2001 (5) TMI 20 - HC - Income Tax

Summary

Issues Involved:
1. Deduction of liability towards marriage and maintenance expenses of the grand-daughters of the deceased.
2. Aggregation of the principal value of the estate including the interest of all lineal descendants of the deceased.
3. Deduction of estate duty payable from the value of the dutiable estate.
4. Inclusion of income tax refund received by legal heirs in the principal value of the estate.

Issue-wise Detailed Analysis:

1. Deduction of Liability Towards Marriage and Maintenance Expenses of the Grand-daughters of the Deceased:
The accountable person claimed a deduction for the marriage and maintenance expenses of the grand-daughters of the deceased. The Tribunal held that these expenses formed only the liability of the son's branch and not of the whole joint family. As the deceased had no unmarried sisters or daughters at the time of his death, the deduction for any liability towards the marriage and maintenance expenses of the grand-daughters was not allowable.

2. Aggregation of the Principal Value of the Estate Including the Interest of All Lineal Descendants of the Deceased:
The accountable person argued that including the interest of all lineal descendants in the joint family property for determining the estate duty rate under section 34(1)(c) of the Act was illegal. The Tribunal, relying on the decisions of the Madras High Court in Ramanathan Chettiar v. Asst. CED and the Andhra Pradesh High Court in N. Krishna Prasad v. Asst. CED, held that such aggregation was neither illegal nor unconstitutional.

3. Deduction of Estate Duty Payable from the Value of the Dutiable Estate:
The accountable person deducted the amount of estate duty chargeable on the estate as a debt. The Tribunal, referencing decisions from the Karnataka High Court in Smt. V. Pramila v. CED and the Andhra Pradesh High Court in CED v. Estate of Late Omprakash Bajaj, rejected this claim. The issue was settled by the Supreme Court in P. Leelavathamma v. CED, against the accountable person, leading to the Tribunal's decision being upheld.

4. Inclusion of Income Tax Refund Received by Legal Heirs in the Principal Value of the Estate:
The Revenue questioned whether the refund of Rs.2,27,681 received by the legal heirs, due to certificates issued by the Income-tax Officer under section 80K, represented property passing on the death of the deceased. The Tribunal held that the refund did not represent property passing on the death of the deceased. The Tribunal noted that the right to receive the refund was contingent on the company's successful appeal under section 80J, which was uncertain at the time of the deceased's death. The Tribunal's finding was that the claim for refund was made only after the company's claim under section 80J was accepted posthumously.

Conclusion:
The court agreed with the Tribunal's findings on all issues. The reference at the instance of the accountable person was returned unanswered due to the settled nature of the issues. For the Revenue's reference, the court held that the refund did not constitute "property" passing on the death of the deceased and thus was not liable for estate duty. The question was answered in favor of the accountable person and against the Revenue, with no order as to costs.