1971 (12) TMI 23 - HC - Income Tax

Estate Duty Act, 1953 - Whether, on the facts and in the circumstances of the case, the inclusion of the sum of Rs. 77,238 on account of the value of shares held by the deceased in the name of his wife, in the principle value of the estate passing on his death, is justified in law - such properties passed on his death and their value will be liable to duty under section 5(1) of Estate Duty Act

Summary

Issues: Assessment of estate duty on shares held in the name of deceased's wife, legal implications of benami transaction, interpretation of sections 5(1) and 6 of the Estate Duty Act.

Analysis:
The judgment pertains to the assessment of estate duty on shares held in the name of the deceased's wife. The deceased, S. H. Chawla, passed away leaving behind his son and wife. The Appellate Tribunal was tasked with determining whether the inclusion of the shares' value in the estate of the deceased was justified under the Estate Duty Act. The accountable person argued that the shares belonged to the wife, Sushila Chawla, despite the money for purchasing them coming from the deceased's pocket. The Tribunal found that the shares were held benami for the deceased's benefit, establishing him as the real owner of the shares.

The judgment delves into the legal concept of a benami transaction, where the benamidar holds nominal title to the property while the real title rests with another. The court emphasized that in benami transactions, the real title prevails over the nominal title, with the benamidar acting as a trustee for the true owner. It was established that the deceased held the real title to the shares, while the wife held only nominal title, rendering the deceased as the actual owner of the shares.

The court interpreted sections 5(1) and 6 of the Estate Duty Act to determine the taxability of the shares in question. Section 5(1) imposes estate duty on property passing on the death of a person, with section 2(16) defining the scope of "property passing on the death." The judgment clarified that properties owned by a person typically pass on their death, making the shares owned by the deceased taxable under section 5(1). The accountable person's argument regarding the deceased's competency to dispose of the shares, based on section 6, was dismissed by the court.

Furthermore, the court elucidated the purpose of section 6, which deems property competent for disposal by the deceased to pass on their death, expanding the scope of estate duty. The judgment distinguished previous cases where property held benami was not deemed to pass on the death, emphasizing the specific circumstances and legal interpretations involved. Ultimately, the court concluded that the shares held by the deceased in the name of his wife were rightfully included in the estate's principal value passing on his death, affirming the decision of the Assistant Controller of Estate Duty.