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TMI Blog1990 (12) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... three daughters of the deceased. 2. After the death of the deceased, the accountable person filed an account of the estate of the deceased on 13th Oct., 1982 declaring the principal value of the estate at Rs. 24,65,525. A major part of the estate appears to have comprised of the shares held by the deceased in different capacities in private and public limited companies. The principal value of the shares held by the estate of the deceased was returned at Rs. 23,94,146 as against the total value of the estate returned at Rs. 24,65,525. As against the returned value of the estate, the assessment was completed by the ACED(2),Madras by his assessment order dt. 28th Oct., 1987 passed under s. 58(3)of the Estate Duty Act determining the principal value at Rs. 40,97,445. While completing the assessment the ACED negatived the contentions put forward on behalf of the accountable person and denied several exemptions and deductions claimed. Against the said assessment order the accountable person went in appeal before the ACED, Madras. He allowed the appeal filed before him partly by his impugned order dt. 20th March, 1989. Aggrieved against the sustained disallowances, exemptions and debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prakash Bajaj (Estate of late) (1977) 110 ITR 263 (AP) 3. Smt. V. Pramila vs. CED (1975) 99 ITR 221(Kar) 4. Smt. Shantaben Narottamdas vs. CED (1977) CTR (Guj) 497 : (1978) 111 ITR 365 (Guj) 5. CED vs. Dr. Rajah Sir M.A. Muthiah Chettiar (1984) 149 ITR 510 (Mad). 6. Govind Prasad vs. CED (1981) 20 CTR (All) 168 : (1981) 127 ITR 642 (All); and 7. Smt. N. Bhagavathy Ammal Ors. vs. CED (1986) 55 CTR (Mad) 351 : (1986) 162 ITR 190 (Mad) We may observe that there is not even one decision supporting the view canvassed before us by the learned counsel for the accountable person. Under the circumstances this ground is rejected. 4. In ground Nos. 18 and 19 the accountable person objects to the inclusion of the lineal descendant's share in the property held by the major HUF for purposes of the computation of the principal value of the estate. The learned counsel relied upon the Madras High Court decision in V. Davaki Ammal vs. ACED(1973)91 ITR 24(Mad). In the above case the Madras High Court elaborately dealt with the constitutional validity of s. 34(1)(c) of the ED Act and held inter alia that s. 34(1)(c) is only a machinery section and it cannot enlarge the scope of chargin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kept in abeyance towards lineal descendants' share was specifically stated at Rs. 5,84,836. In view of the categorical figures given above by the Asstt. Controller in his assessment order we agree with the contentions of the learned departmental representative and we hold that since the tax payable on the lineal descendants' share was kept in abeyance, no grievance can be made out by the accountable person, since the action of the ACED is quite in accordance with the interim direction given by the Supreme Court in the appeal filed before them against Devaki Ammal's case. Therefore we hold that ground Nos. 18 and 19 in the grounds of appeal preferred before us are misconceived and hence they are dismissed. 5. Ground Nos. 1, 2, 3, 4, 5 and 6 can be taken up together. These grounds deal with the addition of the following items as part of the principal value of the estate of the deceased. Rs. 12,000 towards commission which is to be treated as part of the remuneration. Rs. 5,018 towards reimbursement of medical expenses. Rs. 4,069 being income-tax refund relating to the asst. yrs. 1981-82 to 1983-84 due in his individual capacity and Rs. 10,980 being the income-tax refund due to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded amount could not be considered to be the property which passed on the death. The death did no cause the property to change hands. The fact that a person can nominate a beneficiary does not amount to the disposition of a property. The learned departmental representative on the other hand brought to our notice the decision of the Madras High Court in T.V. Srinivasan vs. CWT (1985) 152 ITR 599 (Mad). In the case before the Madras High Court, which related to the asst. yr. 1974-75 admittedly there was an excess sum of Rs. 11,676 towards excess advance tax as on the valuation dt. 31st March, 1974. This sum was treated as an asset in the computation of the net wealth of the assessee on that date, on the ground that the excess advance tax paid should be taken as a deposit with the Government as the assessee continued to be the legal owner thereof. The Madras High Court upheld the conclusion of the Tribunal though for different reasons. The ratio of the decision, as can be found at page 606 of the reported decision, laying down as to how the income-tax liability, as well as the advance tax paid to meet the liability, should be treated while making the accounts held as follows: "If paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y can be treated as a payment in discharge of a debt owed. In this view of the matter, we have to uphold the ultimate conclusion of the Tribunal though for a different reason". It is contended by the learned counsel for the accountable person that the Madras High Court decision deals with a wealth-tax case, whereas the Allahabad High Court decision cited by the accountable person is a direct decision on the point and therefore it should be preferred to that of the Madras High Court decision. We have examined the relative merits of the contentions advanced before us. We are of the view that the ratio of the Madras High Court decision directly applies to the facts of the case before us also. The Madras High Court in their lucid judgment held that the correct way of appreciating the nature of the advance tax paid was to consider it as an asset of the assessee and the tax payable by the assessee as a liability. If we proceed on this fundamental premise we fail to understand how the ratio of the Madras High Court decision would not apply to an estate duty case. We are of the opinion that the ratio of the Madras High Court equally applies to an estate duty case. Admittedly refunds were m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Held, that the beneficial interest in the sums deposited by the deceased under s. 280G of the Act and the right to recover them passed on the death of the deceased to his heirs and were, therefore, 'property passing on the death of the deceased' as defined in s. 2(16) of the ED Act, 1953. The income-tax which the accountable person was likely to pay had no relevance to the valuation of the annuity deposits at the time of the death of the deceased. The value of the estate of the deceased had to be determined as on the date of the death of the deceased and it is not the value of the estate in the hands of the accountable persons subsequently". Therefore, simply because the amount has not been received before the date of death of the deceased it cannot be said that the amounts of income-tax refunds could not be treated as part of the estate of the deceased. The Allahabad High Court in CED vs. Maharani Raj Laxmi Devi purported to follow the ratio of the Hon'ble Supreme Court in the case of M. Ct. Muthiah vs. CED (1986) 58 CTR (SC) 164 : (1986) 161 ITR 768 (SC). In that case the question before their Lordships was when the policy amount under a personal accident insurance policy is pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that income-tax, wealth-tax and gift-tax were to be considered as liabilities as on the relevant valuation date and when claimed as deductions were to be determined on the basis of assessment orders, though passed after the valuation date. Their Lordships further held that the wealth-tax liability crystallises and becomes a debt on the valuation date, whereas the income-tax liability would be crystallised and becomes a debt on the last day of the previous year. As our case is concerned with the advance tax paid for the asst. yr. 1980-81 in the case of the smaller HUF, and the advance tax paid for the asst. yr. 1981-82 and 1982-83 in the case of the individual assessments it can be presumed that they should have been paid before the death of the deceased and, therefore, they constitute the assets of the deceased. The income-tax liability for the asst. yrs. 1980-81 1981-82 and 1982-83 either for the smaller HUF or in the individual assessment of the deceased would become debts payable on each of the last day of the previous year relevant to those respective assessment years. All these incidents happened only during the lifetime of the deceased, that is, prior to 13th Oct., 1982 and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e should be considered on the debit side. Excess of assets over debts arose even during the lifetime of the deceased. Thus we hold that the income-tax refunds, namely Rs. 4,069 in the case of individual assessment relating to the asst. yr. 1981-82, 1983-84 and Rs. 10,351 in the assessment of the minor HUF relating to the asst. yr. 1980-81 are rightly included as part of the estate of the deceased. As regards the commission payment and reimbursement of medical charges, that is, Rs. 12,000 and Rs. 4,069 the facts are not brought out clearly in either of the orders of the lower authorities. Therefore, we set aside the impugned order with regard to these two additions and remand the matter to the ACED. The Asstt. Controller is directed to receive the concerned the matter to the resolution of the company, in which the commission payment was proposed, the Company Law Board's sanction thereon, and the date or, dates on which the payment of these two amounts are made, and with reference to the definite material available on those aspects, predetermine whether those amounts can be correctly included in the estate of the deceased as per law. It goes without saying that the Asstt. Controller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capacities (individual as well as HUF) towards gifts to the Guruvayur Temple. Further there was an averments that the deceased made contributions to the poor feeding which would be done at the Guruvayur Temple daily. This was not in any way disproved by the Department. We only hold that had the lower authority (Appellate Controller) seen the portion of the representation made before the Asstt. Controller, quoted above, there would not be any scope to conclude that the accountable person could not prove that such expenses were being incurred as normal expenses by the deceased during his lifetime. We are satisfied from the evidence on record that the deceased was sufficiently a philanthropist continuously throughout his lifetime and was making gifts to enable the management of the Guruvayur Temple to give poor feeding as a daily routine. We, therefore, see no justification to include the sum of Rs. 5,000 as part of the estate of the deceased. We hold that s. 9(2)(b) applies and hence it should not be taken as part of the estate of the deceased. The appeal in this regard is allowed. 8. Now let us take up ground Nos. 9 and 10. The deceased inherited 1/6th share in his mother's estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urces there was at any time included, any property derived from the deceased." The words used 'at any time' are significant. The significance of the above words was also realised by the Madras High Court Full Bench in the above case. It cannot be denied that the resources of the creditor included an amount of Rs.. 10,980 which is the relinquished portion of the deceased. Therefore, we are of the opinion that the nexus between the relinquishment on the one hand and the loan taken from Smt. R. Raji, sister of the deceased was clearly established. Further, we hold in order to establish the connection between the two or the direct nexus between the two, considerable lapse of time between the two or the direct nexus between the two, considerable lapse of time between these two events cannot negate the theory of nexus or cannot come in the way of establishing nexus. 9. Having said the above ordinarily we would have confirmed the addition of Rs.10,980 to the estate of the deceased but the fact that the deceased had already paid an amount of Rs.. 5,980 while relinquishing 1/6th estate of his mother in favour of his sister, made us refrain to do so in view s. 50A of the Estate Duty Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from the deceased should be established." Therefore, we are of the view that after due verification of the payment of gift-tax, on the relinquishment made by the deceased on 28th Dec., 1978 in favour of his sister, Smt. R. Raji, the said amount must be deducted from out of the estate duty payable as per the provisions of s. 50A. For doing this exercise the matter is remanded to the Asstt. Controller. 10. Now let us deal with ground No. 14. Under this ground the accountable person claims that a further sum of Rs. 5 lakhs is essential to be deducted from the interest of the deceased in his major HUF towards marriage expenses of his two unmarried daughters by the date of his death on 13th Oct., 1982. We have stated that the deceased was assessed to income-tax in three capacities-individual, karthas of bigger and smaller HUFs. The members of the bigger HUF were the deceased, his wife and three daughters and his only son. The members of the smaller HUF was himself, his wife and unmarried daughters. One out of the three daughters was married even during the lifetime of the deceased. Geetha Raman and Radhika Raman (accountable person herein) were the remaining two daughters w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs 99,999. 12. For the third time another partial partition was effected of the movable properties (shares) held by the major HUF on 27th March, 1974. By the date of the said partition the major HUF held 8,080 equity shares of Rs. 10 each in M/s Engine valves Ltd., and 24,750 equity shares of Rs. 5 each in M/s Rane (Madras) Ltd. The market value of all the shares put together was of the value of Rs. 4,99,950. This division was also made between the minor HUF, the son and three daughters. Each of the parties to the partition got Rs. 99,990 worth of shares to his or her share. The shares allotted to each of the daughters under the partial partition dt. 6th March, 1972 and 27th March, 1974 were all equity shares of Rs. 5 face value each in M/s Rane (Madras) Ltd. Each of the three daughters under the partial partition dt. 6th March, 1972 were allotted 10,905 equity shares of the value of Rs. 99,990 in that company. So also under the partial partition dt. 27th March, 1974 each of the three daughters were allotted 8,250 equity shares in M/s Rane (Madras) Ltd., which were of the value of Rs. 99,990. Before the death of the deceased, in Oct., 1982, equity share of Rs. 5 face value was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards marriage expenses of the two unmarried daughters can be allowed a deduction from out of the estate of the deceased. In Smt. B.N. Geetha vs. CED (1988) 26 ITD 500 (Hyd) it was held that in view of the Andhra Pradesh High Court decisions in the case of CED vs. Smt. P. Leelavathamma 1977 CTR (AP) 128: (1978) 112 ITR 739 (AP) and Smt. A. Suhasini vs. CED (1984) 145 ITR 200 (AP) the claim of the accountable person for deduction of Rs. 50,000 towards provision for marriage of unmarried daughters of the deceased should not be considered as a legitimate deduction while arriving at the net value of the estate of the deceased. In the said order I have already held that the Madras High Court decision in CED vs. Dr. B. Kamalamma (1984) 148 ITR 434 (Mad) was doubted by a later Madras High Court decision in G. Shenbagammal vs. CED (1986) 55 CTR (Mad) 368: (1986) 162 ITR 445 (Mad). In the said latter case it was held that the provision for marriage of unmarried daughter could not be considered either as a debt or an encumbrance under s. 44 of the ED Act. Therefore, following our earlier decision, we hold that the provision for marriage expenses of unmarried daughters cannot be deducted fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following: "Having regard to the extend of sacrifice for meeting the demand, it is considered that four half yearly instalments are reasonable. The demand became due in May, 1983. Therefore, the first instalment will be paid by 15th Nov., 1983 and the second instalment shall be paid by 15th Feb., 1984. Subject to this modification, the other instalments will be payable by 15th Aug., 1984 and 25th Feb., 1985 respectively. The above instalment is permitted on the condition that the accountable person pays interest as per stipulation in the law. In his letter dt. 24th Aug., 1983, the advocate brought to notice that the shares were yielding a dividend of 20 per cent and 15 per cent. Taking an average of 17.5 per cent interest on the outstanding demand shall be payable with interest @ 17.5 per cent per annum under s. 70(1) of the Act." The rate of interest was disputed as high by the accountable person in the appeal before us. The first objection is with regard to the filling of an appeal with reference to interest. The learned departmental representative argued that no appeal lies against the quantum of interest. The learned counsel for the accountable person argued that this objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the accountable person that the ACED fixed the rate of interest at 17.5 per cent. The learned counsel argued that interest cannot be charged over and above 4 per cent. Unless and until he is able to prove that higher rate of interest over and above 4 per cent would be yielded by the sale of any of the assets of the deceased. Admittedly most of the estate comprises of the shares held by the deceased in companies. The ACED asked about the rate of yield on the share holding belonging to the deceased. The particulars of the yield was provided in the letter dt 14th Oct., 1982 submitted by the accountable person to the ACED. In the said letter it is clearly shown that if the yield is calculated on the face value of the shares, then the yield would be 20 per cent on the shares in Rane (Madras) Ltd., and 15 per cent on the shares in Engine Valves Ltd. But if the yield is to be calculated on the market value of the shares then the yield would be 2.65 per cent on the shares of Rane(Madras) Ltd., and 3.65 per cent on the shares of Engine Valves Ltd. In the provisional order, the ACED levied interest, taking the yield particulars on the face value of the shares. According to the le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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