1972 (10) TMI 12 - HC - Income Tax

Estate Duty Act, 1953 - petitioner is the widow - Whether inclusion of lineal descendants share in the property passing on the death of coparcener of Mitakshara family is beyond the charging section of Estate Duty Act - whether it violates equality clause and whether it is unconstitutional in respect of article 14 of the Constitution

Issues Involved:
1. Aggregation of lineal descendant's share under Section 34(1)(c) of the Estate Duty Act, 1953.
2. Constitutionality of Section 34(1)(c) under Articles 14 and 19(1)(f) of the Constitution of India.

Issue-wise Detailed Analysis:

1. Aggregation of Lineal Descendant's Share under Section 34(1)(c) of the Estate Duty Act, 1953:
The petitioner, the widow of the deceased, contested the aggregation of the minor son's share with the deceased's share in the joint family properties. The Assistant Controller of Estate Duty determined the value of the deceased's share at Rs. 1,24,859 and added the minor son's share of Rs. 1,26,067, resulting in a principal estate value of Rs. 2,50,926. The estate duty was fixed at Rs. 19,638.90, with a rebate of Rs. 9,866.72, making the payable duty Rs. 9,772.18. The petitioner argued that the value should be Rs. 1,24,859, as the aggregation under Section 34(1)(c) was illegal.

2. Constitutionality of Section 34(1)(c) under Articles 14 and 19(1)(f) of the Constitution of India:
The petitioner contended that Section 34(1)(c) was unconstitutional, violating Articles 14 and 19(1)(f) of the Constitution. The petitioner argued that the provision discriminates against coparceners with lineal descendants, imposing a higher tax burden, thus violating the right to equality and property. The revenue defended the provision, stating it made a reasonable classification aimed at equitable tax distribution among different economic units, aligning with the Act's objective.

The court examined Section 34(1)(c) in light of other provisions of the Act. It noted that Section 2(15) defines "property," and Section 2(16) defines "property passing on the death." Sections 6 to 16 list properties deemed to pass on death, with Section 7(1) specifically addressing coparcenary interests. Section 39 deals with valuing coparcenary interests ceasing on death. Section 34(1)(c) aggregates the interests of lineal descendants with the deceased's coparcenary interest for rate determination.

The court referred to the case of Ramanathan Chettiar v. Assistant Controller of Estate Duty, where Section 34(1)(c) was upheld as it aggregated benefits accrued to lineal descendants. However, the court in this case considered the broader interpretation adopted by the revenue, which included the lineal descendants' shares in the estate for rate purposes.

The court found that Section 34(1)(c) imposed a higher tax burden on coparceners with lineal descendants, which was discriminatory. The classification lacked a reasonable nexus with the Act's objective of taxing property passing on death. The court noted that the charging section (Section 5) did not include lineal descendants' shares, and Section 34(1)(c) could not expand the charging section's scope. The court declared Section 34(1)(c) discriminatory and violative of Article 14, as it treated coparceners with lineal descendants differently without a rational basis.

The court did not address the argument under Article 19(1)(f) as no arguments were presented during the hearing.

Conclusion:
The court allowed the writ petition, declaring Section 34(1)(c) of the Estate Duty Act, 1953, as discriminatory and violative of Article 14 of the Constitution. The respondent was directed to reassess the estate duty without reference to Section 34(1)(c). The petitioner was awarded costs of Rs. 250.

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