1981 (4) TMI 95 - SC - Indian Laws

Whether under s. 52 of the Estate Duty Act, 1953 the Central Govt. is bound to accept in satisfaction of the whole or any part of the duty payable under the Act at such price as may be agreed upon between the Central Govt. and the person accountable for estate duty any property passing on the death of the deceased when an application is made for that purpose by such person? Held that - In the instant case, the High Court was, however, right in holding that it had not been shown that the competent authority had properly exercised its discretion. In the counter-affidavit filed by the Asst. Controller, some reasons were given in support of the decision of the Board. That counter-affidavit is of no use, for, the deponent could not speak on behalf of the Central Govt. or the Board. In the counter-affidavit of Balbir Singh, Secretary, CBDT and Deputy Secretary to the Govt. of India, two principal grounds were mentioned for rejecting the offer-one, that the Central Govt. was not bound to accept the offer and two, that it had been shown that the cash in hand, cash at bank, book debts, business profits, rent and share of the deceased in the firm of Ramnarain Lal Beni Madho amounted to ₹ 4,57,462 which amount was more than sufficient to pay the entire estate duty demand . On the other hand, the respondent contended in his reply-affidavit that he had no liquid cash to to pay the estate duty as it had been invested in business. But there appears to have been no further probe into the question. It is also obvious that the Board proceeded on the assumption that its discretion was unfettered even by considerations relevant to administrative law. In these circumstances, we feel that there was no proper exercise of the discretion by the Board.

Summary

Issues Involved:
1. Interpretation of Section 52 of the Estate Duty Act, 1953.
2. Whether the Central Government is bound to accept property in satisfaction of estate duty.
3. Proper exercise of administrative discretion by the Central Government.

Issue-wise Detailed Analysis:

1. Interpretation of Section 52 of the Estate Duty Act, 1953:
The main question was whether under Section 52 of the Estate Duty Act, 1953, the Central Government is obligated to accept property offered by the accountable person in satisfaction of estate duty. Section 52(1) states that the Central Government "may" accept such property at an agreed price, indicating discretion rather than compulsion. The provision sets forth an alternative mode for recovering estate duty, but it does not impose a mandatory obligation on the government to accept the property offered by the accountable person. The section is permissive and discretionary, allowing the government to decide whether to accept the property based on administrative judgment and relevant considerations.

2. Whether the Central Government is Bound to Accept Property in Satisfaction of Estate Duty:
The accountable person argued that Section 52 conferred a right to offer property in satisfaction of estate duty and imposed a reciprocal obligation on the Central Government to accept it. However, the court held that the language of Section 52 does not compel the Central Government to accept the property. The section is enabling and discretionary, allowing the government to accept or reject the offer based on administrative convenience and practical considerations. The court emphasized that the Act is primarily a fiscal statute aimed at collecting estate duty, not acquiring property. Therefore, the Central Government is not bound to accept the property if it deems it impractical or unnecessary.

3. Proper Exercise of Administrative Discretion by the Central Government:
The court held that even though the power under Section 52 is discretionary, it must be exercised bona fide and in good faith, addressing the matter before it without being influenced by extraneous considerations. The decision should not be arbitrary or capricious. In this case, the High Court found that the Central Government had not properly exercised its discretion, as the reasons provided for rejecting the offer were insufficient and did not demonstrate a proper consideration of the application. The court affirmed the High Court's direction to the Central Government to reconsider the application afresh in accordance with the law, ensuring that the discretion is exercised properly and relevantly.

Conclusion:
The Supreme Court concluded that Section 52 of the Estate Duty Act provides a discretionary power to the Central Government to accept property in satisfaction of estate duty, but it is not mandatory. The government must exercise this discretion in good faith and based on relevant considerations. The appeal was disposed of with a direction to the Central Board of Direct Taxes (CBDT) to reconsider the application afresh, ensuring proper exercise of discretion. No costs were awarded.