1985 (7) TMI 140 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of commission amount in the property passing on death.
2. Deceased's interest in the properties of a smaller Hindu Undivided Family (HUF).
3. Deceased's share in the estate of a bigger HUF.
4. Deduction for maintenance of the widow from the value of HUF properties.
5. Valuation of equity shares of Hico Products Ltd. considering depreciation due to the death of the deceased.

Issue-wise Detailed Analysis:

1. Inclusion of Commission Amount in the Property Passing on Death:

The first ground concerned the inclusion of Rs. 52,500, which was the commission payable to the deceased. The accountable person included Rs. 45,000 in the return but excluded Rs. 7,500, arguing that it was not due on the date of death and became due at the end of the accounting year. The Assistant Controller included the Rs. 7,500 in the property passing on death. The Controller (Appeals) held that commission became payable as soon as services were rendered, regardless of subsequent quantification. The Tribunal agreed, stating, "The right to receive commission constitutes property in praesenti although the commission is to be quantified and to be actually received on a future date." Hence, the entire amount of Rs. 52,500 was included in the property passing on death.

2. Deceased's Interest in the Properties of a Smaller HUF:

The second issue was whether the deceased's interest in the properties of a smaller HUF, where he was the sole surviving coparcener, should be fully included. The Tribunal referenced the Allahabad High Court decision in CED v. Smt. Kalawati Devi, stating, "the entire property passed on the death of the deceased when that property is received on partition from bigger-HUF by the deceased having no son but only wife and daughter." Thus, the Tribunal rejected the accountable person's argument that only half of the property should pass on the death of the deceased.

3. Deceased's Share in the Estate of a Bigger HUF:

The third ground involved the deceased's one-half coparcenary share in the estate of a bigger HUF. The accountable person argued that only one-fourth share should pass on death. The Tribunal rejected this argument, noting that the wife of the deceased had no share in the property on the date of death, referencing the principle that a wife cannot demand partition but is entitled to a share if a partition occurs between her husband and his son. The Tribunal concluded, "the principle laid down in that decision would not be applicable in the present case where the deceased was sole surviving coparcener."

4. Deduction for Maintenance of the Widow from the Value of HUF Properties:

The fourth issue was whether a deduction should be made for the widow's maintenance from the value of the HUF properties. The Tribunal cited Hindu law, stating, "The maintenance of the wife by her husband is a matter of personal obligation... independent of the possession by the husband of any property." The Tribunal found no charge on the property for the widow's maintenance at the time of the deceased's death and rejected the claim for deduction.

5. Valuation of Equity Shares of Hico Products Ltd.:

The fifth ground concerned the valuation of equity shares of Hico Products Ltd., considering depreciation due to the deceased's death. The accountable person argued that the stock exchange quotations did not reflect the real value of the shares, which depreciated due to the deceased's death. The Tribunal noted that the Controller (Appeals) ignored the proviso to section 36(2) of the Act, which states that depreciation due to death should be considered. The Tribunal concluded that the matter required further consideration and remanded it to the Controller (Appeals) for re-evaluation, stating, "if it is proved to his satisfaction that the value had so depreciated that depreciation shall be taken into account and the price shall be estimated accordingly."

Conclusion:

The appeal was partly allowed. The Tribunal upheld the inclusion of the commission amount and the full interest in the properties of both smaller and bigger HUFs. It rejected the deduction for the widow's maintenance but remanded the issue of share valuation back to the Controller (Appeals) for reconsideration of depreciation due to the deceased's death.