1986 (7) TMI 149 - AT - Income Tax

Summary

Issues:
1. Valuation of property passing on death based on surplus income from sub-tenancy.
2. Determining whether the deceased held any asset and if it constituted property passing on death.
3. Calculation of the value of the deceased's right in the premises for estate duty assessment.

Analysis:
1. The judgment concerns the valuation of property passing on death, specifically focusing on the surplus income generated from a sub-tenancy arrangement. The deceased, along with a co-tenant, sublet premises to a company, resulting in a surplus of Rs. 3,381 per month. The Assistant Controller valued this surplus at Rs. 1,16,570, differing from the accountable person's valuation of Rs. 20,332. The Controller (Appeals) upheld the Assistant Controller's valuation, leading to an appeal. The Tribunal confirmed the valuation, considering the length of the period for which the surplus was available and the certainty of receiving the amount, based on permissions obtained. The Tribunal rejected the alternate submission for valuation and upheld the Assistant Controller's computation based on actual income from the sub-tenant.

2. The issue of whether the deceased held any asset that constituted property passing on death was raised. The accountable person argued that the deceased, as a monthly tenant, did not hold any asset despite the income generated from sub-tenancy. However, the Tribunal rejected this argument, stating that the tenancy right, protected under Rent Control Act and with the landlord's consent for subletting, constituted property passing on death. The Tribunal cited the wide interpretation of the term 'property' and previous legal precedents to support this conclusion.

3. The Tribunal addressed the calculation of the value of the deceased's right in the premises for estate duty assessment. It determined that the capitalization of the net income from the deceased's right would represent the value of the property passing on death. The Tribunal disagreed with the submission to use standard rent for valuation, emphasizing that the actual income from the sub-tenant should be the basis for computing the surplus for capitalization. Legal precedents were cited to support this approach, and the Tribunal confirmed the Assistant Controller's computation as appropriate, rejecting the alternate valuation method proposed by the accountable person.