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TMI Blog1988 (2) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the intention of the deceased : " (c) Mari milkat ange je estate duty appvi pade mara executoroaye mari milkat mathi apvani chee. (p) Shaher Calcuttama mari Swatantra malikina makan avelu chee. Te makan no je mukhya darvajo chhe te darvajo pun mara executerone thik lage to Leelabai ane Purshottambhai Hatheesingh Visual Are Centre jo sharu thayalu hoi to teva Centre-ne mara executero-ne thik lage to sharte kul swatantra malik tarike mara executaro aapse ane jo teva centre-ne te darwaje aapvanu mara executero-ne yogya na lage to teva sanjog-ma mara executero tevo darwajo Shreemati Hatheesingh Tagore Charitable Trust-ne kul swatantra malik tarike aye sharte aapse ke sadarhu trust teva darwaja-ne museum-na ek bhag tarike rakhse. (q) Saher Calcuttama je makano mara rahethan mate upayog karvama aave chhe te makan tena mukhya darwaja sivayni aye rite-ni milkat mara executero-aye mari milkat angeni estate duty bharva mate mara executero-ne thik lage te sarato-thi ane thik lage te kimat-e vichavani chhe. Ane te mate mara executero-aye koyi court ni koyi parvangi levani raheshe nahi. Ane tevi milkatna vahechan-na aavej mathi mara executero-aye estate duty bharva mate karvani chhe. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO in including the capital gains on the aforesaid transaction. The reasonings given by the IAC in this regard are as under : " (1) The sale took place for the piece of land, during the accounting year 1980-81, i.e., A.Y. by the assessee ; had he not been the owner the Estate Duty Officer, would have effected sale, in view of this, the assessee was the owner as per his own act and conduct hence liable for capital gain. (2) The assesses himself has declared in his own wealth-tax return about owning of this piece of land by him on the date of the death of the lady, right from the A.Y. 1979-80 till the relevant assessment year. (3) Any Estate Duty tax is only tax upon the assessee, and cannot be allowed as a set off for reducing the sale price for the piece of land, for the purpose of calculation on capital gain, in accordance with any other provisions of law including income-tax. (4) Section 50B of the Estate Duty Act quoted by the assessee in support of the stand, I agree with the ITO that the same is irrelevant with regard to computation of capital gain under Income-tax Act. This section is about the benefit or reduction which the assessee gets under Estate Duty asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised in the name of Asstt. Controller of Estate Duty who in turn will adjust the demand of capital gains against the rebate of capital gain u/s 50B of the ED Act." 9. The learned counsel for the assessee reiterated the submissions which were made before the lower authorities and strongly urged that on the proper appreciation of the relevant provisions of the will left by the deceased (reproduced above) as well as the provisions contained in the conveyance deed (reproduced above), there was no scope of including Rs. 3,54,035 in the total income of the assessee. In this connection, he stressed the point that the capital gains had not arisen to the assessee at all as right from its inception the entire sales consideration was handed over to the Asstt. Controller of Estate Duty towards estate duty liability of the assessee on the principal value of the estate left by the deceased. Inviting our attention to section 74 of the ED Act, 1953, the learned counsel for the assessee stressed the point that the estate duty payable on the passing of the deceased was first charge on the immovable properties passing on her death. In this connection, he relied on the decision in the cases of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 48 of the Act contains the provisions for computation of capital gains. According to that section, the assessee would be entitled to claim deduction from the full value of the consideration in respect of any expenditure incurred wholly and exclusively in connection with a transfer of the capital asset and the cost of acquisition/improvement of such asset. Since in, the instant case, the estate duty paid to the Assistant Controller of Estate Duty was neither an expenditure incurred in connection with the sale of the property situated in Calcutta nor it is cost of acquisition/improvement, there was no question of not bringing to tax Rs. 3,54,035 under the head 'Capital gains'. He, therefore, urged that we should uphold the order of the Commissioner (Appeals). 11. The learned counsel for the assessee, in his reply, once again urged that since the capital gains had not arisen to the assesses and since the entire sale realisation was handed over to the Assistant Controller of Estate Duty towards the estate duty liability as per the provisions of the will of the deceased, the IT authorities ought not to have brought to tax Rs. 3,54,035 in the hands of the assessee. At this sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was by way of dividends from shares and interest on securities. M died on August 17, 1957, within two years of the execution of the trust deed, and the property comprised in the trust was includible in the property passing on the death of M which was liable to estate duty. The estate duty payable by the trustees, who were the assessees, was Rs. 8,25,300. The trustees paid the estate duty immediately on March 26, 1958, by borrowing the amount from the Bank of India Ltd. The trustees paid interest to the bank in the three assessment years 1959-60, 1960-61 and 1961-62 till the whole amount was repaid in 1962. The trustees claimed the amounts paid as interest as deduction against their income under the head ' Dividends ' and ' interest on securities '. The Income-tax Officer rejected the claim but it was allowed by the Tribunal. On a reference at the instance of the Commissioner : Held, that if an assessee had no option except to incur an expenditure in order to make the earning of the income possible, then undoubtedly the exercise of that option is compulsory and any expenditure by reason of the exercise of that option would come within the ambit of section 12(2). In the instant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the expenditure incurred and the earning of the income could be said to have been easily established. Therefore, the expenditure in the instant case would be a permissible deduction under section 12(2) of the Act." 14.1 On the bare reading of the facts and circumstances of the aforesaid case would clearly show that the facts and circumstances obtaining in the instant case are clearly distinguishable. Therefore, it is not necessary to discuss anything further in this regard. 15. The head notes in the case of C. V. Soundararajan read as under : " In a family partition, the assessees were allotted a property in which their mother was given a right of residence. In order to obtain a relinquishment of the said right of residence to enable them to sell the property, the assessees paid to their mother a sum of Rs. 60,000. In computing the capital gains arising on the sale of the property, the claim of the assessees for deduction of this sum of Rs. 60,000 was allowed by the ITO. Though the Commissioner exercising his suo motu powers of revision set aside the said order giving deduction, the Tribunal held that the money received by the mother was for extinguishment of her righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property in question sold by the assessee was free from any encumbrance. As per the provisions of section 74 of the Estate Duty Act, 1953, as already stated above, the " charge " was on the entire properties left by the deceased and not on the property situated at Calcutta. Under clause (c) of the will of the deceased it is stated that her executors should pay the estate duty on the principal value of the estate left by her. In this connection, in clause (q) of the will, the deceased had expressed her wish that such estate duty may be met by selling her property situated in Calcutta. It is pertinent to note that the conveyance deed has been executed between the assessee and the purchasers and the Assistant Controller of Estate Duty was not a confirming party to the said deed as it was not necessary to do so. The relevant portion of the deed of conveyance (reproduced above) only shows that the executors of the deceased are carrying out the desire expressed by the deceased in clause (q) of the will left by her. In other words, the said property cannot be said to be under "charge" as contemplated u/s 74 of the Estate Duty Act, 1953. Instead of receiving the sale proceeds from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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