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TMI Blog1986 (1) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ineal descendants) for rate purposes. 3. The accountable person challenged this order before the Appellate Controller contending that the shares of the lineal descendants could not be aggregated for rate purposes. The AAC followed the decisions of the Andhra Pradesh, Kerala, Punjab and the Allahabad High Courts and rejected this contention. When the matter came in appeal before the Tribunal, the Bench, hearing the appeals, noticed some decisions of the Tribunal on the question of aggregation of the interest of the lineal descendants under section 34(1)(c) of the Estate Duty Act, 1953 ('the Act') in which it was held that the interest of the lineal descendants could not be aggregated for rate purposes. Since the Bench did not agree with that conclusion, the matter was referred to the President for constituting a larger Bench and that is how the matter has come up before us. 4. We have heard the learned counsel for the assessee and also the learned departmental representative. The first point argued was regarding the constitutional validity of the provisions of section 34(1)(c). The only rulings, which have held that provisions are violative of the Constitution are the Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act only provided for the method by which the value of the benefit accruing or arising from the cessor of the coparcenary interest in the joint family property owned by the Mitakshara School of Hindu law had to be computed and that this provision applied only to the deceased member of the coparcenary but it made no provision as to how the interest of the lineal descendants had to be worked out. There being no such provision in the Act, the provision for aggregation becomes unworkable. That being the position, even though the provisions of section 34(1)(c) are constitutionally valid, they cannot be given effect to. 6. The learned departmental representative, on the other hand, contended that once the procedure for determining interest of the deceased coparcener was provided in section 39(1), in the same proceedings in which the interest of the deceased coparcener was determined, the interest of the lineal descendants would also be determined by deeming a partition of the family property immediately before the death. It was contended that it was not necessary to make any separate provision for determining the share of the lineal descendants because once the partition was deemed to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from one another and had received a share in the partition which had taken place during the lifetime of the deceased. The allotment of this share is not a procedural step devised merely for the purpose of working out some other conclusion. It has to be treated and accepted as a concrete reality, something that cannot be recalled, just as a share allotted to a coparcener in an actual partition cannot generally be recalled. The inevitable corollary of this position is that the heir will get his or her share in the interest which the deceased had in the coparcenary property at the time of his death, in addition to the share which he or she received or must be deemed to have received in the notional partition. This interpretation of the provisions of section 6 of the Act will further the legislative intent in regard to the enlargement of the share of female heirs qualitatively as well as quantitatively. Therefore, the widow's share in coparcenary property must be ascertained by adding the share to which she would be entitled at a notional partition immediately before her husband's death and the share which she would get in her husband's interest upon his death." 8. The provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest inherited by her in the family property gets fixed on the death of the male member under section 6 and that she acquires an indivisible interest in the specific share of the family property which would remain undiminished whatever may be the subsequent changes in the composition of the membership of the family. The same would be the effect so far as the share of male members of the family are concerned under section 6 (Explanation 1). The contention of the learned counsel of the accountable person that provisions of section 34(1)(c) are unworkable is, therefore, untenable. Therefore, the same is rejected. 12. It was then urged on behalf of the accountable person, following the decision of the Calcutta High Court in Satyanarayan Saraf v. ACED [1978] 111 ITR 432, that for determining the interest of lineal descendants under section 34(1)(c), a notional partition not only of the bigger HUF but also of the smaller HUFs is contemplated and on such a partition of the former HUF, the wife of the son of the deceased would be entitled to a share equally to that of her son and, to the extent of the share of the wife of the son, the same could not be aggregated under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h on a reference of exactly the same question, i.e., aggregation of the interest of the lineal descendants under section 34(1)(c) and hold that the authorities below were correct in aggregating three-fifth share of three sons with that of the deceased. The question referred to the Special Bench is, accordingly, answered in favour of the revenue. 16. We now proceed to dispose of the remaining points in the appeals both by the department and the assessee. In the assessee's appeal, the first ground pertains to the valuation of goodwill of Bombay Metals Syndicate and of Mehta & Co. The deceased had 18 per cent share in the goodwill of the Bombay Metals Syndicate at the time of his death, though before 4-1-1971 his share was 23 per cent. On 4-1-1971, the grandson of the deceased was taken in as a partner with 10 per cent share, while the share of the deceased was reduced by 5 per cent and that of the deceased's son, i.e., new partner's father, was reduced by the remaining 5 per cent. No gift-tax proceedings were, however, taken so far as 5 per cent share of the new partner's father is concerned. When the deceased died, the Assistant Controller treated 5 per cent share taken (sic) by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the share in the business and, subsequently, increasing the share. Therefore, there was no gift of goodwill or tenancy rights. In Raman Lal Nagji and Dhirajlal Nagji [1979] 118 ITR 785 (Bom.) the deceased took in his son as a partner in his proprietary business but retained the goodwill to himself. Thereafter, a fresh partnership deed was executed reshuffling the shares of partners and deleting the clause regarding the goodwill. Subsequently, new partners were also admitted. The High Court held that there was no gift by the deceased to other partners of the goodwill and there was adequate consideration for parting with goodwill by the deceased. Devotion of time, energy and attention by the other partners was adequate consideration. In CGT v. Smt. Lalita B. Shah [1979] 118 ITR 794 (Bom.), the assessee had been working as a chartered accountant for several years and when his son passed C.A. examination, he employed him and, subsequently, he was taken as a partner and his share was 40 per cent, while the assessee retained 60 per cent. The son was to work whole-time whereas the assessee was not obliged to attend to the business any more than what he thought proper. In consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to the minors on their admission to the benefits of the partnership as a result of agreement amongst the three partners the manner in which the quantum of shares had been readjusted clearly showed that it was the share of the erstwhile partner which had been reduced with a view to conferring rights on the minors, the High Court held that the question whether there has been a gift of a share in the goodwill of the firm to his minor sons would depend on the determination of two specific questions, viz., (i) whether the value of the assets of the old firm, including the goodwill, exceed its total liabilities; and (ii) whether the incoming partner or partners who had been admitted to the benefits of partnership (i.e., the minors) had brought in any capital. If the assets, except the goodwill, did not exceed the liabilities, then there could be no gift in the case of the goodwill. If any partner had contributed capital, there could not be any gift of goodwill. It would appear that the view taken by the Bombay High Court in this case is somewhat at variance with the view taken in other cases discussed earlier. 19. The Madras High Court in Addl. CGT v. A.A. Annamalai Nadar [1978] 113 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is upheld. 23. Ground No. 3 regarding the claim under section 33(1)(n) of the Act, has not been pressed. 24. Ground No. 4 has already been disposed of because that was the ground referred to the Special Bench. 25. Ground No. 5 pertains to the claim of deduction in respect of estate duty liability. The claim of deduction of the estate duty liability has rightly been rejected in view of the decision of the Karnataka High Court in K. Bhoomiamma v. CED [1978] 115 ITR 703 and the Andhra Pradesh High Court in CED v. Estate of Late Omprakash Bajaj [1977] 110 ITR 263. We, therefore, uphold the order of the Controller (Appeals) in this regard. The assessee's appeal is, accordingly, dismissed. 26. In the departmental appeal, the first two grounds pertain to the reduction in the computation of the goodwill of the two firms and also in respect of the gift of goodwill. Both these grounds fail for the reasons given by us while discussing the same issues in the appeal by the accountable person. 27. The deceased had one-half share in the residential house at Amreli in Gujarat known as 'Jaya Nivas'. This house was purchased by him jointly in 1966 with his wife for a sum of Rs. 55,000 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the Assistant Controller has worked out the share of the deceased did not really exist on the date of death because the development rebate reserve as available on 19-10-1971 had not been credited till the date of the death. The order of the Controller (Appeals) is, therefore, correct and is upheld. 31. The last ground pertains to the exclusion of the value of the LIC policy. The only reason why the Controller (Appeals) has excluded the value of the LIC policy is that the policy was assigned to his wife on the very date it was purchased, as per the letter of the LIC, and, therefore, it could not be said that the policy was kept up by the deceased under section 14 of the Act. The correctness of this order has been challenged before us. 32. Having heard the contentions on both the sides, we are of the opinion that the order of the Controller (Appeals) is erroneous and unsustainable. The mere fact that the policy of insurance had been assigned by the deceased to his wife does not mean that the amount of insurance does not pass on the date of death. Section 14(1) lays down that the money received under the policy of insurance effected by any person on his life, where the policy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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