1978 (1) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Proportion of tax liability deduction.
2. Valuation of jewelry.
3. Deletion of Rs. 1,48,959 from the estate's principal value.
4. Inclusion of life insurance policies' value in the estate.

Detailed Analysis:

1. Proportion of Tax Liability Deduction:
The accountable person contended that Premkumari Devi should be given the benefit of deducting a higher proportion of tax liability, arguing she received more than a 1/21 share due to additional jewelry and valuables from Sir Seth Hukumchand and his wife. The Tribunal allowed only a 1/21 share deduction. The court held that the deceased received more than a 1/21 share due to the additional jewelry and valuables, thus entitling her to a larger share of the tax liability deduction. Consequently, the court answered that there was no justification in allowing only a 1/21 share of tax liability.

2. Valuation of Jewelry:
The accountable person valued the jewelry at Rs. 7,45,820 based on an approved valuer's assessment for wealth-tax purposes, which was accepted for wealth-tax purposes. The Deputy Controller of Estate Duty (Dy. CED) estimated the value at Rs. 8,50,000, citing sales of two jewelry items post-death for Rs. 6,31,000. The court held that the valuation should reflect the market price at the time of the deceased's death, as per Section 36(1) of the Estate Duty Act. The court noted that the appreciation in jewelry prices between the death and the sale should be considered, making the approved valuer's estimate reasonable. Thus, the court answered in the negative, indicating that using the subsequent sale as a basis for valuation without accounting for appreciation was unjustified.

3. Deletion of Rs. 1,48,959 from the Estate's Principal Value:
The Dy. CED included Rs. 1,48,959, the difference between the one-seventh share the deceased was entitled to and what she received, in the estate's principal value. The Tribunal deleted this amount, and the court upheld this decision. The court referenced Supreme Court rulings in CGT v. N. S. Getti Chettiar and CED v. Kancharla Kesava Rao, which clarified that partition in a Hindu Undivided Family (HUF) is not a "disposition" or "gift" and thus cannot be added to the estate's value. Therefore, the court answered the first question in the affirmative and the second in the negative.

4. Inclusion of Life Insurance Policies' Value in the Estate:
The Dy. CED included the total value of nine life insurance policies (Rs. 3,92,886) in the estate, deeming them to pass on death under Section 14 of the Estate Duty Act. The Appellate Controller included only one-seventh of the value of five policies (Rs. 1,79,810) as they were paid from HUF funds. The Tribunal excluded this amount. The court held that since the policies were maintained by HUF funds, Section 14 did not apply, referencing decisions in Seethalakshmi Ammal v. CED and CED v. Smt. Y. Annapurnamba. The court concluded that Section 14(1) of the Estate Duty Act was not applicable, answering the third question in the affirmative.

Conclusion:
The court ruled in favor of the accountable person on all issues, emphasizing the proper interpretation of tax liabilities, valuation of assets, and the application of legal provisions concerning estate duty. The parties were directed to bear their own costs in both references.