1994 (7) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Exclusion of the proportion of property required to produce an annuity from the principal value of the estate.
2. Exclusion of Rs. 50 lakhs bequeathed by the Maharaja from his estate under section 44 of the Estate Duty Act, 1953.
3. Calculation of the slice of capital required to produce the annuity considering 'gross income minus income-tax'.
4. Consideration of specific amounts in computing the value of the trust fund under section 7 read with section 40 of the Estate Duty Act, 1953.
5. Exclusion of the liability amounting to Rs. 38,656 from the principal value of the estate.

Detailed Analysis:

Issue 1: Exclusion of the Proportion of Property for Annuity
The Tribunal held that the proportion of the property required to produce the annuity of Rs. 1,44,000 per annum payable to the Maharani Rameshwarlata Saheba is not excludible from the principal value of the estate of Maharaja Kameshwar Singh. The Tribunal referenced IRC v. Anouse Trustee and other cases, concluding that the duty was chargeable on the whole property vested in the trustees without any 'slice' deductions. The court agreed with the Tribunal's approach, noting that the corpus of the trust property remained the property of the settlor, the Raja, and thus, was correctly included in the principal value of the estate. The court answered this question in the affirmative and against the assessee.

Issue 2: Exclusion of Rs. 50 Lakhs Bequeathed by the Maharaja
The Tribunal rejected the contention that the sum of Rs. 50 lakhs bequeathed by the Maharaja to his Maharanis should be excluded from his estate under section 44 of the Estate Duty Act. It was observed that no charge or incumbrances existed on the estate a moment before the Maharaja's death, and the liability created by the will came into force only after his death. The court affirmed the Tribunal's conclusion, noting that no serious argument was presented to challenge this decision. The question was answered in the affirmative and against the assessee.

Issue 3: Calculation of Slice of Capital Considering 'Gross Income Minus Income-Tax'
The Tribunal held that for calculating the slice of the capital required to produce the annuity under section 7 read with section 40 of the Estate Duty Act, the income of the trust fund should be taken as 'gross income minus income-tax'. The Tribunal referenced Ld. Adv. v. Fothrighan and other authorities, concluding that the net income after deduction of income-tax should be considered. The court agreed with this conclusion, noting that no contrary authority was cited by the Revenue. The question was answered in the affirmative and against the Revenue.

Issue 4: Consideration of Specific Amounts in Computing the Value of the Trust Fund
The Tribunal found that the amounts of Rs. 36,600, Rs. 90,462, and Rs. 7,622 could not be taken into consideration in computing the value of the trust fund under section 7 read with section 40 of the Estate Duty Act. The Tribunal noted that the representative of the assessee did not provide details or explain how these amounts should be considered. The court found no reason to interfere with the Tribunal's conclusion and answered the question in the affirmative and against the assessee.

Issue 5: Exclusion of Liability Amounting to Rs. 38,656
The Tribunal upheld the Appellate Controller of Estate Duty's decision to exclude the liability of Rs. 38,656 from the principal value of the Maharani's estate. It was established that this amount represented a loan to the deceased and should be allowed as a liability. The court noted that no serious argument was presented to challenge this conclusion and answered the question in the affirmative and against the Revenue.

Conclusion
All questions were answered in the affirmative, thereby affirming the Tribunal's decisions on all issues. The judgment is to be forwarded to the Income-tax Appellate Tribunal, "A" Bench, Patna.