1991 (1) TMI 43 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 10 of the Estate Duty Act.
2. Relief under proviso to Section 16 read with Sections 46(1) and 46(2) of the Estate Duty Act.
3. Inclusion of the lineal descendants' share under Section 34(1)(c) of the Estate Duty Act.

Issue-wise Detailed Analysis:

1. Applicability of Section 10 of the Estate Duty Act:
The Tribunal found that the deceased, Doraiswamy Chettiar, continued to remain in possession and enjoyment of the gifted properties till his death, which attracted Section 10 of the Estate Duty Act. The accountable person argued that Section 10 should not apply as the gifts were made when the deceased was the sole owner, and later, the properties were converted into joint family properties. However, the Tribunal concluded that the properties were initially separate and only later impressed with joint family character. The Tribunal held that the deceased, as the karta, was in possession of the properties and the income therefrom, and Section 10 of the Act contemplated only physical possession, not the capacity in which the deceased was in possession. The Tribunal's decision was upheld, citing the Supreme Court's ruling in CED v. Smt. Parvati Ammal, which clarified that the value of the entirety of the property would pass under Section 10 if the donor continued to benefit from the property. The court found no material to indicate that the donees assumed possession and enjoyment of the properties to the exclusion of the donor. Thus, the possession and enjoyment by the deceased till his death were attributable to the deeds of gift and leases, affirming the applicability of Section 10.

2. Relief under proviso to Section 16 read with Sections 46(1) and 46(2) of the Estate Duty Act:
The Tribunal found that no material was placed before it to show that the proviso to Section 16(1) of the Act stood attracted, and consequently, no abatement could have been made under Sections 46(1) and 46(2) of the Act. The accountable person's claim for exclusion of Rs. 5,000 under Section 9 of the Act and the value of the lineal descendants' share was also rejected. The court upheld the Tribunal's decision, noting the absence of evidence to support the accountable person's claims. Therefore, the Tribunal was justified in declining to give relief by applying the proviso to Section 16 read with Sections 46(1) and 46(2) of the Act.

3. Inclusion of the lineal descendants' share under Section 34(1)(c) of the Estate Duty Act:
The Tribunal upheld the accountable person's claim regarding the exclusion of the lineal descendants' share based on the decision in V. Devaki Ammal v. Asst. CED, which held Section 34(1)(c) of the Act as discriminatory and violative of Article 14 of the Constitution of India. The court affirmed the Tribunal's decision, stating that Section 34(1)(c) imposed a higher tax burden on coparceners who died leaving lineal descendants, making it discriminatory. Hence, the inclusion of the lineal descendants' share was not proper and should be excluded.

Conclusion:
The court answered all questions in favor of the Tribunal's findings. The applicability of Section 10 was affirmed due to the deceased's continued possession and enjoyment of the gifted properties. The Tribunal's decision to deny relief under Sections 46(1) and 46(2) was upheld due to the lack of supporting evidence. Lastly, the exclusion of the lineal descendants' share was validated, citing the discriminatory nature of Section 34(1)(c).