9911796707
TMI Blog1978 (7) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... Deceased's share in residential house 20,000 ------------- 21,000 21,000 ----------- Principal value 78,118 Add lineal decendants' share for rate purposes (34,100 x 3) 1,02,300 ------------- 1,80,418 -------------- Accordingly, estate duty was calculated and levied by the Assistant Controller. On appeal, the Appellate CED held that while determining under s. 39 of the Act the value of the share of the deceased, Rs. 80,000 which was the entire value of the residential house should, in view of s. 33(1)(n) of the Act, be first deducted and no part of its value should be taken into consideration even for purposes of s. 34(1)(c) of the Act. Accordingly, he allowed the appeal of the accountable person. The Income-tax Appellate Tribunal, Bangalore Bench, dismissed the appeal of the department. At the instance of the department, the following question of law is referred to this court under s. 64(1) of the Act : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the exemption under section 33(1)(n) of the Estate Duty Act, 1953, should be given due effect to while computing the principal value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 34(1)(c) for purposes of rate of estate duty. The relevant provisions of the Act which arise for consideration in this case are ss. 5, 7(1), 33(1)(n), 34(1)(a) and (c) and 39 of the Act. Sections 5 and 7(1) are in Part II of the Act which contains provisions relating to imposition of estate duty. Section 33(1)(n) is in Part III containing exceptions from the charge of duty. Section 34(1) is in Part IV dealing with aggregation of property and rates of duty and s. 39 is in Part V dealing with the principles governing the valuation of the property and interest of the deceased for purposes of levy of duty. By s. 5 estate duty is levied upon the principal value, ascertained as provided in the Act, of all property referred to therein which passes on the death of a person at the rates fixed in accordance with s. 35 of the Act. Section 2(15) of the Act 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. Sub-section (1) of s. 7 of the Act states that subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptember 23, 1963. 2. The items of property which are exempt from payment of estate duty under s. 33 are not like items of property which are not to be treated as part of the estate passing on the death of the deceased referred to in ss. 21 to 24 of the Act. Properties referred to in ss. 25, 26, 27, 28, 29, 32 and 33(1)(a) to (p) do pass on the death of the deceased but only estate duty is not payable in respect of them. 3. The words " property of any of the following kinds belonging to the deceased which passes on his death " in s. 33(1), which are decisive in this case, make it very clear that exemption can be claimed under that sub-section only in respect of that property, (1) which belongs to the deceased, and (2) which passes on the death of the deceased. In view of the foregoing even though " a house" is referred to in s. 33(1)(n), exemption can be claimed only in respect of the interest of the deceased in that house and not in respect of the whole house in which the surviving coparceners also have interest. Hence exclusion of the entire value of the house at the stage of valuation under s. 39 is not called for. The principal value of all the properties of the decease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 34(1)(c). It follows from the above discussion that only the value of the interest of the deceased in a house which forms part of his coparcenary is exempted from estate duty under s. 33(1)(n) and for purposes of aggregation under s. 34(1) whereas under cl. (a) thereof the value of the interest of the deceased in such house is excluded, under cl. (c) thereof the value of the interest of all the lineal descendants in such house has to be added for the purpose of rate of estate duty. Such a construction will not do any violence to s. 33(1)(n) also as exemption is given in respect of one house or a part thereof exclusively used by the deceased for residence under it. Even though certain items of property are mentioned in cls. (a) to (p) of s. 33(1) we have to construe them as having reference to the interest of the deceased in those items of property and not to interests of others. Property under s. 2(15) includes interest in property also. Reliance was placed by the learned counsel for the accountable person on a decision of the Andhra Pradesh High Court in CED v. Estate of Late Durga Prasad Beharilal [1979] 116 ITR 692, 694, in which it was held : " after giving exemption t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll in reckoning the value of the property that passed on the death of an individual. This section has to be applied in the case of individuals in their exclusive right as well as in the case of members of a joint Hindu family who by virtue of the fictions introduced by sections 7 and 39(1) are taken to have passed on properties on their death for the purpose of the Estate Duty Act. Naturally, it follows that in determining the total value of the properties of the Hindu family, these properties that are left out of account by the clear provisions under section 33(1) must also be left out for the purpose of determining the total value of the properties of the joint family. To make it clear, we would like to state that there is no charge at all on the exempted properties. It is as though that these properties are not taken into account at all for the purpose of the Act." When the above passage is read in isolation it may lend some support to the contention urged on behalf of the accountable person. The above reasoning is not quite consistent with the other portions of that decision. But in the earlier part of that decision at page 205, the High Court of Madras dealing with s. 39(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising for determination. Obviously, the answer is in the negative for the section very clearly, refers to the property which passes. The property which passed can only be the half share in the house and the exemption being only in respect of that property, nothing more than the value of the property can even be exempt. The limitation of Rs. 1 lakh provided by section imposes a restriction and that too will have to be applied if the interest that passes can be valued at over 1 lakh of rupees. But the exemption under this section on no account can exceed the value of the property which passed. If the value of the property exceeds Rs. 1 lakh, the exemption will be limited to Rs. 1 lakh. If the value of the property that passed is less than Rs. 1 lakh, the exemption would have to be limited to the value of the property. It is, therefore, clear on the facts of the case that the extent of the exemption is only Rs. 85,000." The other two decisions cited before us on behalf of the accountable person, CED v. Estate of late Sanka Simhachalam [1975] 99 ITR 370 (AP) and CED v. Jyotirmoy Raha [1978] 112 ITR 969 (Cal), do not have any bearing on the question at, issue. In these two cases, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the deceased and it passed on his death. In the case of a residential house belonging to the HUF, it is the share of the deceased which alone passes on his death. In the present case, the HUF consisted of two members only, viz., the deceased and his son. In view of s. 39 the share which will pass on the death of Damodar Das will be half. Thus, only a half share in the house could be said to belong to the deceased and it alone passed on his death. The properties mentioned in the various clauses of s. 33(1) are exempt from estate duty only in so far as they belong to the deceased and pass on his death. In the case of a residential house belonging to the HUF it is the share of the deceased which passes on his death. The value of such share alone in the residential house will be exempt from payment of estate duty under cl. (n). The Tribunal was in error in holding that the entire house was exempt under cl. (n). Section 34 deals with the aggregation of property for determining the rate of estate duty. As already seen only a half share in the residential house under cl. (n) was exempt. Clause (c) of s. 34(1) specifically provides that the interest in the joint family property of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solation without focussing its attention on the principal sub-s. (1) itself. Therefore, our answer to the aforesaid question is as follows : ' The Tribunal was not justified in holding that the value of the entire residential house occupied by Sri Sunder Lal, deceased, karta of his HUF, was exempt from estate duty and the share of the lineal descendants of the deceased was not includible for rate purposes in view of the provisions of s. 33(1)(n) read with s. 34(1)(a) of the E.D. Act, 1953. The half share of the lineal descendants of the deceased was liable to be included for the rate purposes in view of the provisions of s. 34(1)(a) and (c) of the E.D. Act, 1953'." We are of the view that the above two decisions of the Allahabad High Court lay down the law correctly. If the view canvassed by the accountable person is accepted even though the value of the deceased's share in the entire joint family property is only Rs. 34,100 exemption under s. 33(1)(n) will have to be given in respect of the whole house which is valued at Rs. 80,000. Truly this could not have been the intendment of the law. The answer to the question referred to us is, therefore, formulated thus : Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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