1981 (10) TMI 89 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of the value of 7.86 acres of agricultural land in the estate of the deceased.
2. Application of Sections 7 and 12 of the Estate Duty Act.
3. Adverse possession and its effect on the life interest of the deceased.
4. Validity of the settlement deed and subsequent transactions.

Issue-wise Detailed Analysis:

1. Inclusion of the Value of 7.86 Acres of Agricultural Land in the Estate of the Deceased:
The primary issue was whether the value of 7.86 acres of agricultural land should be included in the estate of the deceased, Smt. Talasila Lakshmamma, who expired on 22nd May, 1977. The Accountable person argued that the land was gifted to the deceased's great-grandsons in 1962, and thus, it should not be included in her estate. The Assistant Controller of Estate Duty (Asst. CED) included the value of the land, arguing that there was no documentary evidence to support the claim that the deceased had relinquished her life interest in the property.

2. Application of Sections 7 and 12 of the Estate Duty Act:
The appellant contended that the Assistant Controller was not justified in including the value of the property under Section 12 of the Estate Duty Act, as the settlor had surrendered her right and interest in the property before her death. The Appellate Controller, however, applied Sections 7(1) and 12(1) of the Act, concluding that the property passed to the great-grandsons only after the death of the settlor, and thus, it should be included in her estate.

3. Adverse Possession and Its Effect on the Life Interest of the Deceased:
The appellant argued that the property was in the enjoyment of the beneficiaries to the entire exclusion of the settlor, and thus, the provisions of Section 12 or any other provision of the Act did not apply. The Tribunal examined the evidence, including affidavits and certificates, and concluded that the donees had perfected their title to the property through adverse possession for over 12 years prior to the death of the deceased. Therefore, the life interest of the deceased was extinguished by adverse possession, and the property did not pass on her death.

4. Validity of the Settlement Deed and Subsequent Transactions:
The Tribunal reviewed the settlement deed dated 26th March, 1962, and subsequent transactions, including the partition of the property among the donees and the gift deeds executed in favor of Swarnalatha. The Tribunal found that the donees had been in possession and enjoyment of the property, meeting educational expenses and paying land revenue, which supported the claim of adverse possession. The Tribunal also considered legal definitions and precedents regarding relinquishment and surrender, concluding that the settlor had effectively relinquished her life interest in the property.

Conclusion:
The Tribunal held that the donees had acquired full ownership of the property through adverse possession, and the deceased was excluded from any benefits in the property for more than two years prior to her death. Thus, there was no passing of property on the date of the deceased's death, and the inclusion of Rs. 78,600 in the estate was not justified. The appeal was allowed, and the orders of the lower authorities were set aside.