1973 (2) TMI 23 - HC - Income Tax

Estate Duty Act, 1953 - Whether, on the facts and in the circumstances of the case, the value of the properties settled under the deed of settlement dated 6th October, 1941, was exempt from assessment under section 22 of the Estate Duty Act, 1953 ? - The beneficial interest alone to which the deceased was entitled during his lifetime will be property under Estate Duty Act - Such a beneficial interest having ceased on the death of the deceased and a benefit having arisen by cessor of such interest - It could be brought to tax under section 5 read with section 7(1) of the Estate Duty Act - Value of the entire property cannot be liable to estate duty.

Issues Involved:
1. Interpretation of Section 22 of the Estate Duty Act, 1953.
2. Applicability of Section 5 and Section 7 of the Estate Duty Act, 1953.
3. Determination of whether the entirety of the settled properties can be included in the estate of the deceased.

Detailed Analysis:

1. Interpretation of Section 22 of the Estate Duty Act, 1953:
The primary issue revolves around the interpretation of Section 22 of the Estate Duty Act, which states: "Property passing on the death of the deceased shall not be deemed to include property held by the deceased as trustee for another person under a disposition not made by the deceased." The court had to determine whether the properties held by the deceased as a trustee, but in which he also had a beneficial interest, could be exempt from estate duty under this section.

The court noted that Section 22 is intended to exempt properties held by the deceased purely as a trustee without any beneficial interest. Since the deceased had a beneficial interest in the properties (receiving Rs. 125 per month), the properties could not be entirely exempt under Section 22. The court emphasized that the beneficial interest held by the deceased, which ceased upon his death, should be subject to estate duty.

2. Applicability of Section 5 and Section 7 of the Estate Duty Act, 1953:
Section 5 of the Act is the charging section, which levies estate duty on all property passing on the death of the deceased. Section 7(1) deems any property in which the deceased had an interest ceasing on death to pass on the deceased's death to the extent that a benefit accrues by the cessation of such interest.

The court clarified that only the beneficial interest that the deceased had in the properties, which ceased upon his death, could be brought to charge under Section 5 read with Section 7(1). The court rejected the revenue's contention that the entire value of the settled properties should be included in the estate of the deceased, emphasizing that the sons' interest in the properties had already vested at the time of the settlement deed.

3. Determination of Whether the Entirety of the Settled Properties Can Be Included in the Estate of the Deceased:
The court reframed the question to specifically address whether the entire value of the properties settled under the deed dated October 6, 1941, could be included in the estate of the deceased and brought to charge under Section 5 of the Estate Duty Act. The court concluded that the entirety of the settled properties could not be included in the estate of the deceased. Instead, only the beneficial interest that the deceased had, which ceased upon his death, could be brought to charge.

The court cited various precedents, including decisions from the House of Lords and other courts, to support its interpretation that the Act is concerned with beneficial interest rather than purely legal interest. The court held that the beneficial interest of the deceased, which ceased on his death, should be the only property passing on his death and subject to estate duty.

Conclusion:
The court answered the reframed question in the negative, determining that only the beneficial interest of the deceased that ceased on his death could be brought to charge under Section 5, and not the entire value of the settled properties. The Tribunal was directed to calculate the value of the beneficial interest the deceased had in the settled properties and bring the same to charge. The accountable person was entitled to costs from the revenue, with counsel's fee set at Rs. 250.

← Previous Next →