1983 (2) TMI 8 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 17 of the Estate Duty Act, 1953.
2. Calculation of the amount includible under Section 17(2) of the Estate Duty Act.
3. Interpretation and application of Rule 11(9) of the Estate Duty (Controlled Companies) Rules, 1953.

Detailed Analysis:

1. Applicability of Section 17 of the Estate Duty Act, 1953:
The Tribunal had already determined that Section 17 of the Estate Duty Act, 1953, was applicable to the case. This finding was in favor of the Revenue, and no reference was made on this question. Therefore, the court did not delve further into this issue. The focus was solely on the calculation of the amount includible under Section 17(2).

2. Calculation of the Amount Includible under Section 17(2) of the Estate Duty Act:
The primary issue was whether the amount includible under Section 17(2) was Rs. 12,415 or Rs. 64,264. The Assistant Controller initially determined the value of the deceased's 12,000 shares and calculated the excessive remuneration paid to all directors, including the deceased. The Appellate Controller made adjustments and fixed the net value of the company's assets at Rs. 5,34,889, leading to a different calculation of the includible amount. The Tribunal, however, accepted the net value of the assets and total profits but disagreed on the method of calculating the includible amount, leading to a lower figure of Rs. 12,435.

3. Interpretation and Application of Rule 11(9) of the Estate Duty (Controlled Companies) Rules, 1953:
The court had to interpret Rule 11(9) to determine the non-share benefit slice. The Assistant Controller and the Appellate Controller calculated the non-share benefit slice by considering the excess remuneration received by all directors. The Tribunal, however, held that the entire excess remuneration should be considered to ascertain how much would have been applied for dividend purposes. The court disagreed with the Tribunal, stating that only the excess remuneration received by the deceased should be considered for Rule 11(9). The court emphasized that both share benefit and non-share benefit should be in relation to the deceased alone, not other directors.

The court concluded that the calculation by the Appellate Controller, which considered only the excess remuneration received by the deceased, was correct. The Tribunal's approach of considering the entire excess remuneration paid to all directors was erroneous. Therefore, the court answered the question in the negative and in favor of the Revenue, affirming that the correct includible amount under Section 17(2) was Rs. 64,264. The Revenue was also awarded costs of Rs. 500.