1986 (1) TMI 41 - HC - Income Tax

Issues Involved:

1. Deduction of estate duty payable in computing the principal value of the estate.
2. Inclusion of the value of assets of M/s. Pioneer Motors (P.) Ltd. in the computation of the principal value of the estate under section 17(1) of the Estate Duty Act.
3. Inclusion of the value of the share of the lineal descendants of the deceased in the properties of the Hindu undivided family under section 34(1)(c) of the Estate Duty Act.
4. Further discounting of the value of shares held by the deceased in M/s. Palkulam Estate Private Limited by 15% under rule 15 of the Estate Duty (Controlled Companies) Rules.
5. Validity of the Appellate Tribunal's decision regarding the value of the benefit slice of the assets of the company under section 17(2) of the Estate Duty Act.

Detailed Analysis:

1. Deduction of Estate Duty Payable:
The court addressed whether estate duty payable should be deducted in computing the principal value of the estate. The accountable persons' contention was rejected based on the precedent set in Rm. Arunachalam v. CED [1981] 132 ITR 871. Consequently, the court answered this question in the negative and against the accountable persons.

2. Inclusion of Value of Assets under Section 17(1):
The court examined whether Rs. 70,501, representing the value of assets of M/s. Pioneer Motors (P.) Ltd., should be included in the principal value of the estate under section 17(1) of the Estate Duty Act. The Revenue argued that the deceased's interest in the business transferred to the company should attract section 17(1). However, the court found that the transport business belonged to the Hindu undivided family (HUF) and not to the deceased individually. Since section 17(1) requires the property to be transferred by the deceased individually, and the transfer was made by the HUF, section 17(1) was not applicable. The court thus answered this question in the negative and against the Revenue.

3. Inclusion of Lineal Descendants' Share under Section 34(1)(c):
The court considered whether the value of the share of the lineal descendants in the HUF properties should be included under section 34(1)(c) of the Estate Duty Act. The Revenue conceded that the issue was settled against them by the decision in V. Devaki Ammal v. Asst. CED [1973] 91 ITR 24, which held that section 34(1)(c) infringes article 14 of the Constitution and was unreasonable. Therefore, the court answered this question in the negative and against the Revenue.

4. Further Discounting of Shares' Value by 15%:
The court addressed whether the value of shares held by the deceased in M/s. Palkulam Estate Private Limited should be further discounted by 15% under rule 15 of the Estate Duty (Controlled Companies) Rules. Following the decision in connected proceedings (T.C. Nos. 1417 to 1421 of 1977), the court held that the value should indeed be further discounted by 15%. Thus, the court answered this question in the affirmative and against the Revenue.

5. Validity of Tribunal's Decision on Benefit Slice Value:
Given the court's finding on question No. 2, the consideration of whether the Appellate Tribunal correctly held that the value of the benefit slice of the company's assets cannot be worked out under section 17(2) was deemed unnecessary. Consequently, the court did not answer this question.

Summary of Answers:

1. Question No. 1: Negative and against the accountable persons.
2. Question No. 2: Negative and against the Revenue.
3. Question No. 3: Negative and against the Revenue.
4. Question No. 4: Affirmative and against the Revenue.
5. Question No. 5: Not necessary to answer.

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