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TMI Blog1974 (8) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... th, the Deputy Controller of Estate Duty calculated the compensation amount on the basis of Rs. 10,16,959 and levied duty on Rs. 6,30,628 after making the necessary deductions. The accountable persons contended before him that duty was leviable only on the balance of Rs. 5,21,241, which remained unpaid by the time of the death of the deceased. The Deputy Controller rejected this plea holding that the commutation amount was fixed only provisionally as stated by the assistant examiner of accounts and it was revise twice, the latest amount of compensation being Rs. 10, 16,959. So, according to his decision, this amount should form the basis for levying estate duty. The Appellate Controller affirmed this view and the accountable persons carried the matter in appeal before the Income-tax Appellate Tribunal, Hyderabad Bench. The Tribunal allowed the appeal and held that the balance amount due to the deceased as on the date of her death was only Rs. 2,73,649 and that alone should be treated as having passed on to the heirs on her death. At the instance of the department it referred the following question for the decision of the High Court : " Whether, on the facts and in the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsation even at the instance of the heirs cannot alter the fact that the enhanced compensation also is for the jagir, which belonged to teh deceased and which ws taken from her. So, estate duty is leviable on the amount now determined. On the other hand, Sri. B.V. Subbarayudu, for the accountable persons, endeavours to support the view of the Tribunal arguing that the enhancement was due to the efforts of the heirs and cannot, therefore, be treated as belonging to the deceased. Teh market value of the compensation as on the date of the death of the deceased shoul form the basis for levying the duty and if that was so on April 9, 1955, it could have fetched in the open market only Rs.2,73,649, the balance of commutation amount, which remained unpaid by that time. The reference necessarily raises the question as to what is the property that passed on the death of the deceased and whether the compensation enhanced subsequent to her death on more than one occasion is referable to that property by the heirs or something acquired by them by their own efforts ? The key for answering these questions has to be found not only from the Estate Duty Act but also from teh Hyderabad (Abolition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agement of the jagir to the jagir administrator and to furnish him with an account of, the revenue received and expenditure incurred on account of the jagir in the current or, if the jagir administrator so requires, in the immediately preceding year of account, in so far as such revenue and expenditure are attributable to that year. " Year of account " according to section 2(i) means the Fasli year, or where the accounts of a jagir are maintained according to a year of another era, the year according to that era. So, as per the requirement of section 5(2), the jagirdar is required to furnish the jagir administrator with an account of revenue and expenditure relating to the jagir in the year of transfer and if he is so required, for the immediately preceding year as well. Section 6 declares that from the appointed date, the jagir is included in the Diwani and it means that it ceases to have an independent or separate existence. Sub-section (8) of section 6 has a very material bearing on the question we are called upon to answer. It says : " If a jagirdar or hissedar dies, his share in the net income of the jagir, including his share in the Haq-e-Intazam, shall devolve in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e method for determining the commutation sum is fixed by the section as multiplication of the basic annual revenue of the jagir. That basic annual revenue has to be calculated in accordance with section 4 by the figures mentioned in the second column of the annexed table. Section 4 states that in order to arrive at the basic annual revenue, the gross basic sum shall firstly be ascertained in accordance with sub-section (2) of that section. Thereafter certain deductions are provided in the following sub-clauses. Sub-section (3) lays down that : " The gross basic sum shall be the average annual gross revenue of the jagir for the ten years opening with the year 1347 F. and ending with the year 1356 F." The proviso thereto is not important for the present consideration. The commutation sum has to be determined by the jagir administrator or by an Officer authorised by him, as per section 5(1). Sub-section (2) of section 5 enables the person aggrieved by such determination to prefer an appeal to the Government, which are empowered to either confirm the determination or revise it, in such manner as they think fit. Subject to the result of such an appeal, the determination of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge annual gross revenue of the jagir for the ten years opening with the year 1347 F. and ending with the 1356 F. This period of ten years, which is material for arriving at the gross basic sum, was before the transfer of the jagir itself. There is no other criterion excepting what is contained in sections 3 and 4 of the commutation Regulation for calculating the commutation sum. It consequently and necessarily follows that the enhancements made in 1959 and 1961 could have been made only with reference to the gross basic sum and the method of calculation laid down by sections 3 and 4 of the Commutation Regulations. It may be that the legal heirs of the deceased laid claims to enhancement of compensation after searching out the records and other materials from the court of wards and from the Government offices, as pointed out by the Tribunal. In fact the contention of the accountable person before the Tribunal, as seen from the statement of case, was that in fact subsequent to the death of the deceased, her legal heirs searched out specified material in the offices of the Government and the jagir abolition authorities and on the strength of such material received, they had filed clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, manifestly, this provision has no bearing on the question as to what exactly passes on the death of the deceased person. All the same, learned counsel's submission is that if Rani Ranganayakamma had chosen to sell her right in the commutation sum in the open market at the time of her death, she would have got only that price which would correspond to the unpaid balance of the commutation sum that had been already fixed. Reliance is placed on passages in Chaturvedi's Estate Duty Law, 1973 edition, at pages 491 and 496, V. Balasubrahmanyam's Law and Practice of Estate Duty, second edition, pages 429 and 430, Dymond's Death Duties, fourteenth edition, at page 571, 15th Volume of Halsbury Laws of England, paragraph 145. The sum of all these passages is that where there is in fact no open market for property, a hypothetical open market must be assumed. Indeed, that is exactly what section 36 provides. So, these passages do not render much help. It is argued that the value of the interest or property that passed has to be fixed as the amount which remained unpaid to Rani Ranganayakamma. This argument, in our opinion, is untenable. Obviously, the intendment of section 36 is to enable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anced compensation awarded by the civil court in respect of those lands. Thereupon, the widow filed a writ petition in this court under article 226, challenging the action of the Assistant Controller. One of the questions that fell for decision was whether the compensation enhanced after the death of the deceased person could be taken into consideration for assessing the estate duty. After referring to some decisions, Sriramulu J., rendering the decision of the court, observed at page 621 : "The right to receive compensation for the lands acquired by the Government at their market value on the date of acquisition is one and indivisible right. There is no right to receive compensation and a separate right to receive ' extra compensation '. The only right is to receive compensation for the lands acquired by the Government, which is the fair market value on the date of acquisition. The argument of the learned counsel that the right to receive extra compensation accrued when the civil court passed the order and not before, does not merit acceptance. The so-called right to receive extra compensation cannot be torn from or considered separately from the right to receive the market val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived compensation in her own individual right but has received the compensation in respect of the lands belonging to the deceased and in her capacity as the legal heir of the deceased, whose lands have been acquired. We, therefore, hold, for the elaborate reasons given in our order in writ petition No. 54 of 1970, that the right to receive the compensation for the lands acquired by the Government was a valuable right which could be sold in open market. That is ' property' which passed on the death of the deceased." We may also note two other decisions of this court which arose under the Wealth-tax Act and deal with the compensation that was paid under the Estates Abolition Act. In V. Chandramani Pattamaha Devi v. commissioner of Wealth-tax , Jaganmohan Reddy J.,- as he then was, and Gopala Krishnan Nair J. held that a person liable to pay a sum of money which is ascertainable only in the future constitutes a "debt" in law. Consequently, balance compensation payable under the Madras Estates Abolition Act, 1948, to a person whose estate has been abolished under the Act is an asset and is liable to be assessed to wealth-tax, even though the exact amount of compensation has to be as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re amount was fixed and later altered or only a part of it was fixed and the other part was fixed later, the question is whether the deceased person died entitled to the entire compensation amount, whether already fixed or to be fixed in future. There cannot be any doubt that the deceased person died entitled to receive the commutation sum whenever fixed. Learned counsel in his turn relies upon the decisions of the Jammu and Kashmir High Court in Controller of Estate Duty v. Kasturi Lal fain. In that case, compensation was paid to the heirs of a person dying in an air crash under the Carriage by Air Act, 1934. The court held that the compensation amount could not be included in the assets of the deceased person, holding that the deceased had neither any interest in the property nor was he in its possession either actually or constructively. Under the provisions of the Act, the compensation enures for the benefit of the members of the passenger's family and has nothing to do with the estate of the deceased. So, the compensation was held not liable to be assessed to estate duty. This is clearly a case of the compensation amount not at all belonging to the deceased person. In fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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