TMI Blog1971 (8) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... rties at Rs. 94,403. For the purpose of determining the rate at which the property that passed on the death of the deceased was to be taxed, the Assistant Controller of Estate Duty, under section 34(1)(c) of the Act, aggregated with it the interests of the lineal descendants of the deceased and as per the rate so determined, the estate duty payable on the property that passed on the death of the deceased was determined. Appeal was filed against the estate duty assessment before the Appellate Controller. One of the grounds urged by the accountable persons was that section 34(1)(c) of the Act, under which the aggregation of the lineal descendents' share was made for rate purposes was ultra vires of the Constitution of India. That contention was rejected and the appeal was dismissed by the Appellate Controller. This writ petition has been filed for quashing the order of the Appellate Controller of Estate Duty. The petitioners contended that : (1) Entry 87 of List 1 of the 7th Schedule to the Constitution of India read with article 366(9), permits only the estate of the deceased to be taken into consideration for the purpose of assessment, including the levy of estate duty, asce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contentions raised before it and after a full discussion this court in the above writ petition held that section 34(1)(c) of the Act is intra vires of the Constitution and that it neither violated article 14 nor article 19(1)(f) of the Constitution of India. The arguments that were addressed in that writ petition have almost been repeated in this writ petition, though in a different or slightly altered form. The one principal argument that was addressed before us for giving a full hearing in this case, notwithstanding the fact that arguments were addressed at great length in Writ Petition No. 4038 of 1969 and the fact that it was decided against the applicant in that case, was that the decision of this court in Gunda Bhaskara Rao v. Controller of Estate Duly was neither cited before us nor considered by us in the Writ Petition No. 4038 of 1969. Accepting the above argument, we allowed the counsel to have his full say in the matter. The learned counsel, Sri Siva Rao, who appeared for the petitioner and who argued at great length and for considerable time in Writ Petition No. 4038/69 filed a review petition C.M.P. 3872 of 1971 requesting us to review our judgment passed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department. In answering the reference in that manner Jaganmohan Reddy C.J. (as he then was), speaking for the court, observed that : " An examination of the provisions of section 34 would show that what is sought to be provided for is the aggregation of the estate of the deceased for the purposes of determining the rate of the estate duty leviable upon it. We cannot accept the contention of Mr. Mallikarjuna Rao that the aggregation of the estate of the deceased for the purposes of fixing the rate would include the share of other coparceners in the property. The entire estate duty only with the property which passes on the death of the dcceased." The learned counsel, Sri Narayanacharyulu, appearing for the petitioner strongly relied upon this case for making his submission that the Bench of this court in the aforesaid case had decision that the share of the coparceners in the property cannot be aggregated with the share of the deceased for the purposes of fixing the rate of estate duty. We are unable to accept this submission. The contention put forward by Mr.Mallikarjuna Rao, and which was negatived by the Bench, is found at page 311 of the report. It reads as follows : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the levy of duty on the property that passed on the death of the deceased. What it could not directly achieve by virtue of its power to legislate on the topic in entry No. 87 in List I of the 7th Schedule to the Constitution of India, Parliament could not indirectly achieve by aggregating the share of the deceased with the share of the lineal descendants for rate purposes. The arguments by Sri Siva Rao, in this behalf, in Writ Petition No. 4038 of 1969 were the same as those advanced in this case, except for the fact that the learned counsel did not say in so many words that the power to aggregate under section 34(1)(c) of the Act was neither incidental nor ancillary to the power to make a law in regard to the taxation of the property that passed on the death of the deceased. Oar legislatures have undoubted plenary powers. But these powers are controlled by the basic concepts of the written Constitution and can be exercised within the legislative fields assigned to them, by the three Lists in the 7th Schedule. But beyond the lists, the legislatures cannot travel. If the legislatures step beyond the legislative fields assigned to them their legislative actions are liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer to legislate on estate duty in respect of property other than agricultural lands. As per its definition estate duty is a duty to be assessed not only on the principal value of the property passing upon the death of a deceased but also with reference to the principal value of the property passing on death. In Commissioner of Income-tax v. Khemchand Ramdas it was held that " assessment ", under the Income-tax Act, sometimes means computation of income-tax, sometimes determination of the amount of tax, and sometimes the procedure laid down for imposition of such tax. The same meaning has to be given to the word " assessment " in all the tax laws, including the Estate Duty Act. Since estate duty is a duty on the property passing on the death of a deceased person, a complete law on estate duty must comprise provisions : (1) to show what property passes on the death of a deceased, (2) to ascertain the value of those properties passing on death, (3) relating to deductions to be allowed such as funeral expenses, etc., (4) relating to the rate and the manner in which such tax has to be computed on the property passing on death of a deceased, (5) relating to the whole procedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power granted to it by entry 87 in List I of the 7th Schedule to the Constitution read with article 366(9) of the Constitution. The first contention of the learned counsel is accordingly rejected. The third contention can now be conveniently considered. The contention of the learned counsel for the petitioner is that Parliament could not levy any duty by virtue of power derived from entry 87 in List I of the 7th Schedule to the Constitution, on the estate of lineal descendants, which did not pass on the death of the deceased. What it could not directly achieve it could not also indirectly achieve by aggregating the lineal descendants' share with the share of a deceased person. There is no substance in this contention. The contention is based on an incorrect and wrong premises. Neither the Estate Duty Act nor section 34(1)(c) levies any duty on the share of the lineal descendant which does not pass on the death of a deceased. What it does is that it levies estate duty on the property passing on death. Only for the purpose of determining the rate at which the property passing on the death of the deceased has to be taxed, section 34(1)(c) has been enacted. For that purpose it s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legislature in the matter of classification so long as they do not violate the fundamental principle underlying the doctrine of equality. The power of legislature to classify is of wide range and flexibility so that it can adopt its system of taxation in all proper and reasonable ways. (See State of Kerala v. Haji K. Kutty). If there is equality and uniformity within each group the law will not be condemned as discriminative, though due to some fortuitous circumstances arising out of a peculiar situation some included in a class get advantage over others, so long as they are not singled out for special treatment. Taxing law is no exception to the above doctrine. But, in the application of the principle the courts, as has already been stated above, in view of the inherent complexity of the final adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification. However, such taxation law must adhere to the fundamental principles underlying the said doctrine. (See Khandige Sham Bhat v. Agricultural Income-tax Officer). Bearing in mind the above principles, we will judge whether the classification in this case has transgressed the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eviable on the property passing on death, irrespective of the fact whether he is a Hindu, Muslim, Christian, etc. In the case of death of a father leaving a son, the whole of the property of the father passed to the son by succession, except in a case, where the father is a member of a Hindu undivided family governed by the Mitakshara school of law, in which case father's interest in the family property passes on to his son by survivorship and not by succession. This peculiarity is due to the fact that in a Hindu undivided family governed by the Mitakshara school of law, the sons acquire by birth a right in the ancestral property. In other laws, as well as in the Hindu undivided family governed by the Dayabhaga school of law, the position of the father is different. Thus, in the case of death of a father leaving sons, the entire property of the father passes on death and is chargeable to estate duty at a rate applicable to it. However, in the case of death of a father leaving a son in a Hindu undivided family governed by the Mitakshara school of law, not the entire property but only a share of the property will pass on death. The estate duty is payable on the whole estate in all ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be struck down as offending article 14 of the Constitution, unless the law has singled out such person for a special treatment. The Estate Duty Act has neither singled out a father or a son in a Mitakshara Hindu undivided family for a special treatment. We, therefore, hold that the Estate Duty Act neither makes unreasonable classification nor makes an invidious discrimination between one and the other. It does not therefore, violate or infringe the freedom of equality before law enshrined in article 14 of the Constitution. Contention No. 4 is accordingly rejected. The next contention is that section 34(1)(c) of the Act violates article 19(1)(f) of the Constitution. This very contention was put forward by Mr. Siva Rao, on behalf of the petitioner, in Writ Petition No. 4038 of 1969 but in a different language. He contended that section 34(1)(c) of the Act made an inroad into the property of the lineal descendants by aggregating their shares with the share of the deceased and subjecting the share of the deceased to a rate of tax applicable to the whole of the aggregated property. That contention was rejected. The argument of the learned counsel was that, by reason of aggrega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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