1995 (1) TMI 53 - HC - Income Tax

Issues Involved:
1. Whether the share of the lineal descendants in the coparcenary house property is includible in the principal estate of the deceased for rate purposes under section 34(1)(c) of the Estate Duty Act, 1953.

Detailed Analysis:

1. Facts and Initial Assessment:
The deceased had a 1/5th interest in a residential family house property, shared with his wife and three sons. The value of the house property was assessed at Rs. 65,000, and later estimated at Rs. 1,00,000 by the Assistant Controller of Estate Duty. The 1/5th share of the deceased was exempted under section 33(1)(n) of the Estate Duty Act, while the 3/5th share of the three legal representatives was included for rate purposes.

2. Appellate Controller of Estate Duty's Decision:
The Appellate Controller of Estate Duty excluded the said amount from the principal value of the estate, following the decision in CED v. Estate of Late Durga Prasad Beharilal [1979] 116 ITR 692 (AP).

3. Income-tax Appellate Tribunal's Conclusion:
The Tribunal concluded that the deceased was exclusively occupying the house before his death. Therefore, the entire house was not includible in the principal value of the estate passing on his death, under section 33(1)(n). Consequently, the value of the interest of the lineal descendants was not includible under section 34(1)(c).

4. Legal Provisions:
- Section 33(1)(n): Exempts one house or part thereof exclusively used by the deceased for residence, up to a principal value of Rs. 1,00,000.
- Section 34(1)(c): Requires aggregation of the interests in the joint family property of all lineal descendants of the deceased for rate purposes.

5. Apex Court's Interpretation:
In Asst. CED v. V. Devaki Ammal [1995] 212 ITR 395, the Supreme Court upheld the aggregation and constitutionality of section 34(1)(c), emphasizing that the interests of all lineal descendants must be aggregated to determine the rate of estate duty.

6. Tribunal's Misinterpretation:
The Tribunal failed to properly consider that the coparceners' interest in the joint family property, including the lineal descendants' share, must be aggregated for estate duty purposes. The exemption under section 33(1)(n) applies only to the property exclusively used by the deceased and owned by him, not to the interests of the lineal descendants.

7. High Courts' Precedents:
- Gujarat High Court: In Ramniklal J. Daftary v. CED [1982] 136 ITR 422, it was held that the interest of lineal descendants should be included for rate purposes.
- Madras High Court: In T. Sundaresa Mehta v. CED [1981] 127 ITR 107, it was determined that only the deceased's share in the property is exempt under section 33(1)(n).
- Karnataka High Court: In CED v. K Nataraja [1979] 119 ITR 769, it was ruled that the exemption applies only to the deceased's share, and the value of the lineal descendants' shares must be aggregated under section 34(1)(c).

8. Conclusion:
The court concluded that the exemption under section 33(1)(n) is limited to the deceased's share in the property. The value of the lineal descendants' shares in the coparcenary property must be aggregated with the principal value of the deceased's estate for rate purposes under section 34(1)(c). Therefore, the Tribunal was not justified in excluding the lineal descendants' shares from the principal estate.

Final Judgment:
The reference was answered in favor of the Revenue and against the assessee, with no order as to costs.

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