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TMI Blog1972 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... hare in the family properties if a partition had taken place during his lifetime. But, no such partition took place. The petitioner as an accountable person submitted a return of estate duty declaring the principal value of the share of the deceased in the joint family properties at Rs. 74,884. The Assistant Controller of Estate Duty, the respondent herein, however, determined the value of the property passing on the death of the deceased at Rs. 1,24,859 as against the value returned, after adjusting the funeral and other expenses which are permissible deductions under the Act. He, however, added a sum of Rs. 1,26,067 being the lineal descendant's share, namely, the share of the minor son in the family properties to the value of the share of the deceased in accordance with the provisions of section 34(1)(c) of the Estate Duty Act, 1953, hereinafter called the Act, and determined the principal value of the estate at Rs. 2,50,926. The estate duty payable on the said principal value was fixed at Rs. 19,638.90. After allowing Rs. 9,866.72 as rebate on lineal descendant's share the estate duty payable was arrived at Rs. 9,772.18. Aggrieved against such aggregation of the lineal descen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ringed and that, therefore, the said provision is violative of article 19(1)(f) of the Constitution as well. The revenue, however, contends that section 34(1)(c) of the Act is not violative of either article 14 or article 19(1)(f) of the Constitution, that section 34(1)(c) makes a reasonable classification between the coparceners having lineal descendants and others, that such classification has got a sensible relation to the object of the Act, and that, therefore, it cannot be said to be discriminatory in character so as to attract article 14 of the Constitution. It is also the contention of the revenue that though it is only the undivided interest of a deceased coparcener in a Mitakshara family that is deemed to pass on his death under section 7 of the Act, for the purpose of fixing the rate of duty, the deceased and his lineal decendants are regarded as a group or as a branch family, that this groupal consideration is necessary for arriving it the slice of the joint family property on the basis of a fictional partition in a family which actually continues to be joint before and after death, and that the deceased and his lineal descendants form a natural group or branch not onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty in which the deceased or any other person had an interest ceasing on the death of the deceased shall be deemed to pass on the deceased's death to the extent to which a benefit accrues or arises by the cesser of such interest, including, in particular, a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasanthana law. Sub-section (2) of that section provides that, if a member of a Hindu coparcenary governed by the Mitakshara school of law dies, then the provisions of sub-section (1) shall apply with respect to the interest of the deceased in the coparcenary property only if the deceased had completed his eighteenth year at the time of his death, or where he had not completed his eighteenth year at the time of his death, if his father or other male ascendant in the male line was not a coparcener of the same family at the time of his death. Section 39 deals with the valuation of an interest in coparcenary property ceasing on death. Sub-section (1) of that section sets out that the value of the benefit accruing or arising from the cesser of a corparcenary interest in any joint family property governed by the Mitak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt from estate duty, the estate duty leviable on the property not so exempt shall be an amount bearing to the total amount of duty which would have been payable on the whole estate had no part of it been so exempt, the same proportion as the value of the property not so exempt bears to the value of the whole estate. The Explanation to this section defines what is "property exempt from estate duty". Under that Explanation interest of all coparceners other than the deceased in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasanithana law has to be treated as property exempt from estate duty. The validity of section 34(1)(c) was questioned before this court in Ramanathan Chettiar v. Assistant Controller of Estate Duty on the ground that it is violative of article 14 in that the principle of aggregation is applied only to cases of joint family governed by Mitakshara law and not to families governed by the Dayabhaga law. The court construed section 34(1)(c) as enabling aggregation of the benefits accrued to all the lineal descendants of the deceased and expressed that but for the principle of aggregation contained therein, the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alidity of sectiorn 34(1)(c) on the basis of the wider interpretation which the revenue has adopted . According to the petitioner, while section 5 brings to charge only, the principal value of the property passing on the death of the deceased, section 34(1)(c) brings to charge not only the principal value of the property passing on the death of the deceased but also the principal value of the interests of the lineal descendants of the deceased in the joint family properties and that this clearly results in a hostile discrimination between coparceners having lineal descendants and other coparceners who have no lineal descendants, as also between coparceners having lineal descendants and others in general. That the statutory provision in section 34(1)(c) makes a distinction between coparceners having lineal descendants and others and imposes a higher tax burden on the former is not disputed by the revenue. But, its case is that it is a reasonable classification having a rational nexus with the object of the Act and that, therefore, it will not be hit by article 14 of the Constitution. This leads us to a consideration of the question as to whether the said differentiation has any re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speech nor the notes on clauses of the Estate Duty (Amendment) Bill of 1958 throw any light as to what is the object in aggregating the interests of the lineal descendants along with the coparcenary interest of the deceased in the joint family so as to form one estate and thus subjecting the property passing on the death of the deceased to a higher duty if he were to leave any lineal descendant. But a Circular No. 6-D of 1960 dated June 16, 1960, issued by the Central Board of Revenue explains the scope of section 13 of the Amending Act which brings about the change in section 34(1) thus: Section 13: " This section introduces an important change with regard to the levy of estate duty on property which consists of a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasanthana school. To take for example, a Hindu family of this type owning property worth Rs. 5 lakhs and consisting of a father, wife and his three sons, on the death of the father, the value of the property that passes on his death will be the value of his 1/5th share of the family property, that is, Rs. 1 lakh (on the assumption that under the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not rest on any rational basis having regard to the object which the legislature has in view. " In Ram Krishna Dalmia v. Justice Tendolkar, the Supreme Court, after setting out the various principles that have to be constantly borne in mind by the courts when they are called upon to adjudicate on the constitutionality of any particular law attacked as discriminatory and violative of the equal protection of the laws, expressed that a statute may itself indicate the persons or things to whom its provisions are intended to apply and the basis of the classification of such persons or things may appear on the face of the statute or may be gathered from surrounding circumstances known to or brought to the notice of the court, that in determining the validity or otherwise of such a statute the court has to examine whether such classification is or can be reasonably regarded as based upon some differentia which distinguishes such persons or things grouped together from those left out of the group and whether such differentia has a reasonable relation to the object sought to be achieved by the statute, and that where a statute directs its provisions against one individual person or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se different rates of taxation are prescribed for different categories of persons, transactions, occupations or objects. It is for the legislature to determine the objects on which tax shall be levied, and the rates thereof. The courts will not strike down an Act as denying the equal protection of laws merely because other objects could have been, but are not, taxed by the legislature. . . . " In K. T. Moopil Nair v. State of Kerala it has been laid down that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause in article 14, that if the legislature has classified persons or properties into different categories which are subjected to different rates of taxation with reference to income or property, such a classification would not be open to the attack of inequality on the ground that the total burden resulting from such a classification is unequal, that similarly, different kinds of property may be subjected to different rates of taxation, that so long as there is a rational basis for the classification, article 14 will not be in the way of such classification resulting in unequal burdens on different persons or classes of proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in section 34(1)(c) is violative of article 14 of the Constitution. As already stated, this section makes a classification between coparceners leaving lineal descendants and other persons. In the case of the coparcener dying leaving lineal descendants, the interest of his lineal descendants in the joint family property is clubbed with the interest of the deceased which passes on his death so as to form one estate for the purpose of levy of estate duty, while in the case of others the actual property passing on death alone is taken as the subject-matter of the levy. It is not in dispute that in the former case there is a higher tax burden. Admittedly, section 34(1)(c) singles out a coparcener having lineal descendants and imposes a higher burden by applying a higher rate of tax on the property passing on his death. The question is whether such differentiation between coparceners having lineal descendants and others in general in the imposition of estate duty has a reasonable relation to the object sought to be achieved by the Act. According to the revenue the said differentiation has such a reasonable relation to the objects of the Act. It is stated that one of the objects of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of the charging section. If there had been a deeming provision that the interest of the lineal descendants in the joint family property is deemed to pass on the death of the deceased, then it is possible to say that Parliament has positively intended to tax the lineal descendants' share also along with the coparcenary interest of the deceased passing on death. While the charging section does not bring the lineal descendants' share in the joint family to charge, the machinery section in section 34(1)(c) brings the same to charge in the guise of aggregation for rate purposes. It is well established that machinery sections cannot enlarge the scope of the charging section. It is true that though section 34(1)(c) clubs the interest of the lineal descendants in the joint family property with the interest of the deceased passing on death, tax is actually levied only on the interest of the deceased passing on death, as rebate is given under sub-section (2) of that section for the tax referable to the interests of lineal descendants. But, it cannot be disputed that section 34(1)(c) by including the lineal descendants' share also in the estate of the deceased brings about a differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It may be true that the tax effect is different depending upon the school of Hindu law by which the deceased was governed at the time of his death. If he was a member of the Dayabhaga family, the extent and value of the property passing on his death would be considerably more than what it would be if he had been a member of the Mitakshara family and, naturally, there is a higher burden of tax. But, that difference was entirely due to the fact that the personal law governing the deceased was different. The persons belonging to the Dayabhaga law are not persons similarly situate as members belonging to the Mitakshara law, for the right of inheritance and devolution under their personal law is entirely different, and to compare them with the members of a Mitakshara family who are governed by different rules of inheritance and devolution is to ignore a difference when there is one. As pointed out by the Supreme Court in State of A.P. v. Nalla Raja Reddy, a statutory provision may offend article 14 both by finding differences where there are none and by finding no difference there is one. When the share or extent of the coparcenary property passing on death is different, the tax burde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id concentration of wealth. The intention, scope and object of the Act has only to be gathered from the provisions of the Act. "Estate duty" has been defined under article 366(9) of the Constitution as "a duty to be assessed on or by reference to the principal value, ascertained in accordance with such rules as may be prescribed by or under laws made by Parliament or the Legislature of a State relating to the duty, of all property passing upon death or deemed, under the provisions of the said laws, so to pass." As we have already stated, the interest of the lineal descendants of the deceased in the joint family property has not been treated anywhere in the Act as the property passing or deemed to pass on death. The distinction between coparceners dying leaving lineal descendants and others in the matter of levy of estate duty and subjecting the lineal descendants of the Mitakshara joint family to a higher levy than to which they would normally be liable under the charging section clearly infringes article 14 of the Constitution and it is unreasonable to fix the rate of tax with reference to the interest of the lineal descendants of the deceased in the case of Mitakshara family es ..... X X X X Extracts X X X X X X X X Extracts X X X X
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