1995 (1) TMI 59 - HC - Income Tax

Estate Duty Partner In Firm Partnership Deed Passing Of Property Principal Value Rate Purpose Share Value

Summary

Issues:
1. Inclusion of share of lineal descendants in residential house property for estate duty rate purposes under section 34(1)(c) of the Estate Duty Act, 1953.
2. Inclusion of proportionate share in the accretion in the value of assets of a firm in the principal value of the estate passing on the death of the deceased under section 36(1) of the Estate Duty Act, 1953.

Analysis:
1. The first issue revolves around the inclusion of the share of lineal descendants in the residential house property for estate duty rate purposes. The deceased had a one-third share in a house property owned by a Hindu undivided family. The Assistant Controller of Estate Duty determined the value of this property and exempted a portion under section 33(1)(n) as the share of the lineal descendants. However, the Appellate Tribunal held that the entire value of the one-third share should be considered for estate duty rate purposes under section 34(1)(c). The High Court referred to a previous decision and concluded that the share of lineal descendants must be aggregated with the principal value of the estate for rate purposes, rejecting the Tribunal's decision.

2. The second issue concerns the inclusion of the deceased's share in the accretion of assets of a partnership firm in the principal value of the estate. The Assistant Controller added an amount to the deceased's share in the firm based on the increase in the value of assets. However, the Appellate Controller deleted this addition, considering only the value as per the balance-sheet. The Tribunal upheld this decision, stating that the deceased was only entitled to his investment amount and share of profit or loss as per the partnership deed. The High Court emphasized that the value of the property must be estimated based on its market value at the time of death, and the restrictions in the partnership deed should be considered. As the deceased was not entitled to any accretion in value as per the deed, the Tribunal's decision was upheld, and the share in the accretion was deemed not includible in the principal value of the estate under section 36(1) of the Estate Duty Act, 1953.