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Issues Involved:
1. Discount on the value of shares due to restricted marketability. 2. Increase in value of cumulative preference shares due to accumulated arrears of dividend. 3. Applicability of section 17(1) of the Estate Duty Act to property transfers. 4. Loans received by the deceased considered as "benefit" under section 17(1). 5. Repayment of loans considered as "benefit" under section 17(1). 6. Applicability of rule 11(3) of the Estate Duty (Controlled Companies) Rules. 7. Time-bar on initiation of proceedings against controlled companies. 8. Deduction of estate duty in determining the principal value of the estate. Detailed Analysis: Issue 1: Discount on the Value of Shares The Tribunal found that shares in Messrs. Palkulam Estates Private Limited should be discounted by 15% due to restricted marketability as per article 3(c) of the company's articles of association. This decision aligns with precedents where the value of shares in private companies is depreciated due to marketability constraints. The court upheld this view, affirming that the value of shares should be further discounted by 15%. Issue 2: Increase in Value of Cumulative Preference Shares The Tribunal ruled that the value of cumulative preference shares should not be increased due to accumulated arrears of dividends. The court upheld this, noting the lack of principle supporting the increase in value due to unpaid dividends. The observations in Nanavati's Estate Duty Act were not substantiated by any principle. Issue 3: Applicability of Section 17(1) of the Estate Duty Act The court examined whether transfers made by the deceased to controlled companies fell within the scope of section 17(1). It was determined that the deceased, as the sole coparcener, had absolute rights to dispose of the property. Therefore, the transfers did not fall within the exclusions in section 17(1), making the provisions applicable if benefits accrued to the deceased. Issue 4: Loans Received by the Deceased as "Benefit" The Tribunal found that loans received by the deceased from Messrs. Palkulam Estates Private Limited were not "benefits" under section 17(1). The court agreed, emphasizing that benefits must be something the deceased was entitled to as of right. The loans, being mere advances debited to a current account, did not meet this criterion. Issue 5: Repayment of Loans as "Benefit" The Tribunal ruled that the repayment of loans by Messrs. Nagammal Mills Limited to the deceased could not be considered a benefit. The court upheld this, stating that repayment of loans does not constitute a benefit under section 17(1). This was supported by previous case law, which held that withdrawals from a current account do not amount to "benefits." Issue 6: Applicability of Rule 11(3) Since questions 4 and 5 were answered against the Revenue, question 6 was deemed unnecessary and not answered. Issue 7: Time-Bar on Proceedings The court ruled that the initiation of proceedings against the controlled companies was not barred by limitation. It was noted that once assessment proceedings were commenced within five years of the deceased's death, the bar of section 73A did not apply to subsequent notices issued to controlled companies during these proceedings. Issue 8: Deduction of Estate Duty The Tribunal held that estate duty payable cannot be deducted in determining the principal value of the estate. The court affirmed this, referencing section 44 of the Estate Duty Act, which exhaustively lists permissible deductions. Estate duty does not qualify as a debt or encumbrance under this section. Conclusion: - Question 1: Affirmative, against the Revenue. - Question 2: Negative, against the Revenue. - Question 3: Yes, if benefits accrued to the deceased. - Question 4: Negative, against the Revenue. - Question 5: Negative, against the Revenue. - Question 6: Not answered. - Question 7: Negative, against the accountable persons. - Question 8: Negative, against the accountable persons. No order as to costs was made due to equal success and failure in the reference.
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