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TMI Blog1969 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... other by the Central Board of Revenue, New Delhi. In 1947, there had been large scale displacement of persons who were residents in territories which are known as West Pakistan and these persons, leaving their properties behind, had migrated to this country. In 1950, the Displaced Persons (Claims) Act was enacted. This Act, hereinafter referred to as the " 1950 Act ", provided for the registration and verification of claims of displaced persons in respect of immovable property in Pakistan. Section 2(a) of this Act defined " claim " as the assertion of a right to the ownership of or to any interest in any immovable property in West Pakistan. Section 5 of this Act entitled a displaced person to submit his claim to a registering officer for the registration of his claim to such property. Such claims were dealt with by claims officers under section 6. The claims officers were to hold Summary inquiry and to pass such orders as they thought fit in relation to the verification and valuation of such claims. After this verification and valuation had taken place, the displaced person held what is called a " verified claim ". This verified claim did not confer any rights upon the displaced p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 963 concerns the estate of late Bhagat Lachmi Narain, who was a displaced person, and who died on May 15, 1956, that is, after the coming into force of the 1954 Act as also the Rules framed thereunder. He had a verified claim for a sum of Rs. 12,42,960 in respect of the properties left in West Pakistan. In the return filed under the Estate Duty Act, a sum of Rs. 1,67,330 was added by the Assistant Controller on the ground that this amount represented the compensation payable to the deceased by the Government of India under the 1954 Act and the Rules framed thereunder and was dutiable under the Estate Duty Act. This decision was upheld in appeal by the Central Board of Revenue, New Delhi. Upon an application the Central Board of Revenue has referred the following question for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the amount of Rs. 1,67,330 was correctly included in the principal value of the estate of the deceased for purposes of estate duty ? " The main question in both the references, as stated above, is whether the inclusion of the aforesaid amounts was correct. These amounts have been included as property passing on the death ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue has gone to the extent of saying that even a verified claim under the Displaced Persons (Claims) Act, 1950, is property within the meaning of the Estate Duty Act. This question came up before a Division Bench of the Punjab High Court in Murat Singh's case . The Scheme of the said 1950 Act was examined as also the objects and reasons of the relevant Bill. These objects empowered the Government to receive, register and verify claims of displaced persons in respect of immovable properties which they left behind in West Pakistan. The learned judges came to the conclusion that the verification of the claim itself would not clothe the claimant with any interest in or right to any property in the form of compensation and the verified claim could not be considered to be " property " within the meaning of section 2(15) of the Estate Duty Act. The Punjab High Court relied, inter alia, upon the decision of the Supreme Court in Amar Singh v. Custodian of Evacuee Property, Punjab, where the incidents of a quasi-permanent allotment in pursuance of the East Punjab Evacuees (Administration of Property) Act, 1947, and the Administration of Evacuee Property Act, 1950, were examined. The S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Allahabad High Court, Umrao Singh v. Kacheru Singh, the following meaning was given to " property " under section 5 of the Transfer of Property Act : " The word 'property' may be used in the objective sense of a concrete thing which is the subject of ownership or other rights ; or it may be used in the sense of the rights and interests of the owner or other person in that property. It is in the latter sense that the term is used in the Transfer of Property Act." In my view it is in this sense that one has to determine " property with reference to the Estate Duty Act. In other words, " property " is a concrete thing which is the subject of ownership or other rights. The interest of a person in such property will also be included in " property " by reason of section 2(15) of the Estate Duty Act. Although it is necessary that the property must have existence, it is not necessary that it should be definite, ascertained or determined. Now, coming to the provisions of the 1954 Act, section 4 provides for the making of an application for payment of compensation within the time prescribed by it which is three months of the publication of a notification in that behalf. This section mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 14 of the Act and the form of payment may be either, (a) in cash, or (b) in Government bonds, or (c) by sale of any property from the compensation pool to the, verified claimant against the compensation payable, or (d) by any other mode of transfer to the verified claimant of any property from the compensation pool, or (e) by transfer of shares or debentures in any company or corporation, or (f) in such other form as may be prescribed. Sub-section (2) of section 8 authorises the Central Government to make rules to provide for : (a) the classes of displaced persons to whom compensation may be paid ; (b) the scales according to which, the form and manner in which and the instalment by which compensation may be paid to different classes of displaced persons ; (c) the valuation of all property, shares and debentures to be transferred to displaced persons ; and (d) any other matter which is to be, or may be, prescribed. The culmination of the hopes and expectation's of the verified claimant is the order passed under sub-section (3) of section 7 determining the net amount of compensation payable to him. This order would be " property " just as any other adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es after an order has been made under sub-section (3) of section 7 determining the net amount of compensation payable, it is only the estimated value of such determination at the time of death which will be subjected to estate duty. Similarly, if the verified claimant dies after having received the compensation in any one or more of the modes prescribed by section 8, it will be only the estimated value at the time of his death of the property which has actually come into his hands which will be subjected to estate duty. Revenue has relied upon a decision of the Punjab High Court in R. M. Shahani v. Controller of Estate Duty, where it has been observed : " A compensation claim is merely a decision made by a competent authority in respect of a claim made by a displaced person concerning his property left behind in Pakistan. The decision, when made, entitles the claimant to receive compensation the value of which is fixed according to precise rules. " In that case the value of compensation receivable by the deceased had been determined under the 1954 Act and the Rules at Rs. 72,717 and it seems that this amount was the amount determined under sub-section (3) of section 7 of the 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Estate Duty Act only if such compensation represents the net compensation payable under an order under sub-section (3) of section 7 of the 1954 Act made either before or after his death . Question No. 2 : The valuation of compensation at Rs. 1,01,274 under section 36 of the Estate Duty Act would be correct only if this amount is the estimated value under section 36 of the net compensation determined under sub-section (3) of section 7 of the 1954 Act either before or after his death. I answer the question in Estate Duty Reference No. 2 of 1963 as follows : The amount of Rs. 1,67,330 was correctly included in the principal value of the estate of the deceased for purposes of estate duty if this amount represents the estimated value under section 36 of the net compensation determined under sub-section (3) of section 7 of the 1954 Act, either before or after his death. In the circumstances of the case, I would leave the parties to bear their respective costs in both the references. V. S. DESHPANDE J.-Being displaced persons holding verified claims, Colonel D. H. Rai and Bhagat Lachmi Narain became entitled to be paid compensation under the Displaced Persons (Compensation and Reh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what is stated in sub-section (15) of section 2 which includes only a part of the said concept. The definition of " property " in the estate duty law of England is similar to the definition of " property " in our Estate Duty Act. It is instructive to see, therefore, the width of the scope of the term " property " in the English law as indicated by the following passage from the Elements of Estate Duty (1952) by C. N. Beattie, page 13 : " The expression 'property', as used in the Finance Acts, is defined as including real and personal property and the proceeds of sale thereof respectively, and any money or investment for the time being representing such proceeds. Property, attracting duty includes not only tangible property, but also equitable interests, debts and other choses-in-action, and indeed any rights capable of being reduced to a money value. A right of action for damages possessed by a deceased is property liable to duty on his death. This includes a claim for damages for pain and suffering and loss of expectation of life in respect of a tort causing death, for which an action lies at the suit of the personal representatives under the Law Reform (Miscellaneous Provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a displaced person under the Displaced Persons (Compensation and Rehabilitation) Act, 1954, " property " within the meaning of the Estate Duty Act ? The answer to this question depends on whether such compensation satisfies the criteria of property in the Estate Duty Act. A right to the payment of compensation was conferred on all displaced persons under the Displaced Persons (Compensation and Rehabilitation) Act, 1954, as would be apparent from its provisions. By its preamble it is "an Act to provide for the payment of compensation and rehabilitation grant to displaced persons. " Section 4 places a statutory duty on the Central Government to issue a notification not later than 30th June, 1955, requiring all displaced persons holding verified claims to make applications for payment of the compensation. Under section 7, the settlement commissioner ascertains the amount of compensation payable to such an applicant according to the scales of compensation prescribed in Appendix VIII to the Rules of 1955 and after deducting therefrom the public dues payable by the displaced persons, makes an order determining the net amount of compensation payable to the applicant. This right to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of payment of compensation under this Act, the Central Government may, by rules, provide for all or any of the following matters, namely :--- (a) the classes of displaced persons to whom compensation may be paid. " It would be seen that the rule-making power is conferred on the Central Government " for the purpose of payment of compensation " and not for the purpose of laying down whether compensation should be paid or not. Further, the rules may provide for " the classes of displaced persons to whom compensation may be paid ". The rules cannot provide for any class of displaced persons to whom compensation is not to be paid. Further, section 8(2)(b) deals with the scales according to which compensation may be paid to different classes of displaced persons. It does not exclude any class of displaced persons from payment of compensation. The whole scheme of the Act is a firm commitment of the Government to pay compensation to every displaced person holding a verified claim. Nowhere is there any indication that compensation may not be paid to some of them. Moreover, exclusion of some displaced persons from payment of compensation would not only be contrary to the Act but a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uperannuation) Act, 1925, by the Board of Education to the personal representatives of the deceased. Affirming the decision of Rowlatt J., the Court of Appeal, Per Lord Hanworth M. R., observed as follows : " From and after, therefore, the operation of the Act, there was a definite right on the part of the school teacher who fulfils certain conditions to be paid a sum which is to be estimated and calculated under the provisions of the statute and the regulations which are made in pursuance of it .... By section 1 of the Finance Act of 1894 there is charged to estate duty ' all property, real or personal, settled or not settled, which passes on the death of such person '. It is said, and I think rightly said, that if that section stood alone this sum of 429 shillings would not be charged to the estate duty. For the purpose of fulfilling the word " passes ", it has, I think, been decided in cases that there must be at the death the property in existence which, upon the death, continues and passes on to the successor. In this case there was a right, but it is difficult to say that the right had become and was, in the hands of the deceased teacher, a sum of property which actually pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance regulating the grant of pensions and the pensions used to be placed on the annual estimates of the colony and voted annually by the colonial legislature and to that extent the grant of pension was attended with uncertainty. It was further argued for the assessees that the right to receive com- pensation was not even an actionable claim within the meaning of section 3 of the Transfer of Property Act but was more like a mere right to sue which could not be transferred in view of section 6(e) of the said Act. The right to receive compensation may not be covered by the definition of " actionable claim " in section 3 of the Transfer of Property Act on the ground that civil courts would not recognise it as affording a ground for relief for the simple reason that the jurisdiction of the civil court was precluded by section 27 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954, in respect of any challenge to an order made by an officer or authority under the said Act. The right is, however, enforceable under the Act itself without the need of resort to a civil court. Further, the right was indefeasible and could even be enforced by a writ of mandamus if necessary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had no vested right under section 10 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954, to the transfer of some land to him by way of compensation. On the contrary, such an allotment could be cancelled by the Government under section 19 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954. That was why such an allotment (though called quasi-permanent) was held not to be " property " within article 19(1)(f) of the Constitution. The Supreme Court did not at all consider the question whether the right of a displaced person holding a verified claim was " property ". On the contrary, in column 2, on page 609, the court distinguished between the right of a displaced person holding a verified claim to compensation and the claim of an allottee to the transfer of the allotted land in the following words : " It may be noticed that 'compensation' referred to in section 10, in so far as it relates to a displaced person, obviously refers to the compensation for loss of his property in Pakistan and is not the recognition of a right to compensation for deprivation of his interest, if any, in the allotted property by cancellation. Rules have been made by the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property " includes "any interest " in the property. The word " any " does not seem to be restricted to a definite or ascertained sum of money. It is well-known that an actionable claim is property but the precise amount recoverable thereunder may not be definite. Under sub-section (16) of section 2, " property passing on the death " includes property passing either immediately on the death or after any interval, either certainly or contingently. This would show that not only the quantum of the property but even the passing of it may not be certain but may only be contingent. Even such property is not excluded from the operation of the Estate Duty Act. Under section 21 of the Transferof Property Act, an interest in property, which is to take effect only on the happening of a specified un- certain event, is a contingent interest in the property. But, a contingent interest is a well-recognised form of property which is capable of being transferred. It is not a mere possibility (Commissioner of Wealth-tax v. Ashok kumar Ramanlal, Ma Yait v. Official Assignee and Fernando v. Gunatillaka). The right of a company to call up the uncalled capital is an existing right and was therefore held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be estimated to be the price which, in the opinion of the Controller, it would fetch if sold in the open market at the time of the deceased's death. This itself presupposes that an item of property may not be, capable of being quantified in terms of money and the Controller would, therefore, have to fix its principal value by way of its notional sale in the open market. It is only those things which are inherently unsaleable that would be regarded as not " property " under the Estate Duty Act. As already observed, the right to receive compensation and the compensation payable under the Displaced Persons (Compensation and Rehabilitation) Act, 1954, are certainly saleable it is like a lottery ticket which gives the holder a right to receive a prize on the happening of an uncertain event. He may or may not get anything, but so long as people attach value to such a right, it is saleable and is, therefore, "property". On behalf of the assessees, a further argument was put forth saying that a debt which has not become either quantified or payable is not attachable under section 60(1) of the Civil Procedure Code. This provision has to be read with the provisions of Order XXI, rule 46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f had also enabled the Government to frame Rules prescribing the scales of compensation. The Government could not have refused to frame the scales of compensation inasmuch as the Act had already promised the payment of compensation to displaced persons holding verified claims. The Government could have been compelled to discharge its statutory duty of framing the scales of compensation by a writ of mandamus issued under article 226 of the Constitution. The right to receive compensation vested in Bhagat Lachmi Narain was " property " under the Estate Duty Act, inasmuch as, he died even after the scales of compensation had been framed under the Rules of 1955 in Schedule VIII thereto. The amount of gross compensation payable to Bhagat Lachmi Narain had, therefore, become known before his death. In neither case, however, the amount of net compensation payable could be known, inasmuch as the deductions from those compensation by way of public dues, etc., had not been determined. In my view, therefore, the rights of both the deceased were juridically of the same nature. They were " property " which had to be quantified under the provisions of the Displaced Persons (Compensation and Reha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilitation) Act is, by force of law, entitled to receive some property of the exact value of his net compensation, and hence, therefore, the net compensation is determined, as has been done in the present case, and its value, in the absence of evidence to the contrary, would be the face value. " With respect, the following considerations would lead to a different conclusion in the present case. Firstly, Colonel D. H. Rai died before the scale of compensation in Appendix VIII of the Rules of 1955 was promulgated. On the date of his death, therefore, it could not be said what precise amount of compensation he would have got if he had lived till the determination of the net compensation payable to him under section 7(3) of the Displaced Persons (Compensation and Rehabilitation) Act, 1954. At the same time, the right to receive compensation vested in him was a valuable right which under the law could be sold in open market on the date of his death. The verified claim held by him showed that the property left by him in Pakistan was of considerable value. He was, therefore, definitely entitled to the payment of some amount of compensation. But, such amount could not be known at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X
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