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TMI Blog1975 (4) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... nd determined the rate of the estate duty payable on the property passing on his death. Feeling aggrieved, the petitioner filed an appeal before the Zonal Controller of Estate Duty. He substantially allowed the appeal of the petitioner on other controversies, but maintained the decision of the Estate Duty Officer on this question. The second appeal filed before the Income-tax Appellate Tribunal was also dismissed. As a result of the order of the Income-tax Appellate Tribunal, the petitioner was held liable to pay Rs. 96,846 as estate duty. But, if the shares of the male lineal descendants were not aggregated for rate purposes then the duty payable on the share of the deceased, which passed on his death, would have come to Rs. 57,925. Consequently, the petitioner asserts that the demand of Rs. 38,941 on account of aggregation is unjustified unconstitutional and illegal. Learned Advocate-General, appearing for the petitioner, has challenged the excess levy of the estate duty on the ground that the provisions of section 34(1)(c) of the Estate Duty Act, 1953 (hereinafter referred to as "the Act") providing for aggregation of the shares of lineal descendants with that of the deceased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ana law, Section 34 deals with aggregation. Section 34(1)(c), which alone is involved for interpretation in this case, may be reproduced. This is as follows : " 34. (1) For the purpose of determining the rate of the estate duty to be paid on any property passing on the death of the deceased,--...... (c) in the case of property so passing which consists of a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law, also the interests in the joint family property of all the lineal descendants of the deceased member ; shall be aggregated so as to form one estate and estate duty shall be levied thereon at the rate or rates applicable in respect of the principal value thereof. " Section 39(1) lays down that " the value of the benefit accruing or arising from the cesser of a coparcenary interest in any joint family property governed by the Mitakshara school of Hindu law which ceases on the death of a 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 a partition immediately before his death ". Section 40 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between persons and things. In order to have permissible classification the State is required to fulfil two pre-requisites ; firstly that the classification must be founded on reasonable differentia, and secondly, that the differentia must have the reasonable object sought to be achieved by the Act. These tests were laid down by the Supreme Court in Ram Krishna Dalmia v. Justice S. R. Tendolkar and were subsequently followed in a number of other cases. The field of fiscal legislation being peculiar, complicated and presenting special problems, the Supreme Court has laid down that the legislature has larger scope for classification in this regard. Dealing with the above problem, the Supreme Court held in State of Gujarat V. Ambika Mills Ltd. as under : " In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint, if not judicial deference to legislative judgment. The legislature, after all, has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically precise or logically complete or symmetrical classification :...... If the classification is rational, the legislature is free to choose objects of taxation, impose different rates, exempt classes of property from taxation, subject different classes of property to tax in different ways and adopt different modes of assessment...... A taxing statute is not, therefore, exposed to attack on the ground of discrimination merely because different rates of taxation are prescribed for different categories of persons, transactions, occupations or objects. " The challenge to the validity of section 34(1)(c) of the Act may now be considered in the background of the above principles. It may be worth noting that the Estate Duty Act, 1953, was enacted with the object to prevent concentration of wealth in few hands. It was further hoped that the imposition of estate duty may not only help in reducing unequal distribution of wealth, but in raising revenue as well needed for development schemes. Section 34(1)(c) was subsequently added by the Estate Duty (Amendment) Act, 1958, which came into force on the 1st July, 1960. There is nothing in the Bill introducing the amendment which could thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose persons who are alive. We do not find any merit in these contentions. Section 34(1)(C) of the Act does not levy any duty on the estate of the deceased. It enables aggregation of the interest of the male lineal descendants for the purposes of determining the rate at which the estate duty is leviable on the principal value of the interest of the deceased person. No estate duty is levied on the interest of the male lineal descendants. In our view, it is incorrect to say that the interest of his lineal descendants is clubbed with the interest of the deceased for the purposes of constituting or forming one estate for levying estate duty. Section 34(1)(c) of the Act does not purport to levy duty on the properties of the lineal descendants. As stated above, it has a limited and restricted purpose. Clubbing of value of two interests for the purposes of determining the rate on the property passing on the death of the deceased cannot be interpreted to have enlarged the scope of the charging section. Section 34(1)(c) only provides the machinery of determining the rate. It may be noted that there is no fixed or prescribed method in which alone the rates for payment of taxes can be fixed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the object of enacting section 34(1)(c) of the Act was to remove disparity in the incidence of estate duty on estates of persons belonging to those governed by Mitakshara, Marumakkattayam or Aliyasantana on the one hand and those governed by Dayabhaga or other personal laws, which do not recognise acquisition of interest by birth, on the other hand. The net value of the properties received in case of death of a person governed by the Mitakshara law was more than in the case of a person governed by Dayabhaga before the amendment. Section 34(1)(c) now enables the authorities to impose higher estate duty under the amended law. This results in narrowing the gap in the liability of estate duty. It is indisputable that the revenue system which most nearly approaches the equality is the best. Therefore, the amendment made with a view to achieve equality and uniformity must be held to have a nexus. Further, the amendment does not only help in achieving the object of removing the disparity to some extent, as stated above, but also in the ultimate purpose of removing unequal distribution of wealth. Learned Advocate-General submitted that in the absence of anything said in the Bill or in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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