1975 (12) TMI 48 - HC - Income Tax

1981 (3) TMI 10 - HC

Issues Involved:

1. Whether the amounts of Rs. 4,63,400, Rs. 1,20,117, and Rs. 2,00,000 lying to the credit of the respective trusts were held on trust by the deceased or were debts due by the deceased.
2. Whether the Tribunal was right in considering the liability of the accountable persons to estate duty under section 22 of the Estate Duty Act.
3. Whether the amounts lying to the credit of the accounts of the trusts could be included in the chargeable estate under section 22.
4. Whether the Controller could rely on section 10 of the Estate Duty Act for the purpose of chargeability to duty of the sums lying to the credit of the trusts.
5. Whether section 10 of the Estate Duty Act applies to dispositions made by way of trust without consideration.
6. Whether the sums lying to the credit of the trusts were includible in the estate as properties deemed to pass on death under section 10.
7. Whether the amounts due from the deceased to the trusts were debts liable to abatement under section 46(1)(a) and/or 46(1)(b) of the Estate Duty Act.
8. Whether the amounts lying to the credit of the individual accounts were moneys held by the deceased on trust or were debts due by the deceased.
9. Whether the amounts referred to in question No. 8 are liable to be included in the estate of the deceased under section 10 of the Estate Duty Act.
10. Whether the amounts in the individual accounts were liable to abatement under section 46(1)(a) of the Estate Duty Act.
11. Whether the sums being gifts received were liable to abatement under section 46(1)(b) of the Estate Duty Act.
12. Whether the sums withdrawn within two years of the death of the deceased were liable to abatement under section 46(2) of the Estate Duty Act.

Issue-wise Detailed Analysis:

1. Trust or Debt:
The amounts of Rs. 4,63,400, Rs. 1,20,117, and Rs. 2,00,000 lying to the credit of Monie A. Baria Trust, Rohinton Baria Trust, and Piloo A. Baria Trust, respectively, were held on trust by the deceased and were not debts due by the deceased. The deceased was found to have mixed the trust amounts with his own funds and utilized them for his business, but this did not change the nature of these amounts from trust to debts.

2. Tribunal's Consideration of Section 22:
It was affirmed that the Tribunal was right in considering the liability of the accountable persons to estate duty under section 22 of the Estate Duty Act, as all necessary facts were already on record.

3. Inclusion under Section 22:
The amounts lying to the credit of the accounts of the trusts could not be included in the chargeable estate under section 22, as section 22 is not a charging section but an excepting provision.

4. Reliance on Section 10:
It was held that it was open to the Controller to rely on section 10 of the Estate Duty Act for the purpose of chargeability to duty of the sums lying to the credit of the trusts, as all necessary facts were on record.

5. Applicability of Section 10:
Section 10 does not apply to dispositions made without consideration by way of trust, except in the case of trusts falling under section 27 as amended by Act 33 of 1958, which came into force from 1st July, 1960.

6. Inclusion under Section 10:
On the assumption that section 10 applies to dispositions made by way of trust without consideration, the amounts of Rs. 3,60,000, Rs. 50,001, and Rs. 2,00,000 lying to the credit of Monie A. Baria Trust, Rohinton Baria Trust, and Piloo A. Baria Trust, respectively, would be includible in the estate as properties deemed to pass on death under section 10. The balance of Rs. 1,03,400 in Monie A. Baria Trust and Rs. 70,116 in Rohinton Baria Trust would not be includible.

7. Debts Liable to Abatement:
Since the amounts were held on trust, it was unnecessary to decide if they were debts liable to abatement under section 46(1)(a) and/or 46(1)(b).

8. Individual Accounts:
The amounts lying to the credit of the individual accounts of Monie A. Baria, Minoo Antia, and Laila Antia were debts due by the deceased to the respective parties. For Piloo Antia and Khorshed Billimoria, it depended on whether the amounts were received and re-deposited by them or credited with their consent. If not, the amounts would be held on trust.

9. Inclusion of Individual Accounts under Section 10:
If the amounts in the individual accounts of Piloo and Khorshed were held on trust, they would not be includible in the estate under section 10.

10. Abatement under Section 46(1)(a):
For Monie, Rs. 81,078 was liable to abatement under section 46(1)(a), and Rs. 12,494 under section 46(2). For Piloo, Rs. 34,067 and Rs. 1,07,001 were liable to abatement under sections 46(1)(a) and 46(2), respectively, if the amounts were debts. For Khorshed, Rs. 2,89,257 was liable to abatement under section 46(1)(a) if the amount was a debt.

11. Abatement of Gifts:
The sums of Rs. 77,948, Rs. 1,25,000, and Rs. 1,25,000 being gifts received by Khorshed, Minoo, and Laila, respectively, were not liable to abatement under section 46(1)(b).

12. Abatement of Withdrawn Sums:
The sums of Rs. 12,494 withdrawn by Monie and Rs. 1,07,001 withdrawn by Piloo within two years of the death of the deceased were liable to abatement under section 46(2).

Costs:
The Controller and the accountable persons were directed to bear their respective costs of the reference due to the nature of the case and the varying arguments advanced at different stages.

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