1973 (8) TMI 3 - HC - Income Tax

Estate Duty Act, 1953 - Whether the compensation paid to the heirs of air crash victims by Airlines Corporation is a property passing on death within the meaning of Estate Duty Act Held, no

Summary

Issues Involved:
1. Whether the compensation of Rs. 42,000 received by the heirs of the deceased in both cases was liable to estate duty.

Issue-Wise Detailed Analysis:

1. Inclusion of Compensation in the Estate of the Deceased:
Facts and Background:
- In Reference No. 2 of 1972, the deceased was a partner in a firm dealing in brassware and died in an air crash. His heirs received Rs. 42,000 as compensation, which was not included in his estate.
- Similarly, in Reference No. 5 of 1972, the deceased died in a plane crash, and his wife received Rs. 42,000 as compensation, which was also not included in the estate.
- The Assistant Controller of Estate Duty included the compensation in the estate, but the Zonal Appellate Controller and the Income-tax Appellate Tribunal excluded it, leading to the present references.

Legal Provisions and Interpretation:
- The key provision under scrutiny is Section 5 of the Estate Duty Act, which levies duty on property that "passes on the death" of a person.
- The term "passes on the death" implies a change in possession or control of the property from the deceased to the heirs.
- Section 2(15) defines "property" broadly, including any interest in property, while Section 2(16) defines "property passing on the death" to include property passing immediately or after an interval, either certainly or contingently.

Judicial Precedents and Analysis:
- English decisions under the U.K. Finance Act of 1894 were considered, as the Indian Act is modeled on it.
- The term "passes" was interpreted to mean a change of hands, implying that the deceased must have had control or possession of the property for it to pass to the heirs.
- In Attorney-General v. Milne, it was held that "property passing on the death" denotes an actual change in title or possession at the death.
- Similar interpretations were found in Nevill v. Commissioners of Inland Revenue and Scott v. Commissioners of Inland Revenue.

Application to the Present Cases:
- The compensation of Rs. 42,000 did not exist during the lifetime of the deceased and was not in their control or possession.
- The compensation was paid directly to the heirs by the Airlines Corporation due to the specific manner of death (plane crash), not as a part of the deceased's estate.
- The Tribunal rightly pointed out that under the Carriage by Air Act of 1934, the compensation was meant for the benefit of the dependents and had no connection to the deceased's estate.

Conclusion:
- The compensation did not fulfill the conditions required for property to pass on death:
1. The deceased did not have control, possession, or interest in the compensation.
2. The compensation was not in existence during the deceased's lifetime.
3. The deceased had no power of disposition over the compensation.
- Therefore, the compensation of Rs. 42,000 in both references was not liable to estate duty.

Judgment:
- The court agreed with the Tribunal's decision that the compensation was not chargeable to estate duty.
- In Reference No. 2 of 1972, the question was answered in the affirmative, and in Reference No. 5 of 1972, in the negative, confirming that the compensation was not liable to estate duty.
- The references were disposed of accordingly.

Concurrence:
- The judgment was concurred by both judges involved.