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TMI Blog1974 (11) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1971, assessed the accountable person (Shri Hari Ram) by adding a sum of Rs. 2,32,824 representing 4/6th share of the lineal descendants of the deceased Sadhu Ram to the principal value of his estate for the purposes of rate in accordance with section 34(1)(c) of the Act. He also added a sum of Rs. 10,000 representing 4/6th share of the lineal descendants in the residential house. The assessment, however, is said to have been made on the principal value of the estate left by Sadhu Ram excluding the share of his lineal descendants and the widow. Against that order, the petitioner appealed to the Zonal Appellate Controller of Estate Duty, Delhi, under section 62 of the Act which was dismissed. The petitioner then filed an appeal before the Income-tax Appellate Tribunal under section 63 of the Act which was allowed in part on November 1, 1973. The Appellate Tribunal allowed a sum of Rs. 10,000 on account of medical expenses incurred on the illness of Shri Sadhu Ram before his death which had been disallowed by the lower authorities, but held that the value of 4/6th share in the joint Hindu family property and the residential house had been rightly included in the aggregate value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny interval, either certainly or contingently, and either originally or by way of substitutive limitation " and " on the death " includes " at a period ascertainable only by reference to the death ". Section 3(3) of the Act declares that references in the Act to property passing on the death of a person shall be construed as including references to property deemed to pass on the death of such person. " Property which is deemed to pass " has been described in sections 6 to 16 of the Act, out of which, for our purposes, only sections 6 and 7(1) are relevant. According to section 6 property which the deceased was at the time of his death competent to dispose of shall be deemed to pass on his death. Section 7(1) is in the following words : " Subject to the provisions of this section, property in which the deceased or any other person had an interest ceasing on the death of the deceased shall be deemed to pass on the deceased's death to the extent to which benefit accrues or arises by the cesser of such interest, including, in particular, a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law. Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll income accrued upon the property included therein down to and outstanding at the date of the death of the deceased. (5) For the purposes of this section, no property shall be aggregated more than once nor shall estate duty in respect thereof be levied more than once on the same death." Section 39 is also relevant for the purposes of determining valuation of interest in coparcenary property ceasing on death. Sub-sections (1) and (3) of this section only are relevant for the purposes of the instant case and read as under : " 39. (1) 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 ......... (3) For the purpose of estimating the principal value of the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law in order to arrive at the share which would have been allotted to the deceased had a parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of the revenue, reliance has been placed on an earlier judgment of the Madras High Court in Ramanathan Chettiar v. Assistant Controller of Estate Duty , which was noticed by the Bench deciding V. Devaki Ammal's case, but without any comment. However, on the basis of wider interpretation, which was projected by the revenue, the learned judges proceeded to determine the question of validity of section 34(1)(c) and gave their own reasons in support of the contrary view. Mr. D. N. Awasthy has also relied on the judgment of a learned single judge of the Kerala High Court in T. R.Jayasankar v. Assistant Controller of Estate Duty three Division Bench judgments of the Andhra Pradesh High Court in N. Krishna Prasad v. Assistant Controller of Estate Duty, Smt. Komanduri Seshamma v. Appellate Controller of Estate Duty, and N. V. Somaraju v. Government of India, for the contrary view canvassed by him. In Ramanathan Chettiar's case, it was contended that section 34(1)(c) of the Act was violative of article 14 of the Constitution and was, therefore, void inasmuch as its provisions were applicable only to cases of joint family governed by the Mitakshara law and not to the families govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same result is achieved as in the case of a member of a Dayabhaga Hindu family dying, assuming that the family consisted of members as we have assumed in the case of the Mitakshara Hindu joint family. It would follow, therefore, that there is no discrimination whatever brought about by section 34(1)(c) between members of a Mitakshara joint Hindu family and of a Dayabhaga family in the matter of application of rates of taxation." The learned single judge of the Kerala High Court in T. R. Jayasankar's case repelled the contention of discrimination with the following observations : " It is true that article 14 of the Constitution applies also to taxation law; but in view of the inherent complexity of fiscal adjustment of diverse elements in the matter of taxation, the legislature has a large discretion in picking and choosing the districts, objects, persons, methods and even the rates of taxation, so long as it adheres to the fundamental principles underlying the doctrine of equality before law and equal protection of the laws enshrined in article 14 of the Constitution. If a taxation law is based on a general classification, it cannot be attacked on the ground that it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration for the purpose of fixing the rate of estate duty, on the value of the property passing on the death of the coparcener by aggregating it with the value of the property of the share of the lineal descendant; (2) that by reason of the basic difference in the incidents attached to joint Hindu undivided family under Mitakshara and Dayabhaga schools, a father in a Hindu undivided family in Mitakshara school of law belongs to a class different from the father in the Hindu undivided family under Dayabhaga school of law; that the classification is based upon intelligible differentia which distinguishes one group of fathers from another group of fathers under the two schools of Hindu law and that the classification has also a nexus and reasonable relationship with the object for which the Estate Duty Act has been enacted. Therefore, section 34(1)(c) of the Act is not repugnant to article 14 of the Constitution" (as per the head-notes). The learned counsel for the petitioner in Smt. Komanduri Seshamma's case contended that : (1) Entry 87 of Lisit I of the 7th Schedule to the Constitution of India read with article 366(9) permits only the estate of the deceased to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. (3) Neither the Estate Duty Act nor section 34(1)(c) levies any duty on the share of the lineal descendant which does not pass on the death of a deceased. What it does is that it levies estate duty on the property passing on death. Only for the purpose of determining the rate at which the property passing on the death of the deceased has to be taxed, section 34(1)(c) has been enacted. For that purpose it says that the shares of the lineal descendants have to be aggregated with the property passing on the death of a deceased. How and at what rate tax is to be levied on the property of a deceased passing on death, is a matter which must be left to the legislature. Power to determine the rate of tax with reference to the property passing on the death of a deceased directly comes within article 366(9) of the Constitution and is included in the power to legislate on estate duty, under entry 87, in List I, of the 7th Schedule to the Constitution. (4) Merely on the ground that in a class, one gets an advantage over another in special and uncommon circumstances, a taxing statute cannot be struck down as offending article 14 of the Constitution, unless the law has singled out su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged. It is equally competent to levy estate duty on the property or interest deemed to have passed after the death of the father to the son. It is wrong to read anything in section 34 to mean that at the rate thus found out the entire estate including the property or interest of the son living is charged with estate duty. What is charged ultimately is the precise property or interest left by the father and which is deemed to have passed to the son. (2) The deeming provision in the definition of estate duty in article 366(9) of the Constitution is intended to cover property or interest which passed by the rule of survivorship under the Mitakshara Hindu law. (3) Section 34(1)(c) is not in any manner discriminatory between the Mitakshara father as against the brother or his sons. Between the same class there being no discriminatory treatment, article 14 cannot be said to have been attracted. The Mitakshara father has been placed on a somewhat advantageous position than a father under the Dayabhaga law. If that is so, then no Mitakshara father or Mitakshara son, to whose advantage the provision appears to be, can question the validity of section 34(1)(c) on the ground of disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in that article shall prevent the State from making a law based on reasonable classification founded on intelligible differentia having a rational relation to the objects sought to be achieved by the law. The following quotation was then reproduced from the judgment of the Supreme Court in Venugopala Ravi Varma Rajah v. Union of India , in order to bring out the principles laid down for determining in what cases a provision of a taxing statute violates article 14 of the Constitution : " Equal protection clause of the Constitution does not enjoin equal protection of the laws as abstract propositions. Laws being the expression of legislative will intended to solve specific problems or to achieve definite objectives by specific remedies, absolute equality or uniformity of treatment is impossible of achievement. Again tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several disparate elements. The courts accordingly admit, subject to adherence to the fundamental principles of the doctrine of equality, a larger play to legislative discretion in the matter of classification. The power to classify may be exercised so as to adjust th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher tax burden. Admittedly, section 34(1)(c) singles out a coparcener having lineal descendants and imposes a higher burden by applying a higher rate of tax on the property passing on his death. The question is whether such differentiation between coparceners having lineal descendants and others in general in the imposition of estate duty has reasonable relation to the object sought to be achieved by the Act. According to the revenue the said differentiation has such a reasonable relation to the objects of the Act. It is stated that one of the objects of the Act is to remove the inequalities in the concentration of wealth and to ensure a proper distribution of the same, and the objects and reasons set out in the original Bill Are referred to in this connection. It is also pointed out by Mr. Balasubrahmanyan for the revenue that the provision is mainly intended to remove the disparity in the levy of estate duty between the members of a Dayabhaga family and those of a Mitakshara family, that when a member of a Dayabhaga family dies, the property that passes on his death is that which belonged to his branch, but when a coparcener of a Mitakshara family dies leaving lineal descendants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery sections cannot enlarge the scope of the charging section. It is true that, though section 34(1)(c) clubs the interests of the lineal descendants in the joint family property with the interest of the deceased passing on death, tax is actually levied only on the interest of the deceased passing on death, as rebate is given under sub-section (2) of that section for the tax referable to the interests of lineal descendants. But it cannot be disputed that section 34(1)(c) by including the lineal descendants' share also in the estate of the deceased 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). This position is more apparent when the value of the interest of the deceased passing on death is less than Rs. 50,000. 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. Section 34(1)(c) virtually brings in property belonging to the lineal descendants to charge along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shara law, for the right of inheritance and devolution under their personal law is entirely different, and to compare them with the members of a Mitakshara family who are governed by different rules of inheritance and devolution is to ignore a difference when there is one. As pointed out by the Supreme Court in State of Andhra Pradesh v. Nalla Raja Reddy, a statutory provision may offend article 14 both by finding differences where there are none and by finding no difference where there is one. When the share or extent of the coparcenary property passing on death is different, the tax burden also has to differ. A member of a Dayabhaga family on whose death a larger extent or share of joint family property passes on death cannot be treated alike with a member of the Mitakshara family on whose death comparatively a lesser share of joint family property passes on death, and the liability for estate duty, which is an impost on the property passing on death, cannot be made equitable between the two without reference to the actual extent of property passing. If Parliament had intended to treat them alike, it would have made a provision that, on the death of a member of a Mitakshara joint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the joint family property has not been treated anywhere in the Act as the property passing or deemed to pass on death. The distinction between coparceners dying leaving lineal descendants and others in the matter of levy of estate duty and subjecting the lineal descendants of the Mitakshara joint family to a higher levy than to which they would normally be liable under the charging section clearly infringes article 14 of the Constitution and it is unreasonable to fix the rate of tax with reference to the interest of the lineal descendants of the deceased in the case of Mitakshara family especially when that interest does not pass on death. We are quite aware of the fact that Parliament has got a wider discretion in the filed of taxation to pick and choose persons or things and adopt different rates of taxation or to impose a varying tax burden. However, we are of the view that the legislature cannot overlook the definition of " estate duty" occurring in article 366(9) of the Constitution and the charging section as well as the deeming provisions contained in sections 6 to 16, and subject only the members of a Mitakshara family to a higher tax burden by aggregating the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y own language. With great respect to the learned judges of the Madras High Court, I find myself unable to agree with the arguments and conclusions arrived at by them. After a careful reading of the judgments of the Andhra Pradesh and the Kerala High Courts, I find myself, with respect, in complete agreement with the reasoning and the conclusions thereof and differing with the, view taken by the Madras High Court in V. Devaki Ammal's case , I hold that section 34(1)(c) of the Estate Duty Act is not ultra vires article 14 or 19(1)(f) of the Constitution. For the reasons given above, there is no merit in this petition which is dismissed. The parties are, however, left to bear their own costs. The dismissal of this petition is on the basis that the assessment has been made in accordance with section 34 of the Act, that is, the value of the shares of the lineal descendants of Sadhu Ram was aggregated with the other estate of the deceased for the purpose of determining the rate of estate duty only and that no estate duty has been levied thereon and that the estate duty has been levied out the estate which passed or was deemed to pass on the death of Sadhu Ram. If the order of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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