1985 (9) TMI 116 - AT - Income Tax

Issues Involved:
1. Valuation of immovable property.
2. Inclusion of HUF assets in the estate.
3. Inclusion of lineal descendants' share.
4. Valuation of royalty rights.
5. Valuation of jewellery and silverware.
6. Valuation of shares in a private company.

Detailed Analysis:

1. Valuation of Immovable Property:
The deceased owned a double-storeyed residential house in New Delhi and a residential flat in Bombay. The valuer for the assessee estimated the New Delhi property at Rs. 2,34,500, while the Assistant Controller of Estate Duty (ACED) valued it at Rs. 3,12,900 based on the wealth-tax assessment. The Appellate Controller accepted the valuation of Rs. 2,34,500, noting it was capitalized based on rent. For the Bombay flat, the accountable person valued it at Rs. 1,63,546, while the ACED valued it at Rs. 3,28,968. The Appellate Controller confirmed this valuation. The Tribunal directed that both properties be valued under Rule 1BB of the Wealth-tax Rules, following the precedent set in Jehangir Mohd Ali Chagla & Anr. vs. M.V. Subrahamanian.

2. Inclusion of HUF Assets in the Estate:
The ACED included 45% of the HUF assets in the estate, arguing that the deceased had impressed his self-acquired assets with the character of HUF. The Appellate Controller held that sections 10 and 13 of the Estate Duty Act did not apply, as the deceased did not retain any benefit in the assets nor made any joint investment. This was supported by the precedent in Goli Eswariah vs. CGT and CED vs. Satyanarayan Babulal Chourasia. The Tribunal upheld this decision, confirming that the entire assets of the HUF were not includible in the estate.

3. Inclusion of Lineal Descendants' Share:
The ACED included the value of the lineal descendants' share at Rs. 1,97,374. The Appellate Controller upheld this inclusion, relying on the constitutional validity of section 34 of the Estate Duty Act as confirmed by various High Courts. The Tribunal also upheld this constitutional validity. However, it directed that only 2/9th share of the lineal descendants, including the deceased's son and grandson, should be aggregated for rate purposes, following the interpretation in Gurupud Khandappa Magdum vs. Hirabai Khandappa Magdum and Kalloomal Tapeswari Prasad (HUF) vs. CIT.

4. Valuation of Royalty Rights:
The deceased had rights in the royalty from a book valued by the accountable person at Rs. 25,000, while the ACED valued it at Rs. 1 lakh. The Appellate Controller accepted the lower valuation without reasons. Considering the royalty received in previous years, the Tribunal valued the royalty rights at Rs. 50,000.

5. Valuation of Jewellery and Silverware:
The accountable person declared the jewellery and silverware at Rs. 18,500 based on previous wealth-tax returns. The Appellate Controller accepted the submission that nothing was found at the time of death, supported by the CWT's order for the assessment year 1975-76. The Tribunal confirmed the deletion of this asset.

6. Valuation of Shares in a Private Company:
The deceased owned shares in Capsulation Services P. Ltd., which the ACED valued at Rs. 26.15 per share using Rule 1D of the Wealth-tax Rules. The Appellate Controller upheld this application. The Tribunal considered the Supreme Court's guidelines in CWT vs. Mahadev Jalan, which preferred the yield method over the break-up method unless the company was ripe for winding up. Despite the revenue's contentions, the Tribunal directed that the shares be valued at Rs. 20 per share based on the financial position of the company and relevant precedents.

Conclusion:
The Tribunal partially allowed both the Revenue's and the assessee's appeals, making specific directions regarding the valuation of properties, inclusion of HUF assets, aggregation of lineal descendants' shares, and valuation of royalties, jewellery, and shares.

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