1989 (11) TMI 63 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of Rs. 50,000 compensation in the principal value of the deceased's estate.
2. Applicability of Section 1A of the Fatal Accidents Act, 1855 and Section 110A of the Motor Vehicles Act, 1939.
3. Inclusion of Rs. 10,000 accident benefit from the insurance company in the estate duty.

Issue-wise Detailed Analysis:

1. Inclusion of Rs. 50,000 Compensation in the Principal Value of the Deceased's Estate:
The Appellate Controller of Estate Duty confirmed the inclusion of Rs. 50,000 received by the legal representatives as compensation for the deceased's death in the principal value of the estate. The Assistant Controller of Estate Duty (ACED) argued that under Section 1A of the Fatal Accidents Act, 1855, the deceased had a right to maintain an action for compensation for injuries sustained, which was inherited by his legal representatives. However, the tribunal found this view incorrect, stating that the compensation for death could not have been the property of the deceased and thus was not dutiable. The tribunal cited the Supreme Court decision in M.Ct. Muthiah v. CED [1986] 161 ITR 768, which held that compensation arising from the death of a person is not includible in the estate of the deceased for estate duty purposes.

2. Applicability of Section 1A of the Fatal Accidents Act, 1855 and Section 110A of the Motor Vehicles Act, 1939:
The tribunal clarified that the law applicable to claims for compensation for death is the common law of torts as modified by statutes in India, specifically the Fatal Accidents Act, 1855, and the Motor Vehicles Act, 1939. Section 1A of the Fatal Accidents Act allows for compensation claims by dependents of the deceased, while Section 110A of the Motor Vehicles Act provides a more comprehensive and self-contained code for such claims. The tribunal emphasized that the right to claim compensation for death under Section 110A(1)(b) of the Motor Vehicles Act is not inherited but arises independently for the legal representatives upon the death of the deceased. Therefore, this right could not have been the property of the deceased.

3. Inclusion of Rs. 10,000 Accident Benefit from the Insurance Company in the Estate Duty:
The ACED included Rs. 10,000 received as accident benefit from the insurance company in the estate duty, relying on the Gujarat High Court decision in Bharat Kumar Manilal Dalal v. CED [1975] 99 ITR 179. However, this decision was overruled by the Supreme Court in M.Ct. Muthiah's case, which held that compensation received by heirs for the death of a person does not form part of the deceased's estate. The tribunal noted that the inclusion of the Rs. 10,000 accident benefit was contrary to the law as declared by the Supreme Court and rectified this mistake, emphasizing its duty to correct such errors to prevent avoidable loss to a party.

Conclusion:
The tribunal allowed the appeal, ruling that the compensation amount of Rs. 50,000 and the accident benefit amount of Rs. 10,000 should not be subjected to estate duty. The tribunal's decision was based on the legal principle that compensation for death is not part of the deceased's estate and the Supreme Court's ruling in M.Ct. Muthiah's case, which clarified that such compensation is not dutiable under the Estate Duty Act.