1994 (11) TMI 131 - SC - Indian Laws

Whether section 34(1)(c) of the Estate Duty Act 1953 was not violative of article 14 of the Constitution? Held that - For determining that rate the interests of all the lineal descendants of the deceased in the joint Hindu family property are to be aggregated so as to form one estate and estate duty is to be levied at the rate applicable to the principal value thereof. Sub-section (2) of section 34 is put somewhat clumsily. It uses the expression property exempt from duty and its Explanation defines the expression to include the interests of all coparceners other than the deceased in the joint family property. Where therefore the estate referred to in clause (c) of sub-section (1) of section 34 includes the interests of coparceners other than the deceased which is the property exempt from estate duty the estate duty leviable on the property not exempt i.e. on the interest of the deceased shall be calculated by application of this formula what is the proportion of the value of the property not exempt to the value of estate that proportion of the amount payable on the estate is payable on the interest of the deceased. We see therefore no merit in the contention that section 34(1)(c) is violative of article 14 or that it is unconstitutional on that account.

Summary

Issues Involved:
1. Constitutionality of Section 34(1)(c) of the Estate Duty Act, 1953, in relation to Article 14 of the Constitution.
2. Judicial discipline in following precedents within the High Courts.
3. Aggregation of coparcenary interests for estate duty purposes under Section 34(1)(c).

Detailed Analysis:

Issue 1: Constitutionality of Section 34(1)(c) and Article 14
The primary issue revolves around whether Section 34(1)(c) of the Estate Duty Act, 1953, violates Article 14 of the Constitution, which guarantees equality before the law. The Madras High Court had conflicting judgments on this matter. In *Pl. S. Rm. Ramanathan Chettiar v. Asst. CED [1970] 76 ITR 402*, it was held that Section 34(1)(c) was not discriminatory and did not violate Article 14. Conversely, in *V. Devaki Ammal v. Asst. CED [1973] 91 ITR 24*, another Division Bench of the same High Court found Section 34(1)(c) to be discriminatory and violative of Article 14.

The Supreme Court noted that several High Courts, including the Kerala, Andhra Pradesh, Punjab, Allahabad, and Patna High Courts, have upheld the constitutionality of Section 34(1)(c) in various judgments. These courts have consistently found that the section does not violate Article 14.

Issue 2: Judicial Discipline in Following Precedents
The Supreme Court emphasized the importance of judicial discipline, stating that one Division Bench of a High Court should ordinarily follow the judgment of another Division Bench of the same High Court. If a later Division Bench finds it difficult to follow an earlier judgment, the proper course is to refer the matter to the Chief Justice for constituting a larger Bench. The Supreme Court criticized the later Division Bench of the Madras High Court for not adhering to this principle, especially since the earlier judgment had upheld the constitutionality of Section 34(1)(c).

Issue 3: Aggregation of Coparcenary Interests
Section 34(1)(c) deals with the aggregation of coparcenary interests in the joint family property of a Hindu family governed by Mitakshara, Marumakkattayam, or Aliyasantana law for estate duty purposes. The Supreme Court clarified that Section 34(1)(c) does not treat unequals equally. Instead, it provides a mechanism to avoid discrimination by ensuring that the rate of estate duty is applied uniformly to the aggregated value of the coparcenary interests.

The court referenced the judgment in *Pl. S. Rm. Ramanathan Chettiar [1970] 76 ITR 402*, which explained that without the principle of aggregation, there would be discrimination between members of a Mitakshara joint Hindu family and a Dayabhaga family. The Supreme Court also cited *V. Venugopala Ravi Varma Rajah v. Union of India [1969] 74 ITR 49*, which upheld the legislative discretion in classification for tax purposes, provided it adheres to the fundamental principles of equality.

The court concluded that the Mitakshara, Marumakkattayam, and Aliyasantana families form a distinct class, and the Legislature is entitled to provide for the aggregation of coparcenary interests for estate duty purposes. Section 34(1)(c) merely determines the rate of estate duty by aggregating the interests of all lineal descendants, ensuring uniform application of the tax rate.

Conclusion
The Supreme Court allowed Civil Appeal No. 71 of 1975, setting aside the judgment and order under appeal. It held that Section 34(1)(c) of the Estate Duty Act, 1953, is constitutional and does not violate Article 14. The court emphasized the need for judicial discipline and upheld the principle of aggregation for determining the rate of estate duty. The respondent was ordered to pay the appellant's costs fixed at Rs. 10,000. Subsequent appeals and petitions raising the same issue were also dismissed or allowed in line with this judgment.