1972 (3) TMI 25 - HC - Income Tax

Estate Duty Act, 1953 - This is an application filed under article 226 of the Constitution of India for the issue of a writ to declare the provisions of section 34(1)(b) and (1)(c) of the Estate Duty Act, 1953, as ultra vires and unconstitutional. It is also prayed that the respondents should be restrained from enforcing these provisions in respect of the estate of the petitioner s father - It is true that the constitutional validity could not have been questioned before the authorities under the Act, but, nothing could have been lost if the petitioner had waited till he exhausted all the remedies and then come to this court. In any case, since we have held that the provisions of the Act are not unconstitutional, we would reject the writ petition - Petition dismissed

Summary

Issues Involved:

1. Competence of Parliament to enact Section 34(1)(b) and 34(1)(c) of the Estate Duty Act, 1953.
2. Violation of Article 14 of the Constitution of India by Section 34(1)(c) of the Estate Duty Act, 1953.

Issue-wise Detailed Analysis:

1. Competence of Parliament to enact Section 34(1)(b) and 34(1)(c) of the Estate Duty Act, 1953:

The petitioner contended that Section 34(1) of the Estate Duty Act, 1953, is beyond the competence of Parliament as it levies estate duty on the entire estate forming part of the joint family, in which both the deceased and the petitioner had interests as coparceners. The court referred to Entry 87 of List I, Schedule VII, which specifies "Estate duty in respect of property other than agricultural land" as the legislative field for Parliament. Article 366(9) defines "estate duty" as a duty assessed on the principal value of all property passing upon death or deemed to pass under the laws made by Parliament.

The court clarified that Parliament is empowered to legislate on estate duty, including determining the principal value and the rates at which such value is to be levied. Section 34(1)(c) aggregates the interests of all lineal descendants in the joint family property for determining the rate of estate duty. This aggregation is for rate determination only, not for levying duty on the interest of the son during the father's lifetime. The court emphasized that the duty is levied only on the interest of the deceased, which is deemed to have passed to the petitioner.

The court concluded that Parliament was competent to prescribe rules for determining the principal value and the rate at which estate duty is charged. The principle of aggregation under Section 34(1) is applied solely for rate determination, not for levying duty on the aggregate estate, thus rejecting the petitioner's contention.

2. Violation of Article 14 of the Constitution of India by Section 34(1)(c) of the Estate Duty Act, 1953:

The petitioner argued that Section 34(1)(c) is discriminatory and violates Article 14 of the Constitution. The first ground of discrimination was that a Mitakshara father is placed in a discriminatory position compared to other coparceners like brothers or sons. The court noted that under Mitakshara law, a father holds a peculiar position, and his interest in the joint family property cannot be precisely valued separately. Therefore, the principle of aggregation is used to determine the rate at which the father's interest can be charged with estate duty.

The court explained that the classification of Mitakshara fathers is rational and necessary due to their unique position in the joint family. This classification ensures uniform duty on the property left by the deceased, and there is no discrimination within the same class of Mitakshara fathers. The court rejected the argument that Section 34(1)(c) discriminates against Mitakshara fathers compared to other coparceners.

The second ground of discrimination was between a Hindu joint family father under Mitakshara law and a father under Dayabhaga law. The court highlighted the differences in property rights and inheritance between the two laws. Under Dayabhaga law, the father is the absolute owner of the property, while under Mitakshara law, sons acquire rights by birth. The legislature was competent to evolve a method to approximate the two for estate duty purposes, and slight differences in rates do not constitute discrimination under Article 14.

The court emphasized that in matters of taxation, the legislature has greater freedom to classify persons or objects and adopt different modes of taxation. The classification under Section 34(1)(c) is reasonable, rational, and has a nexus with the object of the Estate Duty Act. The court cited the Supreme Court decision in Venugopala Ravi Varma Rajah v. Union of India to support the permissibility of such classification.

Conclusion:

The court dismissed the writ petition, holding that the provisions of Section 34(1)(c) are neither beyond the competence of Parliament nor violative of Article 14 of the Constitution. The petitioner was advised to exhaust all remedies before the appellate authority. The writ petition was dismissed with costs, and the advocate's fee was set at Rs. 100.