1973 (8) TMI 12 - HC - Income Tax

Estate Duty Act, 1953 - (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the entire property could not be deemed to have passed on the death of the deceased ? (2) Whether the deficit of Rs. 4,88,235 computed in respect of the. free estate of the deceased can be set off against the balance of the estate ? (3) Whether, on the facts and in the circumstances of the case, the sum of Rs. 33,952 is entitled to the rebate envisaged in section 33(1)(f) of the Estate Duty Act ?

Issues Involved:
1. Whether the entire property could be deemed to have passed on the death of the deceased.
2. Whether the deficit of Rs. 4,88,235 computed in respect of the 'free estate' of the deceased can be set off against the balance of the estate.
3. Whether the sum of Rs. 33,952 is entitled to the rebate envisaged in section 33(1)(f) of the Estate Duty Act.

Detailed Analysis:

1. Whether the entire property could be deemed to have passed on the death of the deceased:

The Tribunal was tasked with determining if the entire property gifted by the deceased to his grandson could be deemed to have passed on the death of the deceased under section 10 of the Estate Duty Act. The deceased had gifted a building known as "Maruthi Mansion" to his grandson and continued to stay in a portion of the property as a tenant. The Assistant Controller of Estate Duty initially valued the entire property at Rs. 4,75,000 and included this value in the estate duty computation, reasoning that the donee did not enjoy the property to the exclusion of the donor.

The accountable person contested this, arguing that only the value of the portion occupied by the deceased should be included. The Appellate Controller upheld this contention partially, valuing the deceased's occupied portion at Rs. 2,37,500. The Tribunal further adjusted this value to Rs. 2,50,000, considering common areas used by both lessees.

The court upheld the Tribunal's finding, noting that the deceased was excluded from the portion occupied by the other tenant, and thus, only the portion occupied by the deceased should be included under section 10. The court emphasized that section 10's phrase "to the extent" means only the value of the property from which the donor was not excluded should be included in the estate duty computation.

2. Whether the deficit of Rs. 4,88,235 computed in respect of the 'free estate' of the deceased can be set off against the balance of the estate:

The Assistant Controller computed a deficit of Rs. 4,88,735 in the free estate of the deceased, which was not allowed to be set off against the value of the rest of the estate. The accountable person argued that the estate should be considered as a whole, and liabilities should be set off against the value of properties passing on death.

The court referred to section 44 of the Estate Duty Act, which stipulates that debts and encumbrances should be deducted from the value of the property liable thereto. The court noted that the gifted properties were not liable for the deceased's debts, and thus, the deficit in the free estate could not be set off against the value of other properties. The court upheld the Tribunal's view that the deficit could not be adjusted against the balance of the estate, answering the second question in the negative.

3. Whether the sum of Rs. 33,952 is entitled to the rebate envisaged in section 33(1)(f) of the Estate Duty Act:

The accountable person claimed a rebate for an insurance policy amounting to Rs. 33,952 under section 33(1)(f) of the Estate Duty Act. The Assistant Controller had not taken this amount into account in computing the principal value of the estate due to the deficit in the free estate.

The court noted that section 33(1)(f) exempts moneys payable under insurance policies effected for paying estate duty. However, as the free estate resulted in a minus figure and was not considered for aggregation, the insurance amount did not enter the final computation of the estate's principal value. Consequently, the court held that the rebate under section 34(2) was not applicable and answered the third question in the negative.

Conclusion:
The court concluded that the entire property could not be deemed to have passed on the death of the deceased, the deficit in the free estate could not be set off against the balance of the estate, and the sum of Rs. 33,952 was not entitled to the rebate envisaged in section 33(1)(f) of the Estate Duty Act. Both parties were directed to bear their own costs.

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