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Issues Involved
1. Exemptions under sections 33(1)(n) and 33(1)(c) in computing the share of the deceased in the joint family properties. 2. Addition of Rs. 13,785 as accrued interest on deposits. 3. Deduction towards foreign exchange entitlement charges in valuing fixed deposits in Ceylon. 4. Deductibility of estate duty payable in computing the principal value of the estate. 5. Consideration of subsequent adoption relating back to the date of death of the deceased affecting the share in Hindu undivided family properties. Detailed Analysis Issue 1: Exemptions under sections 33(1)(n) and 33(1)(c) The accountable person claimed exemptions under sections 33(1)(n) and 33(1)(c) of the E.D. Act, 1953, for the Courtallam house property. The Assistant Controller rejected this, but the Tribunal allowed it. The High Court found that exemptions under these sections had already been granted for the deceased's share in the Madras house property. Since exemptions under these sections can be claimed only once, the High Court held that the Tribunal erred in allowing exemptions for the Courtallam house property as well. The court answered this question in the negative, favoring the Revenue. Issue 2: Addition of Rs. 13,785 as accrued interest on deposits The accountable person contended that no interest had accrued on fixed deposits in the Indian Bank, Ceylon, as interest was payable only on maturity. The Assistant Controller included Rs. 13,785 as accrued interest, which the Tribunal later excluded. The High Court disagreed with the Tribunal, stating that interest accrues daily, even if payable on maturity. The court referenced the Supreme Court decision in RM. AR. AR. RM. AR. AR. Ramanathan Chettiar v. CIT, affirming that interest accrues daily. The High Court answered in the affirmative for the Revenue but remanded the matter to the Tribunal to determine the exact amount of accrued interest. Issue 3: Deduction towards foreign exchange entitlement charges The accountable person sought a 55% deduction for foreign exchange entitlement charges when valuing fixed deposits in Ceylon. The Assistant Controller and Tribunal rejected this, stating that the market value should be considered in Ceylon, not India. The High Court upheld this view, noting that estate duty charges apply regardless of the asset's location. The court answered this question in the negative, against the accountable person. Issue 4: Deductibility of estate duty payable The accountable person argued that estate duty payable should be deductible as a debt in computing the estate's principal value. The High Court cited previous rulings, including RM. Arunachalam v. CED, which held that estate duty payable after death is not a debt subsisting at the time of death. The court affirmed that such duty is not deductible under section 44 of the E.D. Act. The court answered this question in the negative, against the accountable person. Issue 5: Consideration of subsequent adoption The accountable person argued that any subsequent adoption should relate back to the date of death, reducing the deceased's share in HUF properties. The Tribunal rejected this, noting that no adoption had occurred by the time of its decision. The High Court found the question hypothetical and declined to answer it, stating that courts typically do not provide opinions on hypothetical scenarios. The court returned this question unanswered. Conclusion The High Court ruled substantially in favor of the Revenue, addressing each issue with thorough legal reasoning and references to relevant case law. The accountable person was ordered to pay costs to the Revenue, with counsel's fee set at Rs. 500.
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