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TMI Blog1972 (10) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... s was done after rejecting the contention of the petitioner that the interest of the deceased as a partner in the assets of the firm, both movable and immovable, situate in Malaysia, should be treated as " foreign property " and excluded from charge. Aggrieved against the order of assessment made by the respondent, the present writ petition has been filed. In this writ petition it is contended that the order of the respondent treating the interest of the deceased in the said foreign firm as a foreign movable and bringing it to charge under the provisions of the Act is ex facie illegal and without jurisdiction, that section 5 read along with the definition of the word " property " in section 2(15) enables a tax to be levied only on local " property passing or deemed to pass on the death of the person ", and that they will not enable the foreign property, either movable or immovable, being brought to charge. It is also contended that section 21, while dealing with foreign property passing on the death of the deceased, makes a distinction between movable and immovable property in the matter of imposition of the charge, that in respect of foreign movable property the charge is made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontentions, it is necessary to refer to the relevant provisions of the Act. Section 2(15) defines " property " as including any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale and also includes any property converted from one species into another by any method. We are not concerned in this case with the two Explanations to that definition. Section 5(1) which imposes the levy of estate duty is as follows: " In the case of every person dying after the commencement of this Act, there shall, save as hereinafter expressly provided, be levied and paid upon the principal value ascertained as hereinafter provided of all property, settled or not settled, including agricultural land situate in the territories which immediately before the 1st November, 1956, were comprised in the States specified in the First Schedule to this Act, which passes on the death of such person, a duty called 'estate duty' at the rates fixed in accordance with section 35. " Section 21 occurs in Part III of the Act dealing with exceptions from charge of duty and it is as follows: " 21. (1) There shall not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not any foreign property is, in our view, without any basis. Section 21 cannot be treated as a charging section so far as foreign movables are concerned as suggested by the learned counsel for the petitioner. In our view it is only a provision for exemption of certain properties from the charge under section 5. The exemption covers (1) foreign immovable property owned by the deceased, and (2) foreign movable property of the deceased if he was not a domicile of India at the time of his death. We are not inclined to accept the petitioner's contention that section 5 should be construed as not to have any extra-territorial operation and that, if so construed, foreign movables cannot be brought within the scope of the charging section even on the basis of the domicile of the deceased. The learned counsel refers to the decisions in Provincial Treasurer of Alberta v. C. E. Kerr and Union of India v. Harbhajan Singh Dhillon in support of his submission that the scope of the legislation is to be gathered from the charging section, that section 5 of the Act, which is the charging section, read along with the definition of " property " in section 2(15), operates only on the property in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te legislatures, and that decision cannot be construed as laying down that a sovereign legislature such as the Indian Parliament can make a law only with regard to a property situate within its territory. In Thangappan v. Subadra the court was concerned with relative legislative powers of two State legislatures which are not sovereign, and, therefore, it held that the State legislature had power to legislate only in respect of persons or properties within the State and that it had no power to legislate in respect of persons or properties situate within another State. That decision also cannot apply to the situation on hand, where we have to construe the legislative competence of a sovereign legislature. It is well-established that generally words in a statute are to be construed with reference to the powers of the legislature which enacts it. Lord Esher M.R. said in Colquhoun v. Heddon : " It seems to me that, unless Parliament expressly declares otherwise, in which case, even if it should go beyond its own rights as regards the comity of nations, the courts of this country must obey the enactment, the proper construction to be put on general words used in an English Act of Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the municipal court is concerned with is the competence of the legislature according to its constitutional powers, and even though it appears that it would not be possible to enforce the law outside the territory of the country, the municipal court cannot declare the law to be invalid on that account, but must enforce the law with the machinery available to it. It is true that, under international law, it is not competent for a State to enact laws in respect of foreigners beyond the jurisdiction of that State. But whatever be the weight of an extra-territorial law the municipal courts of the State which passed the law are bound to obey them, leaving it to the Government to justify its action with other countries. The Judicial Committee had expressed in British Columbia Electric Railway Co. v. King : " A legislature which passes a law having extra-territorial operation may find that what it has enacted cannot be directly enforced, but the Act is not invalid on that account and the courts of its country must enforce the law with the machinery available to them." Therefore, when a sovereign legislature, such as the Indian Parliament, expressly or impliedly manifests an intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of what has been stated above, let us consider the scope of section 5 read with section 2(15). There are no words either in the definition of " property " in section 2(15) or in section 5 to limit their operation to properties situate in India alone. Therefore, they have to be taken to cover all properties passing on death, whether they are located inside or outside the Indian territory. It is only by virtue of section 21(1)(a), immovable property situate outside India is excluded from the definition of " property passing on death of the deceased ". Similarly, by section 21(1)(b), movable property situate outside India is excluded from the charge, if the deceased was not domiciled in India at the time of his death. Section 21 is a provision for exception from the charge of duty and this corresponds to section 2(2) of the U.K. Finance Act of 1849 and section 24 of the U.K. Finance Act of 1936. But for the exception contained in section 21, all foreign properties, both movable and immovable, will come under the charge. As a matter of fact, section 28(1) of the U.K. Finance Act of 1962 extends the charge of duty to foreign movable property subject to certain minor exceptions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives rise to the charge. It is well established that under the private international law the State has got the right to levy estate duty on movable property situate within its territorial jurisdiction even if the deceased was a person domiciled abroad. It is also the recognised rule of international law that the law governing devolution of immovable property is lex situs and the law governing devolution of the immovable property is lex domicille, and it is this principle which is embodied in section 21(1) of the Act for determining the extent of the chargeability of foreign properties under the Act. According to section 21(1)(b), movable properties situate outside India are dutiable if the deceased was domiciled in India at the time of his death. We are, therefore, of the view that the petitioner's contention that section 21(1) so far as it refers to the domicile of the deceased at the time of his death as the basis for the chargeability of duty on foreign movables is invalid as being discriminatory, has no substance, and has to be rejected. In article 366(9) of the Constitution of India " estate duty " has been defined as a duty to be assessed on or by reference to the princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vable property, notwithstanding that the firm owns immovable property. It is said that the interest of a partner in a firm owning immovable property has been arbitrarily taken as a movable property with a view to bring such interest under the changing section read with section 21(1)(b). We find that the said rule merely restates the position under the general law. It has been held by the Supreme Court in Narayanappa v. Bhaskara Krishnappa that the interest of a partner in partnership property during the subsistence of the partnership is movable property even though the firm had immovable property as part of its assets and the reason for taking that view is that under section 29 of the Partnership Act, the partner has got only a right to receive the share of profits so long as the partnership subsists. In that case, their Lordships of the Supreme Court approved the view taken in Venkataratnam v. Subba Rao, wherein this court, after discussing all the relevant decisions on the point, both English and Indian, held that an unregistered deed of release by a partner of his share in the partnership business is admissible in evidence, even where the partnership owns immovable property and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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