1981 (7) TMI 19 - HC - Income Tax

Summary

Issues Involved:
1. Relevance of the Land Acquisition (Bombay Amendment) Act, 1948, in determining the value of the land.
2. Interpretation of the phrase "if sold" in section 36(1) of the Estate Duty Act, 1953.
3. Deductibility of brokerage paid on the sale of the land.

Issue-Wise Detailed Analysis:

1. Relevance of the Land Acquisition (Bombay Amendment) Act, 1948:
The Tribunal held that the Land Acquisition (Bombay Amendment) Act, 1948, was not relevant in determining the value of the land as it had been declared void from its inception by the Supreme Court. The accountable person argued that the value should be based on the prices prevailing on January 1, 1948, as per the Bombay Amendment Act. However, the Assistant Controller rejected this contention since the Bombay Amendment Act was declared void ab initio by the Supreme Court in N. B. Jeejeebhoy v. Assistant Collector, Thana Prant, Thana, AIR 1965 SC 1096. The Tribunal confirmed this view, noting that the Act was non-existent for all purposes due to its invalidity from inception. The court upheld this position, emphasizing that the effect of the Supreme Court's decision rendered the Act non-existent, and thus, it could not influence the valuation of the land.

2. Interpretation of "if sold" in Section 36(1) of the Estate Duty Act, 1953:
The Tribunal interpreted the phrase "if sold" in section 36(1) of the Estate Duty Act to mean that the property should be valued as if there were an open market at the time of the deceased's death, regardless of whether an actual sale occurred. The accountable person contended that the Tribunal should have considered the highest bid in a hypothetical sale. The court, however, held that the valuation must assume an open market and does not require an actual sale. The court also dismissed the argument that the notional bidders could not have anticipated the invalidity of the Bombay Amendment Act, stating that the Act was non-existent from inception and thus irrelevant to the valuation. The court cited various precedents, including Lynall v. IRC [1972] AC 680 and IRC v. Crossman [1937] AC 26, to support the principle that the valuation should be based on a hypothetical sale in an open market.

3. Deductibility of Brokerage Paid on the Sale of the Land:
The accountable person did not press the question regarding the deductibility of the brokerage amount for purposes of deduction from the value of the estate. Consequently, the court did not address this issue in detail. The Tribunal had previously disallowed the brokerage claim, following the decision in Pandit Lakshmi Kant Jha v. CWT [1973] 90 ITR 97 (SC).

Conclusion:
The court answered the first two questions in the affirmative, favoring the Revenue and against the assessee, and noted that the third question did not survive as it was not pressed. The accountable person was ordered to pay the costs of the reference to the Controller of Estate Duty.