1982 (9) TMI 9 - HC - Income Tax

Issues Involved:
1. Inclusion of the value of the accountable person's half share in the family residential house in computing the value of his share in the family properties under Section 34(1)(c) of the Estate Duty Act.

Detailed Analysis:

Issue 1: Inclusion of the Value of the Accountable Person's Half Share in the Family Residential House

Background:
- Thiru Kamak Dharmaraj Nadar, the karta of a Hindu Undivided Family (HUF), died on September 19, 1970.
- The Assistant Controller of Estate Duty included Rs. 19,500, being the value of the accountable person's half share in the family residential house, in the total value of the joint family properties for estate duty purposes.
- The accountable person contested this inclusion, arguing that the value of his half share in the family residential house should be excluded.

Appellate Controller's Decision:
- The Appellate Controller held that the deceased's right was only a coparcenary interest in the joint family properties, and thus, Section 39(3) applied. Consequently, the value of the entire dwelling house should be excluded in determining the value of the lineal descendant's share in the joint family properties.
- The Appellate Controller reduced the value of the lineal descendant's share from Rs. 83,629 to Rs. 64,129.

Income-tax Appellate Tribunal's Decision:
- The Tribunal upheld the Appellate Controller's decision, stating that the value of the share of the lineal descendants should be computed only after excluding the value of their share in the family residential house.

Legal Interpretation:
- The core issue revolves around the interpretation of Sections 33(1)(n) and 39(3) of the Estate Duty Act.
- Section 33(1)(n) provides exemption from estate duty for a house used exclusively by the deceased for residence, up to a value of Rs. 1 lakh in urban areas or the full value in rural areas.
- Section 39(3) mandates that for estimating the principal value of joint family property, the entire property should be treated as belonging to the deceased.

Court's Analysis:
- The court emphasized that under Section 39(3), the entire joint family property should be treated as belonging to the deceased for the purpose of determining its principal value.
- The court noted that the exemption under Section 33(1)(n) should be applied to the entire value of the residential house when determining the principal value of the joint family property.
- The court referenced previous judgments, including CED v. Estate of late R. Krishnamachari, which established that the exemption should be applied to the entire house rather than just the deceased's share.

Conclusion:
- The court concluded that Rs. 19,500, being the value of the accountable person's half share in the family residential house, should indeed be excluded when computing the value of the deceased's share in the family properties.
- The question referred was answered in the affirmative and against the Revenue, affirming that the accountable person's half share in the family residential house should not be included in the value of his share of the joint family properties for estate duty purposes.

Order:
- The court ruled in favor of the accountable person, with no order as to costs.

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