the  amount of  R.S.. 68,400  the  insurance policy and  the circular  issued by  & Co.  had to  be  read together. The  policy expressly provided that in the case of an insured  person suffering an injury, the insured would be paid the capital sum insured against the name of the insured person and in respect of the person- suffering was twice the annual salary  drawn by the person on death or occurrence of the accident.  The High  Court held  that the  sum of  R.S.. 68,400 was,  therefore, liable  to estate duty but held also that the  sum received  under the  provisions of  the Indian Carriage by  Air Act  was not  liable to duty under the Act. The learned  judges referred  to  the  two  decisions  under appeal. The  real question  which fell  for consideration in the case  before the  Bombay High Court was whether question No. l  in that  case was  what the right the deceased had in the personal  accident policy.  The question  No. 1  in that case was  whether, on  the facts and in the circumstances of the case,  the sum  of R.S..  68,400 payable on the death of the deceased in pursuance of the insurance policy was liable to duty  on estate.  It would  thus appear that each case is decided in the peculiar facts in terms of the policy.      Reliance was also placed on certain observations in the case of  P. Indrasena  Reddy &  Pingle Madhusudhan  Reddy v. Controller of  Estate Duty,  156 I.T.R. 45. There, the Court was  dealing  with  the  test  of  "disclaimer".  The  Court observed that the test of "disclaimer" has to H 340 be  adopted  to  determine  whether  the  deceased  had  any interest in insurance policies. If the facts showed that the beneficiaries disclaimed, the resulting interest would be in favour of  the deceased  and the policy amount would pass to the legal representative.       It  was condition precedent for the application of the Act that  the estate  holder must  have possessed or enjoyed the property  or  interest  in  property,  the  interest  in property might  be either  vested or contingent but interest should  be  that  with  regard  to  which  either  immovable property or  movable property or an interest in immovable or movable which  was capable  of being  ascertained during the lifetime or  at the  time of the death of the estate holder. The property  vested or  contingent must  be one  which  was capable of  being ascertained.  Even if the above tests were satisfied then there has to be a passing of that property or interest as  contemplated under  section 2(16)  of the  Act. Even if  a person  might have power to dispose of a property or interest  in property,  he cannot or his estate cannot be brought within the purview of the Act solely because of that factor. In  order for  an estate to be liable to estate duty the power  of disposition  must be with regard to a property capable of  being ascertainable  during the  lifetime of the deceased ceased  or at  the time  of his  death. It was next urged that  property or interest in property had necessarily to change  hands in  order to be liable to estate duty under the Act.  There  had  to  be  a  change  in  the  beneficial possession and  enjoyment of the property or the interest in that property. In other words the property or interest which

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is liable  to estate  duty has to pass through the estate of the deceased.  It is  important to  bear in mind that though the deceased  might have  a right of disposition as and when the property  would be  available in  case  the  contingency happens namely the death of the deceased in an accident, but that right is different from the right to the money accruing or arising because of the death due to accident. See in this connection the  case of  Shri H. Anraj etc. v. Government of Tamil Nadu  etc., [  1986] (1)  SCC 414. So in this case the property is  really born  on the death of the deceased in an accident. Property  in the  sense the sum of R.S.. two lakhs was non-existence  before the  death. There  might have been some right  of disposition  in respect of the property which might accrue  on the  death of  the deceased.  That right is different from  the right  to the movable property of R.S. 2 lakhs that is taking place.      An accident  insurance policy  cannot be  construed  as movable property  unlike  a  life  insurance  policy  or  an annuity because  as laid down in section 2(15) of the Act it is not only necessary for the person 341 to have  property or  interest in property but that interest must be  in A  regard to a movable property and his interest should also  be capable  of being  ascertainable during  his lifetime or  at the  time  of  his  death  in  that  movable property. Secondly,  an accident  insurance policy could not be construed  as a property or an interest in property since a person  who possessed  it cannot  also be  said to  have a contingent interest  because there  was every possibility of the  accident   policy  getting   extinguished  or  rendered worthless during his lifetime; on the other hand in the case of a  life insurance  policy, there  was always  a  tangible continuing interest  only that  the value  of that  interest might be  subjected to  change at the time of passing of the property.      A contingent  interest which  did not  get  crystalised during the  lifetime of  the  deceased  hut  which  interest would, with certainty, accrue after the demise of the estate holder will  be caught  by section  6 of the Act. A property passed from  the deceased  to the beneficiary. Though only a future interest  that crystallised  after the  death of  the estate holder  would be  deemed as  a property of the estate holder. The  accident policy  could only  accrue  after  the death of the estate holder. It became property for the first time after  the demise  of the  estate holder.  There was no element of property during the lifetime of the estate holder      The interest  in an  accident insurance  policy did not pass through  the estate of the deceased as in the case of a life insurance  policy or  annuity  and  here  the  interest directly went  to the  beneficiaries in the case of death by accident of the estate holder.      This Court  had  to  deal  with  nomination  under  the Insurance Act  in the  case of  Smt. Sarabati Devi & Anr. v. Smt. Ushal Devi, [1984] (1) SCR 992. In that case the effect of nomination under the Insurance Act was analysed.      The meaning of the expression "property passes" came up for consideration in the observations of Viscount Simonds in the case  of Public  Trustee v. Inland Revenue Commissioners [1960] A.C.  398, where  at page  407 of the report Viscount Simonds dealing  with section  1 of the Finance Act. 1894 of U.K observed that:           "the word  "passes", familiar as it has now become           to us,  was not  in 1894  a term of art in the law           relating to death duties, and that it would appear           to have been a matter of H

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342           sheer necessity  for  the  Act  to  proceed  to  a           definition of  the area  of charge. It was natural           that the  draftman should  do so by the use of the           word "deem,"  a word  which, has been described by           Lord Radcliffe, is apt to include the obvious, the           uncertain and the impossible."      Section 6  of the  Act which  makes property  which the deceased at  the time  of his  death competent to dispose of deemed to  pass on  his death makes, as in the words of Lord Radcliffe, inter  alia, to  include, ’impossible’.  But  the question here  in the instant case is whether the expression ’impossible’  also  include  the  possibility  of  including something which  is not  property as  yet of the deceased to pass on  the death  of the  deceased. The fact that a person can  nominate   a  beneficiary   will  not   tantamount   to disposition.      In view  of the discussions above we are of the opinion that insurance  money became property only on happening of a specified contingency.  That property  arose on the death of the  deceased  during  the  subsistence  of  the  policy  in accident. We  are dealing  with the  passing of  property or situation where  property can  be deemed to have passed. The property in  this case  is the  sum of  R.S.. 2  lakhs which became receivable by the nominee or the legal representative of the  deceased because of the death of the deceased in air accident during the subsistence of the policy. That right to the sum  arose because  (a) the  deceased died;  (b) in  air accident; (c)  during the  subsistence of  the  policy  that property was not there before. Therefore, property came into being on  that contingency  after  death.  In  our  opinion, therefore, no property can be deemed to pass on the death of the deceased.  In any  event, during  the  lifetime  of  the deceased, an  interest was  vested totally and irretrievably in the  hands of  the beneficiary  or  the  legatee  or  the nominee. The  death did  not cause property to change hands. The fact  that a  person can nominate a beneficiary will not tantamount to  a disposition  of the  property. In any event that  disposition   vested  in  the  nominee  or  the  legal representative a  right in  the property. It did not pass on the death of the deceased. In the premises, we are unable to accept the High Court’s conclusion on the first question and we are  in agreement  with the  views of  the High  Court of Jammu and  Kashmir in  Controller of  Estate Duty v. Kasturi Lal Jain  (supra) .  The first  appeal No.  2086 of  1974 is allowed and question no. 1 is answered in the negative.      In that  view of the matter question No. 2 which is the subject 343 matter of  Civil Appeal No. 67(NT) of 1975 need not be dealt with. However,  we are of the opinion on the construction of section 34(3)  and the  views expressed by the High Court on this point  that  had  it  been  necessary  to  answer  this question, we  would have  treated this  as a separate estate from the  other estate of the deceased and the value of this could not be aggregated. B      The third  question which is also the subject matter of appeal No.  67 of  1975 relates  to the  adoption under  the custom of  Chettiar  Community.  Now  whether  a  particular custom prevails in a particular community or not is a matter of evidence.  Mayne’s Treatise  on Hindu  Law and Usage 10th Edn. edited  by S. Srinivasa Iyengar from page 280 described the peculiar form of Dwyamushyayana adoption thus:           "208. An  exception  to  the  rule  that  adoption           severs a son from his natural family exists in the

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         case of  what is called a dwyamushyayana or son of           two fathers. This term has a two-fold acceptation.           Originally it  appears to  have been  applied to a           son who was begotten by one man upon the 1 wife of           another, but  for and  on behalf of that other. He           was  held  to  be  entitled  to  inherit  in  both           families, and  was bound  to perform  the  funeral           obligations both  of his actual and his fictitious           father. This  is the  meaning in which the term is           used in the Mitakshara; but sons of this class are           now obsolete. Another meaning is that of a son who           has been  adopted with an express or implied under           seems to  take place  in different  circumstances.           One is  what seems  to  take  place  in  different           circumstances. One  is what  is called the Anitya,           or temporary adoption, where the boy is taken from           a different  gotra, after  the  tonsure  has  been           performed in  his natural  family. He performs the           ceremonies of  both fathers,  and inherits in both           families, but  his son  returns  to  his  original           gotra. This form of adoption is now obsolete.                The only form of dwyamushyayana adoption that           is  not   obsolete  is   the  nitya   or  absolute           dwyamushyayana in which a son is taken in adoption           under an  agreement that  he should  be the son of           both the  natural and adoptive fathers. It appears           to be obsolete in Madras on the East Coast. But in           the West Coast among the Nambudri Brahamana, it is           the  ordinary  form.  In  Bombay  and  the  United           Provinces its  existence is  fully recognised.  It           has H 344           been recognised  by the  Judicial Committee in two           cases from Bengal."      In Mulla’s Principles on Hindu Law, 3rd Edition, p. 393 Dvyamushyayana, the  effect of partition has been described. These have  been set  out in the judgment of the High Court. It is not necessary to reiterate them again.      In any  event we accept the reasoning of the High Court that if  the adoption  was not valid as contended for by the revenue, then  Muthiah continued  to  be  a  member  of  the natural family  and as  such his  share in  the joint family would have  passed on  the death  of the  deceased. In  this background, it  is, however,  difficult  to  appreciate  the stand of  the revenue  that the  adoption was  valid but  no effect could be given to the ter ns of Muri. Muri, according to revenue  stood by  itself. The  High Court  found it  not possible to  accept this  argument. We are of the same view. The agreement  properly read  could not  be taken as a post- adoption agreement.  In that  view  of  the  matter  certain factual  aspects  were  urged  before  the  High  Court  for contending that  the accountable person was not free to urge that there was no valid adoption and Muthiah continued to be a member of the natural family. We do not find much merit in such contentions  and these  need not  be dealt  with. These have been  dealt with  by the High Court and we accept them. Not much  serious arguments in support of the appeal on this aspect by  the  revenue  was  advanced  before  us.  In  the premises we  uphold the  decision of  the High  Court in two questions involved  in appeal  No. 67  of 1975 and therefore the second  question in  that appeal  is answered  by saying that amount  of Rs.2  lakhs if  assessable would  have  been assessed as  a separate estate and on the third question-the share of the deceased in the property of the joint family at the time  of death  was one-third  and not  one-half. In the

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premises this appeal fails and is dismissed.      In view  of the  divided success,  parties will pay and bear their costs in both the appeals. A.P.J.                                     Appeal dismissed. 345