1993 (1) TMI 138 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of Rs. 55,000 under Section 9 of the Estate Duty (ED) Act, 1963.
2. Valuation of the motor car at Rs. 20,000.
3. Disallowance of miscellaneous liability of Rs. 1,000.

Issue-Wise Detailed Analysis:

1. Inclusion of Rs. 55,000 under Section 9 of the ED Act, 1963:
The accountable person contested the inclusion of Rs. 55,000, arguing that the dissolution of the trust and transfer of the trust fund to the granddaughter did not amount to a gift or disposition within two years of death under Section 9 read with Section 22 of the ED Act. The facts revealed that late Shri Vithal Krishna Joshi created a trust for his granddaughter, Miss Nayana, and the trustees decided to dissolve the trust and transfer the corpus to her before the stipulated time due to the advanced age and declining health of the settlor and his wife.

The Assistant Controller of Estate Duty (Asstt. CED) included Rs. 55,000 in the estate's principal value, deeming it a gift made within two years prior to the deceased's death. The Appellate Controller of Estate Duty (Appellate CED) upheld this decision, concluding that the transfer was a gift by the settlor, influenced by his anticipation of death.

The Tribunal agreed with the Revenue's position, stating that the creation and premature dissolution of the trust were part of a tax planning strategy to avoid estate duty. The Tribunal emphasized that the trust was revoked by the author himself, under the cloak of a resolution passed by the trustees, and the gift was not bona fide as it was made within two years of the settlor's death. Therefore, the inclusion of Rs. 55,000 under Section 9 of the ED Act was justified.

2. Valuation of the Motor Car at Rs. 20,000:
The accountable person returned the car's value at Rs. 8,000, claiming repair expenses of Rs. 16,720, but did not produce bills. The Asstt. CED valued the car at Rs. 20,000, considering the repairs added value to the car. The Appellate Controller confirmed this valuation, noting that the repair expenses were at least Rs. 9,000.

The Tribunal upheld the car's valuation at Rs. 20,000 but allowed the claim of Rs. 9,000 as a liability. It reasoned that the car's appreciated value due to repairs justified the liability claim, and the appreciation depended on the incurred expenses reflected in the unsettled bill.

3. Disallowance of Miscellaneous Liability of Rs. 1,000:
The accountable person claimed Rs. 1,000 for petty bills related to newspapers, groceries, household, and sundry expenses. The Asstt. CED rejected the claim for lack of bills, and the Appellate Controller confirmed this decision.

The Tribunal also confirmed the disallowance, noting that no specific arguments or evidence were provided to support the claim. The burden of proving the liability was on the accountable person, which was not discharged.

Conclusion:
The appeal was partly allowed. The inclusion of Rs. 55,000 under Section 9 of the ED Act was upheld, the motor car's valuation at Rs. 20,000 was confirmed with the allowance of Rs. 9,000 as a liability, and the disallowance of the miscellaneous liability of Rs. 1,000 was affirmed.