1970 (2) TMI 13 - HC - Income Tax

Estate Duty Act, 1953 - interest charged on the provisional duty and the recovery proceedings - legallity

Summary

Issues:
Challenge to order for interest payment on provisional duty under section 70 of the Estate Duty Act.
Interpretation of section 70 of the Estate Duty Act regarding the imposition of interest.
Applicability of interest payment when duty is paid in instalments.

Analysis:
The petitioner contested an order demanding interest under section 70 of the Estate Duty Act on a provisional duty amount. The deceased's widow initially submitted an account, leading to a provisional assessment. Despite various reminders and partial payments, the final assessment was made, and the petitioner appealed the decision, resulting in a reduced duty amount. Subsequently, the petitioner paid the outstanding duty in instalments and received a refund. However, a demand for interest was made post full payment, prompting the petitioner to challenge the validity of the interest claim.

The crux of the dispute revolved around the interpretation of section 70 of the Estate Duty Act, which allows for the postponement of duty payment under specific conditions. The petitioner argued that interest could only be imposed after a formal order by the Controller, as per the Act's provisions. Conversely, the revenue contended that interest becomes payable once the duty is quantified, irrespective of the Controller's satisfaction.

Comparative analysis with the UK Finance Act of 1894 revealed similarities in provisions for interest payment on estate duty. However, the absence of a specific provision for interest accrual in the Indian Estate Duty Act, akin to the UK Act, led to a crucial distinction. The court emphasized that interest could only be levied upon a Controller's order under section 70, which was not issued in this case until after full duty payment.

The judgment concluded that the Estate Duty Act, 1953, lacked a mechanism for automatic interest accrual, unlike the UK Finance Act. As no formal order for interest was issued before full duty payment, the demand for interest post-installment payment was deemed invalid. Consequently, the court upheld the petitioner's challenge, quashing the interest order and recovery proceedings, with no costs awarded.

In essence, the court's ruling clarified that interest under the Estate Duty Act is contingent upon a Controller's order under section 70, necessitating explicit approval before interest can be imposed. The judgment underscored the importance of procedural compliance and statutory interpretation in determining the validity of interest claims on estate duty payments.