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TMI Blog1981 (4) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... wo, that it had been shown that " the cash in hand, cash at bank, book debts, business profits, rent and share of the deceased in the firm of Ramnarain Lal Beni Madho amounted to ₹ 4,57,462 which amount was more than sufficient to pay the entire estate duty demand ". On the other hand, the respondent contended in his reply-affidavit that he had no liquid cash to to pay the estate duty as it had been invested in business. But there appears to have been no further probe into the question. It is also obvious that the Board proceeded on the assumption that its discretion was unfettered even by considerations relevant to administrative law. In these circumstances, we feel that there was no proper exercise of the discretion by the Board. - - - - - Dated:- 23-4-1981 - Judge(s) : E. S. VENKATARAMAIAH., R. S. PATHAK JUDGMENT The judgment of the court was delivered by VENKATARAMIAH J.-The question which arises for consideration in this appeal by special leave is whether under s. 52 of the Estate Duty Act, 1953 (hereinafter referred to as " the Act "), the Central Govt. is bound to accept in satisfaction of the whole or any part of the duty payable under the Act at such price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in respect of whose estate, duty was payable under the Act in discharge of the whole or part of such duty and that it imposed a reciprocal obligation on the Central Govt. to accept such property and adjust its price as may be agreed upon between the Central Govt. and the accountable person towards the duty payable. He further contended that the Central Govt. had no right to refuse to accept the offer so made by the accountable person and that he having made the offer to pay the duty by transfer of the property in question he could not be compelled to pay the duty to the extent of its price. He, therefore, prayed for the issue of appropriate directions to the Central Govt. to comply with s. 52 of the Act accordingly. On behalf of the Union Govt it was, inter alia, urged that it was not bound to accept an offer made under s. 5 2(1) of any property and it was within the discretion of the Union Govt. to reject the offer. The High Court held that if the accountable person exercised the option to pay estate duty by transferring property, the Central Govt. could not refuse to accept the offer and insist upon payment by, another mode when there was agreement about the price betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time when the Act was enacted,'could be introduced into the' Act, it was not accepted by the Indian Finance Minister. Section 49 of the British Finance Act, 1946 (9 10 Geo 6c, 64), provided that the Commissioners of Inland Revenue could accept any property unders s. 56 of the Finance (1909-10) Act 1910, in satisfaction or part satisfaction of any estate duty and amended the latter Act accordingly. Section 56(1) of the British Finance (1909-10) Act, 1910, which was again amended by the British Finance Act of 1949, read thus: "56. (1) The Commissioners may, if they think fit, on the application of any person liable to pay estate duty or settlement estate duty, accept in satisfaction of the whole or any part of such duty any such real (including leasehold) property as may be agreed upon between the Commissioners and that person. " The legal position in the United Kingdom as it existed in 1965, in so far as transfer of real and leasehold property in payment of estate duty is concerned is summarized in Dymond's Death Duties (14th Edn.) at pages 720-791 thus : " D.-Transfer of Property In Payment of Duty (1) Real and leasehold property By s. 56(1) of the Finance (1909-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more or less the same even after the former estate duty was replaced by the new tax known as capital transfer tax by the British Finance Act, 1975 (vide section 22 of the Finance Act, 1975). The relevant part of paragraph 17 of Schedule 4 to that Act reads thus: " 17. (1) The Board may, if they think fit, on the application of any person liable to pay tax, accept in satisfaction of the whole or any part of it any property to which this paragraph applies. (2) This paragraph applies to any such land as may be agreed upon between the Board and the person liable to pay tax. (3) This paragraph also applies to any objects which are or have been kept in any building (a) If the Board have determined to accept or have accepted that building in satisfaction or part satisfaction of tax or estate duty, or ...... .. (See Halsbury's Statutes of England (Third Edition) Vol. 45, at page 1870) Section 52 of the Act was substituted by a new section 52 by the Direct Taxes (Amendment) Act, 1964. The new section reads thus: " 52. Payment of duty by transfer of Property.-(1) The Central Government may, on an application of the person accountable for estate duty, accept in satisfaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order." Let us now analyse s. 52 of the Act. A proceeding under s. 52 does not commence until an application is made by the person accountable for estate duty. It is entirely at his option whether a property passing on the deceased should be transferred so that its price can be adjusted towards payment of the estate duty. The Central Govt. cannot compel him to do so. When the accountable person voluntarily applies to the Central Govt., the section says that the Central Govt. may accept the property offered in satisfaction of the estate duty at such price as may be agreed upon between it and the accountable person. Section 52 of the Act does not say that the Central Govt. shall do so but it may do so. The question in this case is whether the Central Govt. is bound to do so. We shall revert to this question later on. Then the price of the property has to be agreed upon between the Central Govt. and the accountable person. The price so agreed upon should naturally relate to the date on which the agreement takes place and it cannot certainly be the principal value of the property determined in the estate duty proceedings. This provision may perhaps indirectly act as a deterrent aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the Central Govt. is bound to accept a property offered by the accountable person under s. 52 and initiate proceedings to settle its price by negotiation. The language of the statute prima facie does not compel the Central Govt. to do so. The section is in the nature of an enabling provision which authorises the Central Govt. to accept a property in lieu of estate duty payable subject to the conditions mentioned in it. It is true that even enabling words in statute which confer a discretionary power may have to be interpreted as compulsory where they amount to words clearly intended to effectuate legal right. But, ordinarily, such words are permissive only. In the instant case the very fact that there is a need for an agreement upon the price of the property between the Central Govt. and the accountable person makes the power of the Central Govt. under s. 52(1) of the Act discretionary and permissive. Any other meaning may lead to impractical and incongruous result. The Central Govt. cannot be compelled to accept the property in discharge of the estate duty when no agreement is possible on its price, and when law does not provide for a machinery to determine the price when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in good faith by addressing itself to the matter before it and should not allow itself to be influenced by extraneous and irrelevant considerations.- The question should not be disposed of in an arbitrary or capricious way. In this case, the court can only ask the authority concerned to exercise the discretion vested in it but it [the authority] cannot be asked to exercise it in a particular way. On this question , we approve the decision of the Andhra Pradesh High Court in Chella Rama Bhupal Reddy v. Central Board of Direct Taxes [1977] 108 ITR 695. The true legal position may be summarised thus. : What s. 52(1) does is to set forth one more mode in which estate duty may be recovered. It is a provision made specially for the recovery of estate duty. It enables the Government to recover the duty in accordance with that mode. The other statutory modes prescribed under s. 51 and specified in the Rules are those where recourse by the accountable person obliges the revenue to accept the payment made in any of those modes and to treat it, by compulsion of statute, as satisfaction of the dues. The peculiarity of the mode provided under s. 52(1) is that while recourse to it by the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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