1968 (12) TMI 8 - HC - Income Tax

Estate Duty Act, 1953 - Whether the Board were correct in holding that the sum standing in the names of the daughters-in-law of the deceased, could not be deducted in computing the principal value of the estate of the deceased - Held, yes

Summary

Issues Involved:
1. Ownership of the properties included in the estate of the deceased.
2. Deductibility of the sum of Rs. 26,436 standing in the names of the daughters-in-law in computing the principal value of the estate of the deceased.

Detailed Analysis:

Issue 1: Ownership of the Properties Included in the Estate
The primary question was whether the deceased, Sukhdeo, was the absolute owner of the several properties included in the estate. The Central Board of Revenue found that Sukhdeo started the business independently, and all the properties were acquired by him from the profits of that business. The partition deed of 1941 (annexure "C") explicitly mentioned that the properties were solely owned by Sukhdeo and could be disposed of by him at his discretion. The court held that the properties were the individual property of Sukhdeo, despite the assistance of his sons in the business. The court emphasized that under Hindu law, there is no presumption that a business started by a family member is a joint family business, even if the member is the father or the karta of the family. This principle was supported by the Supreme Court's decision in Chattanatha Karayalar v. Ramachandra Iyer.

The court also considered the argument that the properties became joint family property due to the sons' contributions. However, it concluded that mere assistance by the sons does not convert the father's separate property into joint family property. The doctrine of blending requires a clear intention to abandon separate rights and throw the property into the common stock, which was not demonstrated in this case. The court noted that Sukhdeo's actions, such as associating his sons' names in mortgage deeds and filing income tax returns as joint family income, did not sufficiently indicate an intention to treat the property as joint family property. The court referred to cases like Kailashi v. Shankar and Lakkireddi Chinna Venkata Reddi v. Lakkireddi Lakshmama to support this view.

Issue 2: Deductibility of the Sum of Rs. 26,436
The second question was whether the sum of Rs. 26,436 standing in the names of the daughters-in-law could be deducted in computing the principal value of the estate. The Central Board of Revenue held that this amount could not be deducted under section 46(1) of the Estate Duty Act. The court agreed with this interpretation, stating that even if the amount represented debts owed to the daughters-in-law, it could not be deducted because the debts were incurred to persons to whom Sukhdeo had made gifts of Rs. 20,000. Section 46(1) specifies that any allowance for a debt incurred by the deceased is subject to abatement if the consideration given for the debt consisted of property derived from the deceased. The court concluded that the Central Board of Revenue correctly applied this provision.

Conclusion:
The court answered both questions in the affirmative, upholding the Central Board of Revenue's findings that Sukhdeo was the absolute owner of the properties and that the sum of Rs. 26,436 could not be deducted in computing the estate's principal value. No order as to costs was made.