1984 (2) TMI 17 - HC - Income Tax

Summary

Issues Involved:
1. Inclusion of Rs. 1,56,971 in the estate of the deceased under section 5 of the Estate Duty Act.
2. Inclusion of Rs. 8,23,697 spent on construction under section 9 of the Estate Duty Act.
3. Inclusion of Rs. 12,61,649 and Rs. 8,85,850 under section 22 of the Estate Duty Act.
4. Applicability of section 46 of the Estate Duty Act to the sums of Rs. 12,61,649 and Rs. 8,85,850.
5. Consideration of estate duty payable in determining the principal value of the estate under section 36 or as a debt under section 44 of the Estate Duty Act.
6. Inclusion of Rs. 5,01,460 for properties occupied by Sahabzadas and Sahebzadis.

Detailed Analysis:

1. Inclusion of Rs. 1,56,971 in the estate of the deceased under section 5 of the Estate Duty Act:

The accountable person, Nawab Mir Barkat Ali Khan, argued that Mazharunnisa Begum was not the wife of the late Nizam. However, the Assistant Controller, Appellate Controller, and Tribunal upheld the inclusion of Rs. 1,56,971 in the estate of the deceased, based on several legal documents and actions taken by the late Nizam that indicated he held Mazharunnisa Begum as his wife. The court found that the estate of Mazharunnisa Begum, which was enjoyed and possessed by the Nizam, should be included in the computation of the value of the estate as passing on his death. The court referred to the definition of "property passing on death" and concluded that the addition of Rs. 1,56,971 was rightly included in the estate of the deceased. The question was answered in the affirmative and against the assessee.

2. Inclusion of Rs. 8,23,697 spent on construction under section 9 of the Estate Duty Act:

The late Nizam constructed quarters for dependants and khanazadas on the King Kothi palace property. The Assistant Controller included the sum of Rs. 8,23,697 as a gift under section 9 of the Estate Duty Act, a decision upheld by the Appellate Controller and Tribunal. The court found that the expenditure incurred by the deceased was a disposition under Explanation 2 to section 2(15) of the Act, as it represented an extinguishment of a right and the accrual of a benefit. The court also noted that the accountable person had previously claimed that the quarters were gifts in wealth-tax proceedings. The inclusion of this amount was justified.

3. Inclusion of Rs. 12,61,649 and Rs. 8,85,850 under section 22 of the Estate Duty Act:

The sums of Rs. 12,61,649 and Rs. 8,85,850 were claimed to be held by the deceased in a fiduciary capacity. The Assistant Controller, Appellate Controller, and Tribunal rejected this contention. The court found that the amounts did not meet the requirements of section 22, as they were not held under a disposition made by the deceased or another person. The amounts were not held as trustee under any disposition, and the beneficiaries had not assumed possession and enjoyment to the exclusion of the deceased. Section 22 was deemed inapplicable.

4. Applicability of section 46 of the Estate Duty Act to the sums of Rs. 12,61,649 and Rs. 8,85,850:

The court examined whether the sums constituted a debt under section 44(a) and whether section 46 applied. The late Nizam was under an obligation to pay back the amounts, which constituted a debt. The court referred to the definitions and previous case law, concluding that the sums were debts subject to abatement under section 46. The court rejected the contention that the amounts were merely deposits held in a fiduciary capacity.

5. Consideration of estate duty payable in determining the principal value of the estate under section 36 or as a debt under section 44 of the Estate Duty Act:

The court referred to a previous decision in CED v. Estate of Late Om Prakash Bajaj, which held that the amount of estate duty payable cannot be taken into account in determining the principal value of the estate. The question was answered in the negative and against the accountable person.

6. Inclusion of Rs. 5,01,460 for properties occupied by Sahabzadas and Sahebzadis:

This issue was covered by a previous decision in CIT v. Barkat Ali Khan, which was against the assessee. The court answered the question in the affirmative and against the accountable person.

Conclusion:

The court upheld the inclusion of the various sums in the estate of the deceased and rejected the contentions of the accountable person on all issues. A certificate to appeal to the Supreme Court was granted for all questions, as appeals were pending in related cases.