1975 (5) TMI 3 - HC - Income Tax

Summary

Issues Involved:
1. Maintainability of the application by the Union of India for payment of sale proceeds towards estate duty.
2. Existence and enforcement of a statutory charge under Section 74(1) of the Estate Duty Act.
3. Validity of the mortgage and subsequent sale of properties in execution of a mortgage decree.
4. Rights of the auction purchasers vis-`a-vis the statutory charge.
5. Release of properties from the statutory charge under Section 74(3) of the Estate Duty Act.

Issue-wise Detailed Analysis:

1. Maintainability of the Application:
The Union of India, through the Assistant Controller, applied for an order directing the Registrar to pay Rs. 99,500 from the sale proceeds towards the estate duty liability of Jiban Krishna Mitter's estate. The plaintiff contended that the application was not maintainable and misconceived, arguing that the sale of the properties was subject to a statutory charge under the Estate Duty Act, affecting the rights of the purchasers who were not parties to the application. The court found that technical objections regarding the form of the application should not prevent the enforcement of statutory provisions for public revenue collection. The court emphasized the inefficiency and inaction of the estate duty authorities but ultimately held that the application in its present form was not maintainable and dismissed it.

2. Existence and Enforcement of a Statutory Charge:
The court highlighted that the properties in question were subject to a paramount statutory charge under Section 74(1) of the Estate Duty Act, which states that estate duty payable in respect of property passing on the death of the deceased shall be a first charge on the immovable property. The court noted that any private transfer of such property is void against any claim for estate duty. The court emphasized that the statutory charge remains effective unless released by the Controller under Section 74(3), which was not done in this case. Therefore, the statutory charge on the properties remained enforceable.

3. Validity of the Mortgage and Subsequent Sale:
The mortgage created by Prakash Krishna Mitter in favor of the plaintiff was deemed a private transfer and thus void under Section 74(1) of the Estate Duty Act. The court held that the mortgage and subsequent sale in execution of the mortgage decree could not invalidate the statutory charge. The court stated that the auction purchasers could not claim the properties free from the statutory charge, as the mortgage itself was void. Consequently, the sale in execution of the mortgage decree was also declared void.

4. Rights of the Auction Purchasers:
The auction purchasers argued that they were bona fide purchasers for value without notice of the statutory charge and that their rights could not be affected. The court, however, held that the statutory charge under Section 74(1) made all private transfers void as against the claim for estate duty. The court emphasized that an auction purchaser in a court sale takes the property subject to all defects of title, including statutory charges. Therefore, the auction purchasers' rights were not protected against the statutory charge.

5. Release of Properties from the Statutory Charge:
The court examined whether the properties were released from the statutory charge under Section 74(3) of the Estate Duty Act. It found no evidence that the Controller had exercised his discretionary power to release the properties. The mere apportionment of estate duty liabilities among accountable persons did not amount to a release of the properties from the statutory charge. The court reiterated that there could be no estoppel against a statute and that the statutory charge remained enforceable.

Conclusion:
The court dismissed the application by the Union of India, holding that it was not maintainable in its present form. The mortgage and subsequent sale of the properties were declared void as against the statutory charge for estate duty. The court emphasized the need for strict compliance with statutory provisions for the release of charged properties and highlighted the inefficiency of the estate duty authorities in enforcing public revenue collection. The court allowed the Union of India to take appropriate steps for enforcement of the statutory charge against the properties through due process of law.