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TMI Blog1986 (3) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... o as " the Appellate Controller ") and the order of the Tribunal. Late Haricharan Sahu died oil May 31, 1969. He was a member of a Hindu undivided family and the four accountable persons, namely, Durga Prasad Sahu, Bindeshwari Prasad Sahu, Sarju Prasad Sahu and Lakshmi Prasad Sahu, are the four sons of the deceased. The Assistant Controller computed the principal value of the estate of the deceased at Rs. 1,61,295 which represented the value of the properties belonging to the Hindu undivided family to which the deceased belonged. The Assistant Controller had found that the deceased had 1/6th share in the properties of the Hindu undivided family. According to the Assistant Controller, the duty was to be levied oil the 1/6th share at the rate applicable to the principal value of the estate formed by including the shares of the four sons of the deceased also. The Assistant Controller rejected the plea of the accountable persons that no duty was leviable as the total estate coming to the share of the deceased was below the dutiable limit. Reliance was placed on the case of Gunda Bhaskara Rao v. CED [1968] 67 ITR 309 (AP). A copy of the assessment order of the Assistant Controller has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the estate ascertained in accordance with the provisions of law. The Tribunal also held that the rate of estate duty is as per specification in section 35 read with the Second Schedule to the Act. The Tribunal also held that applying these provisions and the provisions of section 39 of the Act, the value of the interest of the deceased in the joint Hindu family, was less than Rs. 50,000. The Tribunal referred to the provisions of section 34 of the Act which provided for aggregation of various amounts so as to form one estate and estate duty has to be levied at the rate applicable in respect of the principal value of the aggregated estate. The Tribunal further referred to the Explanation to section 34(2) of the Act which provides that the property exempt from estate duty amongst other things meant the interest of all the coparceners other than the deceased in the joint family property of Hindu family governed by the Mitakshara law. The Tribunal also pointed out that section 35 of the Act also provides the rate with reference to the principal value of the estate and where the principal value of the estate does not exceed Rs. 50,000, the rate is prescribed as nil. Considering all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso fairly conceded by both the parties that under section 39(1) of the Act, the value of the benefit accruing and arising from the cesser of a coparcenary interest in the joint family property governed by the Mitakshara School of Hindu law which ceases on the death of member thereof shall be the principal value of the share in the joint family property which would have been allotted to the deceased had there been partition immediately before his death. Thus, it has to be held that the deceased would be entitled to 1/6th share which has been also accepted by the Assistant Controller, the Appellate Controller and the Tribunal. It has also been fairly conceded by both the parties that on May 31, 1969, when the deceased expired, according to the Second Schedule to the Act, where the principal value of the estate does not exceed Rs. 50,000, the estate duty payable will be nil. Thus, it is evident that no estate duty is payable on 1/6th share of the deceased, as the principal value of this share was below Rs. 50,000. In this connection, Mr. B. P. Rajgarhia has submitted that even though 1/6th share of the deceased is less than Rs. 50,000, if the share of the lineal descendants is aggreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes any property 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 section 34(2) of the Act lays down that for the purpose of this sub-section, " property exempt from the estate duty " means the interests of all coparceners other than the deceased in the joint family property of a Hindu family governed by the Mitakshara law. This clearly goes to show that no estate duty is to be paid on the interests in the joint family property of the lineal descendants of the deceased. Mr. B. P. Rajgarhia has also referred to section 35 of the Act which lays down that the rates of estate duty shall be as mentioned in the Second Schedule. On the basis of the aforesaid provisions, Mr. B. P. Rajgarhia has submitted that in the Second Schedule where it is mentioned that the duty up to Rs. 50,000 will be nil, it only means that no duty will be chargeable to that extent, but it does not show that it is exempt a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he joint family properties at Rs. 74,884. In this case, the question of aggregation naturally arose. If the share of the deceased is liable to estate duty, then it cannot be doubted that the principle of aggregation laid down in section 34 will be applicable. Of course, in this decision, it was held that section 34(1)(c) of the Act infringes article 14 of the Constitution and so it was declared ultra vires. However, Mr. B. P. Rajgarhia has relied on one observation in this judgment where it has been observed that it cannot be disputed that section 34(1)(c) of the Act brings about a different tax effect and imposes a higher tax burden on the property passing on death in case the deceased had left lineal descendants, notwithstanding the provisions in sub-section (2) and that this position is more apparent when the value of the interest of the deceased passing on his death is less than Rs. 50,000 as in such a case by the operation of section 34(1)(c), the lineal descendants' share is included with that of the deceased and estate duty becomes payable, while but for such inclusion no estate duty would become payable. This observation of the Madras High Court is only a reasoning and this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses in section 33(1) will be taken out to that extent. It was also given as a guideline that the aggregate of the remaining must be divided as if at the time of the death there was a partition and the share due to the deceased determined and the share so determined will be the share on which the duty could be imposed under the Act and no other, but in the case where the deceased had left behind lineal descendants, by virtue of the provision in section 34(1)(c), the extent of the shares of the lineal descendants of the deceased had to be aggregated to the share of the deceased in the property and the rate applicable to the aggregated value of that estate was to be taken into account, and then a reference was made to section 33(1)(n) of the Act. It was also mentioned in paragraph 12 of the judgment that on the facts of the case, the extent of the exemption in the house will be only to the extent of Rs. 85,000. It is not clear from this decision as to what was the value of the other properties which were liable to estate duty relating to the extent of the share of the deceased. Hence, this decision is also not helpful to the Revenue. In the case of Hari Ram v. Asst. CED [1975] 101 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the estate of the deceased co-parcener for the purpose of levying the duty thereon and that the addition was simply for the sake of working out a higher rate of duty and once that purpose is achieved, the interest is separated and no duty is levied on the interest of the other co-parcener, namely, the lineal descendants. This court held that section 34(1)(c) of the Act is valid. It is thus evident that in each of the decisions cited by Mr. B. P. Rajgarhia, the principal value of the estate of the deceased passing on the death of the deceased exceeded Rs. 50,000. He did not cite any decision where the principal value of the estate of the deceased passing on his death was less than Rs. 50,000 and even then it was held that section 34(1)(c) of the Act will be applicable. It cannot be doubted that where the interest of the deceased passing on his death exceeds Rs. 50,000, then certainly section 34 of the Act will be applicable in that case and it is only in such cases where the question arose as to whether section 34 of the Act was constitutional or not. Mr. K. N. Jain has relied on two decisions where specifically the question was considered where the dutiable estate of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done only for the purpose of determining the rate at which the property passing on his death should be assessed to estate duty, but this was subject to the condition that, independently of the aggregation, the property should have been liable to estate duty and since this condition was not fulfilled in this case, the property passing on the death of the deceased continued to be not liable to be charged to estate duty and the state of non-liability was not transformed into a state of liability by aggregation under section 34 of the Act. For this purpose, reliance was placed on the decision in T. R. Jayasankar v. Asst. CED [1972] 83 ITR 445. Probably, reliance was placed on the decisions in Sardarni Virpaul Kaur v. CED [1972] 85 ITR 45 (P H) and V. Devaki Ammal v. Asst. CED [1973] 91 ITR 24 (Mad) relating to the principle of aggregation discussed therein. In view of the decisions relied upon by Mr. K. N. Jain which specifically laid down that where the estate of the deceased passing is of a value less than Rs. 50,000 and is not chargeable to estate duty, then no aggregation under section 34 of the Act can be done. I agree with the decisions of the Kerala and Delhi High Courts, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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