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TMI Blog1984 (11) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... ndivided family owned considerable movable and immovable properties. 5. On November 17, 1969, Smt. Sirigeri Thippamma, the petitioner before us, as the accountable person under the Estate Duty Act of 1953 (Central Act 34 of 1953) ( the Act ), filed a return before the Assistant Controller of Estate Duty, Hubli ( the Assistant Controller ), declaring the value of the estate passing on the death of her husband at ₹ 1,73,770. On June 15,1971, the Assistant Controller completed his assessment (exhibit-l) in which he included a sum of ₹ 1,53,303 as the share value of the lineal descendants of the Hindu undivided family for rate purposes under section 34(1)(c) of the Act and levied estate duty on the petitioner on that basis. Against the said order of the Assistant Controller, the petitioners filed an appeal in Appeal No. EDA 11 of 1971-72/HBL before the Appellate Controller of Estate Duty, Southern Zone, Madras ( the Appellate Controller ), who by his order dated October 31, 1972 (exhibit-2), disposed of the same giving certain minor reliefs with which we are not now concerned, but declining to interfere with the aggregation of the share value of the lineal descendants, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying leaving lineal descendants and others who are divided prior to their death from their lineal descendants, in the matter of estate duty and subjecting the estate of an undivided coparcener (leaving lineal descendants) of a Mitakshara joint family to a higher duty than would have been normally levied under the charging section, it is respectfully submitted, infringes article 14 of the Constitution. It is also unreasonable to fix the rate of tax with reference to the interest of the lineal descendants of the deceased in the case of Mitakshara Hindu joint family when that interest admittedly does not pass on the death of a deceased. There is no reasonable nexus between the object of the statute and the levy of the duty on the principle of aggregation. 13. Sri Sarangan has urged that section 34(1)(c) of the Act that chooses only the share value of lineal descendants of a Hindu undivided family for aggregation and consequent levy of higher duty under the Act, was violative of article 14 of the Constitution. In support of his contention, Sri Sarangan has strongly relied on a Division Bench ruling of the Madras High Court in V. Devaki Ammal v. Assistant Controller of Estate Duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perience gained in the working of that Act since its coming into force on October 15, 1953. The main amendments are intended to restrict some of the concessions which in the light of subsequent experience do not appear to be justified. Other amendments have been proposed to clarify assessment procedure, to facilitate collection of duty and also to provide for two appellate authorities. These latter amendments seek to bring the provisions of the Estate Duty Act, 1953, in line with those of the Indian Income-Act, 1922, the Wealth-tax Act, 1957, and the Expenditure-tax Act, 1957. 2. The Notes on Clauses explain the object underlying each of the important amendments proposed in the Bill. 18. The notes to clause 17 of the Bill setting out the specific reasons for substitution of section 34 and the introduction of section 34(1)(c), which is material for our purpose, read thus [See [1958] 33 ITR 119 : Clause 17 redrafts the provisions relating to aggregation for determining the rate of estate duty so as to bring under aggregation the interests in the joint family property of the lineal descendants of the deceased member as well. 19. The bill was referred to a select ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary for these cases. Section 34(1)(b) provides for aggregation of the value of agricultural lands that are not subject to estate duty under the Act. section 34(1)(c) of the Act provides for the aggregation of a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law as also the interests in the joint family property of the lineal descendants of the deceased member. Under the Act, as it originally stood prior to its amendment by the Amending Act, there were two rates of estate duty, one in the case of property, which consists of an interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law (vide Part I of the Second Schedule to the Act) and the other in the case of other properties (vide Part II of the Second Schedule to the Act). In the case of properties falling under Part I, the first slab exempt from duty was ₹ 50,000 and in the case of properties falling under Part II, the first slab exempt from duty was ₹ 1,00,000. The Amending Act abolished these distinctions and differences, introduced a uniform first exemption slab at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained the true meaning and scope of article 14 as follows : 'The provisions of article 14 of the Constitution have come up for discussion before this court in a number of cases, namely, Chiranjit Lal v. Union of India [1950]1SCR869 , State of Bombay v. F. N. Balsara [1951]2SCR682 , State of West Bengal v. Anwar Ali Sarkar 1952CriLJ510 , Kathi Raning Rawat v. State of Saurashtra 1952CriLJ805 , Lachmandas Kewalram v. State of Bombay 1952CriLJ1167 , Qasim Razvi v. State of Hyderabad 1953CriLJ862 and Habib Mohamad v. State of Hyderabad 1953CriLJ1158 . It is, therefore, not necessary to enter upon any lengthy discussion as to the meaning, scope and effect of the article in question. It is now well-established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification, two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differential which distinguishes persons or things that are grouped together from others left out of the group, and (ii) that that differentia must have a rational relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be constantly borne in mind by the court when it is called upon to adjudge the constitutionality of any particular law attacked as discriminatory and violative of the equal protection of the laws. 29. A close perusal of the decisions of this court in which the above principles have been enunciated and applied by this court will also show that a statute which may come up for consideration on a question of its validity under article 14 of the Constitution may be placed in one or other of the following five classes : (i) 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 the surrounding circumstances known to or brought to the notice of the court. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of West Bengal v. Anwar Ali Sarkar, 1952CriLJ510 ; Dwarka Prasad v. State of Uttar Pradesh [1954]1SCR803 and Dhirendra Kumar Mandal v. Superintendent and Remembrancer of Legal Affairs [1955]1SCR224 . (iv) A statute may not make a classification of the persons or things for the purpose of applying its provisions and may leave it to the discretion of the Government to select and classify the persons or things to whom its provisions are to apply but may at the same time lay down a policy or principle for the guidance of the exercise of discretion by the Government in the matter of such selection or classification; the court will uphold the law as constitutional, as it did in Kathi Raning Rawat v. State of Saurashtra,1952CriLJ805 . (v) A statute may not make a classification of the persons or things to whom their provisions are intended to apply and leave it to the discretion of the Government to select or classify the persons or things for applying those provisions according to the policy or the principle laid down by the statute itself for guidance of the exercise of discretion by the Government in the matter of such selection or classification. If the Government in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Law Ed. 590 : 'In taxation even more than in other fields, Legislatures possess the greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it.' 34. As Rottschaefer said in his Constitutional Law at p. 668 : A statute providing for the assessment of one type of intangibles at its actual value while other intangibles are assessed at their face value does not deny equal protection even when both are subject to the same rate of tax. The decisions of the Supreme Court in this field have permitted a State Legislature to exercise an extremely wide discretion in classifying property for tax purposes so long as it refrained from clear and hostile discrimination against particular persons or classes 35. The burden is on a person complaining of discrimination. The burden is proving not possible 'inequality' but hostile 'unequal' treatment. This is more so when uniform taxes are levied. It is not proved to us how the different plantations can be said to be 'hostilely or unequally' treated. A uniform wheel tax on cars does not take into ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me included in a class get an advantage over others, so long as they are not singled out for special treatment Taxation law is not an exception to this doctrine : vide Purshottam Govindji Halai v. Shree B. M. Desai 1956CriLJ129 and Kunnathat Thathunni Moopil Nair v. State of Kerala [1961]3SCR77 . But in the application of the principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification so long as it adheres to the fundamental principles underlying the said doctrine. The power of the Legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and Reasonable ways.' 38. In S. Kodar v. State of Kerala, [1975]1SCR121 , a Constitution Bench of the Supreme Court has expressed that the economic wisdom of a tax was within the exclusive province of the Legislature. Bearing these principles, it is necessary to examine the challenge of the petitioners based on article 14 of the Constitution. 39. We have earlier noticed the history and object of legislation leading to the introduction of section 34(1)(c) and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit on the manes of paternal and maternal ancestors. Another distinguishing feature relates to certain incidents of the joint family. According to the Mitakshara law, each son acquires at his birth an equal interest with his father, and on the death of the father, the son takes the property, not as his heir, but by survivorship. The position of the son or grandson in the Mitakshara is somewhat similar to that of sueheredes who under the Roman law are regarded as having a sort of dormant ownership in the estate of their father even during his lifetime. Their succession was not so much a succession as coming into the enjoyment of what in a sense had already partly belonged to them. According to the Dayabhaga school, the son does not acquire any interest by birth in ancestral property. His rights arise for the first time on the father's death. On the death of the, father, he takes such of the property as is left by the father, whether separate or ancestral, as heir and not by survivorship. Partition is another branch of law on which there is some radical difference between the two principal schools. 41. The Act as also the Hindu Succession Act of 1956 have not interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t consisting of Ramanujam and Ramaswamy JJ. noticing the earlier Division Bench ruling of that court in Ramanathan Chettiar's case [1970]76ITR402(Mad) , which had upheld the validity of the provision rejecting the very ground urged before them, has invalidated the same. The question is whether the principle in Devaki Ammal's case should be accepted. 47. We have stated earlier that the construction placed by their Lordships in Devaki Ammal's case [1973]91ITR24(Mad) , on the scope and ambit of section 34(1)(c) is not in accord with that provision and the Full Bench ruling of this court in Andal Thayaramma's case [1985]151ITR197(KAR) . With respect to their Lordships, we are of the view that the erroneous construction placed on the provision has necessarily led to an erroneous conclusion on the challenge based on article 14 of the Constitution. Even otherwise, every one of the reasons on which we have sustained the provision but have not been noticed and examined by their Lordships in Devaki Ammal's case [1973]91ITR24(Mad) , compel us, with respect, to dissent from the views expressed by their Lordships in that case and we do so accordingly. 48. On the forego ..... X X X X Extracts X X X X X X X X Extracts X X X X
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