Sections 5 and 6 of the Estate Duty Act, 1953--Assessment in respect of property standing in the name of 'benamidar'--Clarification regarding - Income Tax - 364/1983

Sections 5 and 6 of the Estate Duty Act, 1953--Assessment in respect of property standing in the name of 'benamidar'--Clarification regarding Circular No. 364 Dated 15/7/1983 The Supreme Court have, in their judgment in the case of Controller of Estate Duty, Lucknow v. Aloke Mitra [1980] 126 ITR 599, held that the liability to pay estate duty under section 5(1) of the Act arises upon the death of the real owner and not of the benamidar who is merely the ostensible owner. This judgment resolves the controversy on the question as to the liability to estate duty in respect of properties held benami. The Allahabad High Court had in its judgment in the case of O.S. Chawla v. Asst. Controller of Estate Duty [1973] 90 ITR 68 [FB], held that where property is held benami, it passed on the death of the real owner and is thus liable to estate duty. The view taken by the Andhra Pradesh High Court in Smt. Shantabai Jadhav v. Controller of Estate Duty [1964] 51 ITR (ED) 1 and Smt. Denabai Boman Shah v. Controller of Estate Duty [1967] 66 ITR 385 (AP), the Punjab and Haryana High Court in Controller of Estate Duty v.M.L. Manchanda [1974] 93 ITR 173, and the Allahabad High Court in Controller of Estate Duty v. T.N. Kochhar [1973] 89 ITR 216, is that since property which stands benami is one which the beneficial owner is not competent to dispose of, such property shall not be deemed to pass on the death of the real owner. The latter view has not been accepted by the Supreme Court. 2. The Supreme Court has held that in the case of benami transactions, the real owner has got the title, though the property is in the name of the benamidar. The real owner can deal with the property without reference to the benamidar. A benamidar has no interest at all in the property standing in his name. The fact that the real owner cannot recover the property sold by the benamidar unless he shows that the purchaser had actual or constructive notice of the real title, does not mean that the benamidar has real title to the property. He is merely an ostensible owner thereof. 3. In view of the foregoing analysis, liability to estate duty in respect of property held benami would arise on the death of the real owner and not on the death of the benamidar. (S.C. Tiwari) Secretary, Central Board of Direct Taxes.