1984 (8) TMI 101 - AT - Income Tax

Summary

Issues:
1. Constitutional validity of section 34(1)(c) of the Estate Duty Act, 1953.
2. Aggregation of interests of lineal descendants for calculating estate duty rate.

Detailed Analysis:

Issue 1: Constitutional validity of section 34(1)(c)
The appeal before the Appellate Tribunal ITAT BOMBAY-B pertained to the assessment of estate duty following the death of an individual who was a member of a Hindu Undivided Family (HUF) governed by the Mitakshara law. The primary contention revolved around the interpretation and application of section 34(1)(c) of the Estate Duty Act, 1953. This provision mandated the aggregation of interests of lineal descendants in joint family property for determining the estate duty rate. The Controller (Appeals) had earlier relied on decisions holding this provision unconstitutional, particularly citing the Madras High Court's ruling in V. Devaki Ammal v. ACED [1973] 91 ITR 24. The department, however, contended that various High Court decisions supported the constitutional validity of section 34(1)(c), including cases like N.V. Somaraju v. Government of India [1974] 97 ITR 97 and S. Devendra Singh v. CED [1982] 136 ITR 176. The Tribunal noted the conflicting views across different High Courts but emphasized the preponderant view favoring the constitutionality of the provision. It highlighted that the Supreme Court's dismissal of a special leave petition against a Madras High Court decision did not conclusively settle the matter, as the constitutional validity issue was still pending before the Supreme Court. Ultimately, the Tribunal decided to follow the majority view of High Courts supporting the validity of section 34(1)(c) and set aside the Controller (Appeals) order, reinstating that of the Assistant Controller.

Issue 2: Aggregation of interests of lineal descendants
The second key issue in the judgment was the aggregation of interests of lineal descendants in joint family property for estate duty calculation purposes. The Tribunal considered the conflicting decisions of various High Courts on this matter, particularly contrasting the Madras High Court's stance with that of other High Courts. Notably, the Tribunal highlighted that earlier decisions of the Madras High Court had supported the constitutionality of the provision in question. However, in light of the majority view among High Courts upholding the validity of section 34(1)(c) and the absence of a definitive Supreme Court ruling on the matter, the Tribunal opted to align with the prevailing judicial opinion favoring the constitutionality of the provision. This decision led to the rejection of the aggregation of interests of lineal descendants for estate duty rate calculation, in line with the Assistant Controller's approach. The Tribunal's analysis underscored the importance of following the predominant judicial interpretation on contentious legal issues, especially in cases where multiple High Courts have expressed divergent views.