1977 (4) TMI 50 - AT - Income Tax

Summary

Issues: Appeal against disallowance of claim under E.D. Act and addition of interest on gifts within two years of death.

Analysis:

Issue 1: Disallowance of claim under E.D. Act
The accountable person appealed against the disallowance of a claim of Rs. 38,000 under the provisions of Section 36(2) of the Estate Duty Act. The argument was based on Hindu law principles stating that until a partition takes place, a member does not have a vested right over a specific property. The Appellate Controller upheld the disallowance, citing Section 39(1) of the E.D. Act. In the appeal before the ITAT, the accountable person contended that joint ownership of immovable property affects its fair market value, referencing expert opinions. The ITAT considered the coparcenary interest of the deceased and recognized that an undivided share in a joint property does not fetch the same price as absolute ownership. They allowed a 10% deduction from the value as estimated in wealth-tax assessments, in line with Section 39(3) of the Act.

Issue 2: Addition of interest on gifts within two years of death
The second grievance was regarding the addition of Rs. 7,000 as the estimated amount of interest on gifts made within two years of the deceased's death. The Appellate Controller included this amount based on the deceased gifting a sum to his grandson, which was invested and accrued interest. The accountable person argued that the Department failed to prove the interest earned and that inclusion should not be based on estimates. The ITAT upheld the inclusion of interest, citing Section 34(4) of the Act, which mandates the inclusion of income accrued on property included in the estate. They found that income had accrued on the gifted amount until the deceased's death, supporting the Appellate Controller's decision.

In conclusion, the ITAT partially allowed the appeal, granting the accountable person a deduction for the joint property valuation but upholding the inclusion of interest on gifts in the deceased's estate as per the provisions of the Estate Duty Act.