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TMI Blog1987 (5) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Dr. Raja Sir M.A. Muthiah Chettiar of Chettinad, Chettinad House, Raja Annamalaipuram, Madras. He died on 24-1-1970 leaving behind his wife Kumara Rani Smt. Meenakshi Achi, mother Rant Meyyammai Achi, besides father Dr. Raja Sri M.A. Muthiah Chettiar and brother Dr. M.A.M. Ramaswamy. On his death 1/3rd share in the property of the Hindu undivided family devolved on his legal heirs in terms of proviso to motion 6 of the Hindu Succession Act, 1956 and this has been duly accounted for by the accountable person in accordance with section 7(1) of the Estate Duty Act, 1953. The estate duty attributable to the estate Passing on death was Rs. 8,57,050. The properties of the Hindu undivided family, were not physically divided. In the original assessments made it would appear that just as 1/3rd of the property of the Hindu undivided family falling to the share of the deceased was excluded from the net wealth of the Hindu undivided family for them years so also 1/3rd of the estate duty liability was excluded by the Wealth-tax Officer. Subsequently by rectificatory orders the Wealth-tax Officer excluded totally the estate duty liability from the net wealth of the Hindu undivided family fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on his death in terms of proviso to section 6 of the Hindu Succession Act. Further he contended that section 2(m) does not mention estate duty payable as it is concerned with tax, penalty and interest and rule 35A of the Tribunal Rules specifically provides for filing of separate stay petition regarding recovery of estate duty in contradistinction with income-tax, Interest and penalty. Referring to the decision of the Allahabad High Court in the case of Maharani Raj Laxmi Kumari Devi v. CED [1980] 121 ITR 1002, he submitted that the function of proviso to section 6 of the Hindu Succession Act was not to effect a disruption in a coparcenary family but it creates a fiction only for the purpose of fixing the persons who are entitled to succeed to the property of the deceased coparcener. Therefore proviso to section 6 of the Hindu Succession Act does not effect a partition by operation of -law. He then referred to the decision of the Gujarat High Court in the case of CWT v. Kantilal Manilal [1973] 90 ITR 289, for the proposition that the property that devolved on the legal heirs was a specific share in definite ascertained properties subject of course to payment of proportionate share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 6 of the Hindu Succession Act does not effect a disruption in a coparcenary family and only creates a fiction for limited purpose. The fiction is created for the purpose of fixing the persons who are entitled to succeed to the property of the deceased coparcener that is for the purpose of laying down the succession. The fiction is limited in scope and does not effect a partition by operation of law. This is what has been observed by their Lordships of the Allahabad High Court in the case of Maharani Raj Laxmi Kumari Devi. Since there is no physical partition but the quantum of share being fixed or the proportion is crystallised it is nonetheless subject to payment of proportionate share of the debts and liabilities. The property that belongs to the Hindu undivided family and the share that devolved on the legal heirs in the absence of physical partition by metes and bounds continued to be enjoyed as tenants in common and the legal heirs on whom the share devolved by intestate succession also continued to be members of the family vide the observation of the Gujarat High Court in the case of Kantilal Manilal at page 295 and the decision of the Supreme Court in the case of Narayan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided family or that passed on the death of the deceased and in the absence of any physical partition and allotment of any specific property it was not possible for the legal heirs to do so. In case the Hindu undivided family discharges the liability from out of its property it is entitled to recover the same from the legal heirs out of the share of the property that passed on death of the deceased. Thus as a matter of fact the joint and several liability imposed under section 53(5) would come into operation so far as the payment of estate duty liability is concerned. It is only a matter of fineness of law that the liability should be appropriated to the share of the Hindu undivided family property that devolved on the legal heirs in terms of proviso to section 6 of the Hindu Succession Act. It is for this reason that we are of the opinion that the liability to estate duty is attributable only to the share of the Hindu undivided family property that is deemed to pass on the death of the deceased in terms of section 7(1) of the Estate Duty Act, the principal value of which is to be computed in terms of section 39(1) and (3) of the Estate Duty Act. In this view of the matter there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets of the deceased, but the assets of the deceased actually or constructively received merely constituted the limit of the liability. Further, as pointed out by the Gujarat High Court in the case of Kantilal Manilal at page 294, the quantum of share of the deceased though fixed and the proportion in which the share is to be counted is also crystallised themselves subject to of course payment of proportionate share of the debts and liabilities and such proportionate share of debts and liabilities would include the liability to estate duty also. This is how the assessee has understood the case and the learned counsel for the assessee also relied on this decision in support of his case. The question whether the debts and liabilities in terms of section 44 of the Estate Duty Act would include the estate duty payable on the property deemed to pass is a debatable point and there could be possibly two opinions and in any case it is not a mistake apparent on the record. The Commissioner (Appeals) held that the liability is attributable to the share of the property that passed on death of the deceased and therefore deductible therefrom. This is another view which is possible. The D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rajah M.A.M. Muthiah Chettiar on 24-1-1970 by virtue of proviso to section 6 of the Hindu Succession Act, 1956 his undivided 1/3rd share in the HUF properties devolved on his wife Kumararani Smt. Meenakshi Achi and mother Rani Meyyammai Achi. In computing the net wealth of the HUF by virtue of this legal position, only 2/3rd of the assets and debts of the HUF is being assessed in the hands of the assessee. The balance of 1/3rd is being assessed in the following manner :- Kumararani Smt. Meenakshi Achi (wife of 2) 1/6 On the death of mother Smt. Meyyammai Achi on 1-3-1970 her legal heirs viz. Dr. Rajah Sir M.A. Muthiah Chettiar 1/12 Dr. M.A.M. Ramaswamy 1/12 Total & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is no debatable point at issue as the provisions are quite straightforward and, therefore, he held that the WTO rightly invoked the provisions of section 35. 7. On merits the assessee argued that under sec.. 74 of the Estate Duty Act every piece of property, whether movable or immovable, owned by the HUF Is saddled with the estate duty liability attributable to the 1/3rd share of Kumararajah. It was further submitted that there was no actual partition on the date of death i.e. on 24-1-1970. The immovable properties of the HUF were not partitioned by metes and bounds. Therefore, according to the assesses either the entire estate duty liability of Rs. 8,57,050 or at least 2/3rd thereof should be allowed as a deduction in the wealth-tax assessment of the HUF. 8. The CIT (A) has pointed out that the provisions of the Estate Duty Act are clear. Under sec. 74 the estate duty payable In respect of property passing on the death of a person, shall be a first charge on the "property so passing" on the death of Kumararajah. He further pointed out that the coparceners other than the late Kumararajah are not liable to pay out of the estate not passing on the death of Kumararajah. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Another submission made by the learned counsel was that the WTO has no jurisdiction under sec. 35 as there is no error apparent on the face of the record. According to the learned counsel, whether the estate duty liability is an allowable debt or not is a debatable point of law and hence, such issue cannot be dealt with in an order passed under sec. 35. On the other hand, the learned Departmental Representative supported the order passed by the CIT (A). 11. This matter came up for consideration before the Tribunal, Madras Bench-B. The learned Accountant Member, who proposed the order in WTA Nos. 741 to 745 (Mds)/84 & WTA Nos. 289 to 292 (Mds)185 accepted the CIT W's view on merits, i.e. the learned A.M. was agreeable to the view of the CIT (A) that the entire estate duty liability attributable to the undivided share of late Kumararajah must be allowed as a deduction in the wealth-tax assessments to be made on the legal heirs of late Kumararajah subject to the provisions of sec. 2(m)(iii) of the WT Act. 12. SO far as the jurisdiction of the WTO in invoking the provisions of sec. 35 of the WT Act is concerned, the learned A.M. was of the view that "the question whether the debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... death of a deceased, is one of the sections in Part VI of the Act, and, therefore, so far as sec. 44 is concerned, the debts and encumbrances mentioned therein can never include estate duty payable on the estate which passes on the death of the deceased." The provisions of sec. 53 were considered by a Division Bench of the Gujarat High Court in Mrs. Indumati Ratanlal's case. The principal question before the Division Bench of the Gujarat High Court was whether interest paid on a loan borrowed for the purpose of payment of estate duty was deductible for the purpose of income-tax. While dealing with this question the High Court held as under: "There is no difference between interest paid on money borrowed to pay income-tax and interest on money borrowed to pay estate duty. While the former is not paid for the purpose of making or earning the income, the latter is not made for the purpose of making or earning the assets. Whether interest paid is allow able under sec. 57(iii) of the Act or not, depends on the facts of each case. If property is received by a person subject to a charge for payment of a liability and moneys are borrowed for clearing that liability, the interest paid on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mrs. Constance Lubeck [1970] 78 ITR 199 (Mad.); Smt. V. Pramila v. CED [1975] 99 ITR 221 (Kar.); Estate of Late Omprakash Bajaj's case; Smt. Shantaben Narottamdas v. CED [1978] 111 ITR 365 (Guj.) and CED v. Smt. P. Leelavathamma [1978] 112 ITR 739 (AP). 16. Thus, the Courts are having uniform view that the estate duty liability is not a debt as contemplated under sec. 44 of the ED Act, so as to be capable of rendering itself as a debt to be deducted from out of the estate passing on the death of the deceased. 17. Where without any elaborate argument one could point out to an error and say "here is a substantial point of law which stares one in the face, and there could reasonably be no two opinions entertained about it", a clear case of an error apparent on the face of the record would be made out-Thungabhadra Industries Ltd. v. Govt. of A.P. AIR 1964 SC 1372. Where by misreading a section, which is clear, a wrong view is taken and a wrong calculation is made, it would certainly come within the purview of sec. 154 as a mistake apparent on the face of the record-CIT v. Mcleod & Co. Ltd. [1982] 134 ITR 674, 677 (Cal.). In ITO v. Asok Textiles Ltd. [1961] 41 ITR 732, the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RENCE UNDER SUB-SECTION (11) OF SECTION 24 OF THE WEALTH-TAX ACT, 1957 READ WITH SUB-SECTION (4) OF SECTION 255 OF THE INCOME-TAX ACT, 1961 As there is a difference of opinion between the members we refer the following question to the President under sub-section (11) of section 24 of the Wealth-tax Act : "Whether, on the facts and in the circumstances of the case, the rectificatory orders passed by the Wealth-tax Officer under section 35 of the Wealth-tax Act, 1957 in the view that there was mistake apparent from the record are justified or not ?" THIRD MEMBER ORDER Per Shri Dr. S. Narayanan, Vice President - The above appeals involve the nine assessment years 1970-71 to 1978-79. The appellant is a HUF. The common objection taken in all these appeals is to the orders passed by the WTO under sec. 35 of the Wealth-tax Act, 1957 ("the Act") whereunder he excluded the estate duty liability originally allowed as a deduction in the assessment of net wealth for these years. There was a difference of opinion on the validity of such, action of the WTO. The learned Accountant Member, who wrote the leading order, held that the WTO was not justified in passing the said orders and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/6 2. Since the mother of Kurnararajah died on 1-3-1970, her 1/6 share devolved on her legal heirs viz. Dr. Rajah Sir M.A. Muthlah Chettiar and M.A.M. Ramaswamy. Thus Dr. Raja Sir Muthiah Chettiar obtained 1/12 share of the HUF property 1/12 3. M.A.M. Ramaswamy obtained the remaining 1/12 share of the HUF property 1/3 4. The accountable person of the late Kumararaja included the above 1/3rd undivided share (in the property of the assessee- HUF) as part of the principal value liable to estate duty in the estate duty account filed by him. The estate duty attributable to such undivided 1/3rd share amounted to Rs. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asoning was: since the entire 1/3rd share of the late Kumararaja stood excluded from the assets of the HUF the entire estate duty liability corresponding to that 1/3rd share should also be ignored. In this view he withdrew the deduction of Rs. 5,48,408 that had been allowed as a deduction in the wealth-tax assessment of the assessee-HUF for this year. 8. The assessee contested this order of the WTO (under sec. 35) in appeal. The Commissioner (A), however, dismissed the appeal. In doing so he recorded the following :- (i) The WTO had full jurisdiction to invoke sec. 35. This is not a case where there was a debatable point at issue. (ii) Sec. 74 of the Estate Duty Act did not help the assessee. Under that provision estate duty payable in respect of property passing on the death of a person is a first charge on the property so passing. The estate duty attributable to the 1/3rd share of the Kumararaja was a charge only on that 1/3rd share which so passed on his death. The coparceners other than the deceased were not liable to pay such duty out of the properties of the HUF not passing on such death. (iii) No doubt, there was no physical partition of the properties of the HUF by mete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment years 1970-71 to 1974-75 in the order of 11-6-1984 was followed by the Commissioner (A). The assessee contested both these orders of the Commissioner (A) in further appeal. 10. The learned Accountant Member accepted the assessee's appeals. His reasoning was briefly as follows: (i) There was no partition by metes and bounds on the death of Kumararaja. There was notional partition by virtue of the proviso to sec. 6 of the Hindu Succession Act. The property that belonged to the assessee-HUF and the share that devolved on the legal heirs of the Kumararaja "in the absence of physical partition by metes and bounds" continued to be enjoyed as tenants-in common and the legal heirs also continued to be members of. the assessee-family. (ii) The property that so devolved or interest in the property thereof was under the management of the karta of the assessee family, who also happened to be the accountable person in this case. It was he who rendered the accounts of the deceased. In terms of sec. 53 of the Estate Duty Act the accountable person was accountable for the whole of the estate duty limited to the extent of the assets actually received. (iii) Section 39(3) of the E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility to estate duty of every accountable person is a personal liability limited to the extent of the assets actually or constructively received by him. The question whether debts and liabilities in terms of sec. 44 of the Estate Duty Act would include the estate duty payable on the property deemed to pass is a debatable point. There could be, conceivably, two opinions about it. It cannot represent a mistake apparent from the record. (vii) In the instant case there was only a change of opinion on the part of the WTO. There was no obvious and patent mistake apparent from the record. A mistake would not be something which can be established only by a long-drawn process of reasoning on points on which there may be, conceivably, two opinions. Action under sec. 35 was, therefore, not justified. 11. The learned J.M. who took a contrary view recorded the following position: (i) Courts have taken the uniform view that estate duty liability is not a debt as contemplated under sec. 44 of the Estate Duty Act so as to be capable of rendering itself deductible from the principal value of the estate on the death of the deceased. Thus it cannot be said that there is any debate on this point o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 'Revenue' in our opinion, is significant. It denotes some kind of abstraction or symbol in the same sense in which the expression 'crown' is used to distinguish it from any person enthroned. The. interests of the Revenue is not to be equated to rupees and paise, merely. There is a biblical saying that we do not live by bread alone. Varying this saying, it may be said that the Revenue does not live by tax alone. In this sense, therefore, the interests of the Revenue are not tied up merely with realising as much revenue as possible, willy-nilly, merely looking to the productivity aspect of taxation. The jurisdiction of the Commissioner under sec. 263 is undoubtedly a supervisory jurisdiction. It is intended for interference in special cases to counteract orders which are erroneous as well as prejudicial to the interests of the Revenue All that we wish to observe is that the scope of the interference under this section is not to set aside merely unfavourable orders and bring to tax some more money to the treasury. Nor is the section meant to get at sheer escapement of revenue which, as is well known, is taken care of by provisions elsewhere in the Act such, for instance, as section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s error in considering for deduction the estate duty liability that pertained to the said 1/3rd share. When the WTO proposed to exclude the asset (l/3rd share of the deceased) from its wealth the assessee had no objection at all. In fact that was the assessee's claim also. Following such exclusion, logically and legally, the assessee itself should have excluded the estate duty liability relating to that 1/3rd share also. The assessee instead claimed a deduction for the estate duty liability, may be due to a mistaken appreciation of the legal position. And the WTO, through oversight alloyed the claim to the extent of 2/3rd thereof. He thus committed a clear error in law. It was this error he rectified under sec. 35. No doubt the question of equity would arise if no such deduction had been claimed by the legal heirs of the late Kumararaja in the assessments concerned. But (the Departmental Representative contends) two wrongs would not make one right. To have allowed deduction of the estate duty liability of the late Kumararaja's estate in the wealth-tax assessments of the assessee-HUF was indefensible in law; and not to rectify such a error would be another error. Hence the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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