1972 (10) TMI 26 - HC - Income Tax

Estate Duty Act, 1953 - Whether foreign movable property is liable to estate duty in India - Whether the share in a firm holding immovable property is a movable property

Summary

Issues Involved:
1. Jurisdiction and legality of including foreign property in the estate duty assessment.
2. Discrimination and violation of Article 14 of the Constitution.
3. Excessive delegation of legislative power to the Central Board.
4. Validity of Rules 7(c) and 8(h) of the Estate Duty Rules, 1953.

Analysis of Judgment:

1. Jurisdiction and Legality of Including Foreign Property:
The petitioner argued that the deceased's interest in the foreign firm should be treated as "foreign property" and excluded from charge under the Estate Duty Act, 1953. The court examined Section 5 and the definition of "property" in Section 2(15) of the Act, concluding that Section 5 covers all properties, whether situated in India or abroad. Section 21(1) provides exemptions for foreign immovable property and foreign movable property if the deceased was not domiciled in India at the time of death. The court rejected the petitioner's contention that Section 5 should be limited to properties in India, stating that Parliament has the competence to legislate on properties situated outside India if there is a sufficient nexus, such as the domicile of the deceased.

2. Discrimination and Violation of Article 14:
The petitioner contended that Section 21 discriminates between foreign movable and immovable properties based on the domicile of the deceased, violating Article 14 of the Constitution. The court held that the classification between movable and immovable properties situated outside India is valid and does not contravene Article 14. The court emphasized that Parliament has the latitude to select properties for taxation and exemption. The court also noted that the principles of private international law support the imposition of estate duty on movable property based on the domicile of the deceased.

3. Excessive Delegation of Legislative Power:
The petitioner argued that Sections 21(2) and 85(1), which empower the Central Board to frame rules for determining the nature and location of assets, constitute an excessive delegation of legislative power. The court disagreed, stating that the nature and locality of assets can vary, and it is reasonable for the statute to leave these determinations to be made through rules. The court found that the rules framed by the Central Board are consistent with general law and international principles, and therefore, do not constitute excessive delegation or arbitrariness.

4. Validity of Rules 7(c) and 8(h):
The petitioner challenged Rules 7(c) and 8(h) of the Estate Duty Rules, 1953. Rule 7(c) treats a partner's share in a partnership as movable property, even if the firm owns immovable property. Rule 8(h) deems the share to be situated where the principal place of business is located. The court upheld these rules, citing Supreme Court precedents that a partner's interest in a partnership is considered movable property, regardless of the firm's assets. The court found that these rules align with established legal principles and do not suffer from excessive delegation.

Conclusion:
The court dismissed the writ petition, upholding the inclusion of the deceased's share in the foreign firm in the estate duty assessment. The court found no violation of Article 14, no excessive delegation of legislative power, and validated Rules 7(c) and 8(h) of the Estate Duty Rules, 1953. The petitioner's contentions were rejected, and the assessment order was deemed lawful and within jurisdiction. The petitioner was ordered to pay costs of Rs. 250.