1970 (7) TMI 6 - HC - Income Tax

Estate Duty Act, 1953 - deceased had executed a deed of transfer in respect of property conveying the same to his son -son providing for an annuity to father - held that since applicant is a accountable person, applicant is liable for estate duty on that property

Issues Involved:
1. Whether the share in Burlington Hotel and Hakman's Hotel taken by the applicant under the decree dated September 1, 1950, was correctly treated as property deemed to pass on the death of the deceased.
2. Whether the transaction evidenced by the deed of transfer dated September 11, 1936, amounted to a gift under the Estate Duty Act, 1953.
3. Applicability of Section 10 of the Estate Duty Act to the transaction.
4. Accountability of the applicant for estate duty on her share of the property.

Detailed Analysis:

1. Whether the share in Burlington Hotel and Hakman's Hotel taken by the applicant under the decree dated September 1, 1950, was correctly treated as property deemed to pass on the death of the deceased:

The court examined whether the share in the properties taken by the applicant under the decree was correctly treated as property deemed to pass on the death of the deceased. The properties originally belonged to the deceased, who transferred them to his son in 1936, reserving an annuity of Rs. 10,000 per year for himself. The son, Sultan Mohammad, died in 1948, and the applicant, his widow, inherited a 1/4th share in the properties. The Assistant Controller, Estate Duty, held that the transfer amounted to a gift under Section 7 of the Act and issued a notice of demand to the applicant for estate duty on her share. The Board of Revenue affirmed this assessment, leading to the present reference.

2. Whether the transaction evidenced by the deed of transfer dated September 11, 1936, amounted to a gift under the Estate Duty Act, 1953:

The applicant argued that the 1936 transaction did not amount to a gift as defined under Section 122 of the Transfer of Property Act because it was not without consideration. The deed mentioned consideration in the form of services, obedience, love and affection, and an annuity of Rs. 10,000 per year. The court noted that the transaction did not conform to the definition of a gift under Section 122 of the Transfer of Property Act because it involved substantial pecuniary consideration.

3. Applicability of Section 10 of the Estate Duty Act to the transaction:

Section 27 of the Estate Duty Act was considered, which deals with transfers involving annuities or life interests. The court held that the transaction would not amount to a transfer for consideration under Section 27 and would be considered a gift for estate duty purposes. The court further referred to Section 10, which states that property taken under any gift shall be deemed to pass on the donor's death if bona fide possession and enjoyment were not retained to the exclusion of the donor. Since the deceased retained an annuity, the conditions of Section 10 were met, making the property liable to estate duty.

4. Accountability of the applicant for estate duty on her share of the property:

The applicant contended that she should not be accountable for estate duty as she inherited the property from her husband, not directly from the deceased. However, Section 53(1)(c) of the Act makes every person in whom any interest in the property is vested by alienation or derivative title accountable for estate duty. The court held that the applicant, having inherited the property, was accountable for the estate duty on her 1/4th share. The court referred to English law and the decision in George Da Costa v. Controller of Estate Duty, which supported the view that estate duty is payable on property deemed to pass on the death of the deceased.

Conclusion:
The court affirmed the view taken by the Board of Revenue that the applicant is an accountable person liable to pay duty on her 1/4th share of the properties. The question referred by the Board was answered in the affirmative and against the applicant. The respondent was awarded costs of Rs.200.

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