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TMI Blog1975 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Act on his death. The Appellate Controller confirmed the assessment. In the appeal to the Appellate Tribunal it was contended that the amount did not form part of the estate of the deceased, since it was payable to the nominee direct and that the deceased had no disposable right over the amount. The restriction in the matter of nomination being confined to the members of the family of the subscriber was relied on in this context. The further submission was that the beneficiary had a vested right in the fund and that the amount did not form part of the estate of the deceased. Several decisions were relied on before the Tribunal. After considering all of them, the Tribunal also confirmed the assessment. At the instance of the accountable person the following question of law has been referred to this court : " Whether, on the facts and in the circumstances of the case, the amount of Rs. 1,04,794 paid to the widow of the deceased from the I.C.S. (Non-European Members) Provident Fund is liable to estate duty in the hands of the accountable person? " Mr. Swaminathan, the learned counsel for the accountable person, who is the son of the deceased, submitted that the deceased ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts officer, provided that he sent, along with such notice, a fresh nomination in accordance with the provisions of rule 5. If the nominee died and if there was no special provision as to what should happen on the death of such nominee, the subscriber had to send to the accounts officer a notice in writing cancelling the nomination together with a fresh nomination made in accordance with the provisions the Rules. Under rule 6A the amount standing to his credit in the Fund was liable to be withdrawn (a) for building a residence, (b) for meeting the cost of higher education of any child of the subscriber dependent upon him, (c) for meeting the expenditure in connection with the marriage of his daughter or other female dependant and (d) for meeting the expenditure in connection with the marriage of his sons. Rules 6B to 6F limit the amount to be withdrawn in such cases and prescribe the conditions to be satisfied in the case of such withdrawal. Rule 7 provides that subject to the conditions contained therein, the subscription to the Family Pension Fund may, at the option of a subscriber, be substituted for the the whole or part of the subscription to the Fund and that any amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strictions imposed by the Rules. This is thus a peculiar kind of property where the owner is put under some discipline so as not to fritter away the fund to his credit. If he were not the owner, he would not be in a position to deal with the Fund without reference to the nominee or in accordance with his own wishes within the field open to him. He is not required to take anybody's consent before he makes a change in the nomination. The learned counsel for the accountable person referred us to the Provident Funds Act, 1925. For the Controller of, Estate Duty, the submission was that this Act had no application, as the entire law relating to this Fund was to be gathered from the Rules framed by the Secretary of State under the Government of India Act, 1935. The Provident Funds Act, 1925, is a consolidating enactment relating to Government and other provident funds. " Government Provident Fund " has been defined in section 2(d) of the Act as meaning " provident fund, other than a Railway Provident Fund, constituted by the authority of the Secretary of State, the Central Government, the Crown Representative or any State Government for any class or classes of persons in the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le spoken of in section 5 of the Act is defeasible by change in the nomination, or the nomination becoming invalid by reason of certain happenings. The object of section is only to dispense with the requirements of a succession certificate or a similar authority to get the amount on the death of the subscriber. In other words, the nominee would be entitled to be paid on the death of the subscriber so long as the nomination is not varied or had not become invalid by reason of the happening of any contingency. Section 4 provides for the payment of the amount to the subscriber if he was alive on the date of the retirement. It is only in the event of the death of the subscriber that the nominee gets a title to the Fund. Thus during the lifetime of the subscriber the nominee's interest is only a contingent interest. The power to dispose of the fund, subject to the restrictions imposed by the Rules, is available to the subscriber till his death. The property in the Fund continues to be his till he dies. In fact, the language of section 5 of the Provident Funds Act is consistent (a) with the interest of a nominee being a future one, so that it is not available during the lifetime of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers) Provident Funds Rules into account, or both of them, the subscriber had a property in the Fund which passed on his death. The provisions of section 5 of the Estate Duty Act would, therefore, apply as property in the amount passed on his death. Section 6 would also apply, because the subscriber had power to change the nomination during his lifetime. He was, to that extent, competent to dispose of the Fund and there would be a deemed passing on his death in accordance with section 6 of the Act. Section 15 of the Estate Duty Act, 1953, contemplates a deemed passing where any annuity or other interest was purchased or provided by the deceased. The deeming is of the beneficial interest accruing or arising by survivorship or otherwise on his death. There was some discussion before the estate duty authorities on the question as to whether the words " other interest " in section 15 following the words " any annuity " were used in the ejusdem generis sense or not. In view of the fact that we are confirming the assessment by reference to sections 5 and 6, it is not necessary to go into this aspect in the present case. We may now consider some of the decisions to which our attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could have changed the nomination. When once it was statutorily vested, the Administrator-General could not, it was held, claim the fund. In the case of persons belonging to the Indian Civil Service it is doubtful if section 3(2) would have any application because there is an obligation under the rules to make an alternative nomination in case the nominee pre-deceased him or to make a fresh nomination on the death of the original nominee. What vests under section 3(2), even if it is taken to apply, is the amount that is to the credit of the deceased at the time of his death. In other words, the vesting is not at any earlier point of time. The learned judges of the Allahabad High Court had no occasion to consider the application of the provisions of the Estate Duty Act and, therefore, the observations cannot be taken as throwing light on the question before us. In Syed Abdul Azeez Khan v. W.J. Fowler, the immunity from attachment was held to be available even though the amount had become due to the subscriber and had also been directed to be paid to him, but had not actually been paid. The principle is that the amount continues to retain the character of a provident fund until a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because of the death. This is not the position here. The provident fund was very much in existence during the lifetime of the deceased. This case also has no application. The learned counsel for the accountable person attempted to argue that the sum of Rs. 1,04,794 should be treated as a separate estate which is not aggregatable. Section 34(3) of the Estate Duty Act provides that any property in which the deceased never had an interest is not to be aggregated with any property, but should be taken as an estate by itself. In such cases the estate duty is to be levied at the rate or rates applicable in respect of the principal value thereof. This point bad been taken before the Assistant Controller who held that in the present case the deceased had an interest in the Fund during his lifetime so that it would not be a case of the deceased never having an interest in the Fund to which section 34(3) applied. In the appeal before the Assistant Controller, this point was not obviously raised, as we do not find any discussion thereof in his order. The Tribunal also has not discussed this point because it was not raised before it. However, in the reference application the accountable per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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