1997 (12) TMI 68 - HC - Income Tax

Issues Involved:

1. Application of Section 7 of the Estate Duty Act to policy No. 83920339.
2. Application of Sections 7 and 14 of the Estate Duty Act to policy No. 83428875.
3. Inclusion of lineal descendants' share in the principal value of the deceased's estate under Section 34(1)(c) of the Estate Duty Act.
4. Inclusion of policy monies assigned to relatives in the value of Hindu undivided family (HUF) properties under Section 14 read with Section 39(3) of the Estate Duty Act.
5. Application of Section 39(3) of the Estate Duty Act to properties deemed to pass on the death of the deceased.

Detailed Analysis:

1. Application of Section 7 of the Estate Duty Act to policy No. 83920339:

The Tribunal found that policy No. 83920339 was not assigned but merely nominated in favor of the deceased's wife. The entire premia were paid by the HUF. The court upheld the Tribunal's decision, stating that in the absence of any evidence indicating an intention to make the policy amount the exclusive property of the wife, the policy amount remained HUF property. Therefore, the proportionate share of the deceased in the HUF assets is liable to be included under Section 7 read with Section 39 of the Act. The first question was answered against the accountable person.

2. Application of Sections 7 and 14 of the Estate Duty Act to policy No. 83428875:

The Tribunal found that although the policy was assigned in 1950, the deceased paid the premia from 1958 to 1965. Therefore, Section 14 of the Estate Duty Act was applicable, and the proportionate amount of the policy is liable to be included in the deceased's estate. The court found no error in the Tribunal's factual findings and upheld their decision. The second question was answered against the accountable person.

3. Inclusion of lineal descendants' share in the principal value of the deceased's estate under Section 34(1)(c) of the Estate Duty Act:

The Tribunal followed the decision of this court in Devaki Ammal v. Asst. CED [1973] 91 ITR 24, which was later reversed by the Supreme Court in Asst. CED v. Devaki Ammal [1995] 212 ITR 395. The Supreme Court upheld the aggregation of the lineal descendants' share with the deceased's share under Section 34(1)(c) as constitutional. Following this Supreme Court decision, the third question was answered in favor of the Revenue.

4. Inclusion of policy monies assigned to relatives in the value of HUF properties under Section 14 read with Section 39(3) of the Estate Duty Act:

The Tribunal found that the policies (Nos. 86048096 and 341216) were assigned to the deceased's son and daughter, and the premia were paid by the HUF. The Tribunal concluded that the policy amounts belonged to the assignees, not the HUF. The court, however, directed the Tribunal to reconsider whether the policy amounts could be regarded as HUF property, applying the test laid down by the Andhra Pradesh High Court in Narayanlal P. Lahoti v. CED [1968] 68 ITR 849. The fourth question was answered in favor of the Revenue, with directions for further examination by the Tribunal.

5. Application of Section 39(3) of the Estate Duty Act to properties deemed to pass on the death of the deceased:

The Tribunal found that the entire premia for policies on the grandchildren's lives were paid by the HUF. The Tribunal erroneously concluded that Section 39(3) could not be invoked as the property was not joint family property at the time of the deceased's death. The court directed the Tribunal to reconsider whether the premia paid were to the detriment of the joint family or were intended as advances for the grandchildren's benefit. The fifth question was answered in favor of the Revenue, with directions for further examination by the Tribunal.

Conclusion:

1. First question: Answered in the affirmative and against the accountable person.
2. Second question: Answered in the affirmative and against the accountable person.
3. Third question: Answered in the negative and in favor of the Revenue.
4. Fourth question: Answered in the negative and in favor of the Revenue.
5. Fifth question: Answered in the negative and in favor of the Revenue.

No order as to costs.

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