1979 (2) TMI 31 - HC - Income Tax

Summary

Issues:
Estate duty assessment on deceased's interest in properties under partition deed.

Analysis:
The judgment pertains to a reference under s. 64(1) of the E.D. Act concerning the deceased's interest in properties allotted to his sons under a partition deed. The deceased, Sethuraman Pillai, was allotted specific house properties in the partition deed while his sons were allotted other properties. The deceased had the right to collect rental income from certain houses for his lifetime as per the deed. The estate duty assessment was disputed as the Asst. CED included the value of properties in the assessment, considering the deceased had an interest in the houses. The Appellate CED and Tribunal upheld the assessment, leading to the reference question on whether the deceased had an interest in the properties that ceased on his death, resulting in a benefit to his sons.

The key issue revolved around whether the deceased had an interest in the properties, which ceased on his death, leading to a benefit accruing to his sons. The Tribunal held that the deceased did not have a life interest in the houses, and thus, the amount added to the estate duty assessment was deleted. However, the High Court analyzed the provisions of s. 7 of the E.D. Act, which deem property passing on death where an interest ceases, leading to a benefit. The court noted that the deceased's right to collect rent ceased on his death, resulting in a benefit to his sons, as they could then collect the rent.

The court rejected arguments that the properties were already allotted to the sons and that only accumulated rent passed on the deceased's death. It emphasized that the deceased's right to collect rent was integral to the property's value, and his interest in the property ceased on his death, leading to a passing of property under s. 7. The court distinguished this case from precedents where interest did not pass on death, emphasizing the tangible association with the property in the present case due to the right to collect rent.

The court referred to previous judgments, such as CED v. R. Kanakasabai, Manian Natesan v. CED, and CED v. Jameela Begum, to support its interpretation of s. 7. These cases established that a right to income or residence in a property could constitute an interest in the property passing on death. The court held in favor of the revenue, affirming the estate duty assessment, as the deceased's right to collect rent constituted an interest in the property that passed on his death, resulting in a benefit to his sons.