TMI Blog1973 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... died in a plane crash. The heirs of the deceased, namely, his wife, Mst. Mohini Devi, received a sum of Rs. 42,000 as compensation from the Airlines Corporation which was not included in the estate of the deceased under the provisions of the Estate Duty Act (hereinafter to be referred to as " the Act "). In both the cases the Assistant Controller of Estate Duty held that the compensation paid to the heirs of the deceased should have been included in the estate of the deceased and was a property which passed to the heirs of the deceased and, therefore, they be assessed to duty under the provisions of the Act. The assessees then went up in appeal to the Zonal Appellate Controller who allowed the appeal and held that the amount of Rs. 42,000 ought not to have been included in the estate of the deceased and he accordingly deleted the amount in both the cases. The department then went up in appeal to the Income-tax Appellate Tribunal, Chandigarh Bench, who after hearing counsel for the parties affirmed the decision of the Zonal Appellate Controller and held that the amount of compensation of Rs. 42,000 in each case was not the property of the deceased which passed to his heirs and was, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the words " which passes on the death of such person ". In other words, we have to determine what is the exact meaning of the expression " passes on the death of such person ". In order to amilify the meaning of these words it may be necessary to refer to the definition of property itself as given in section 2(15) and (16) of the Act which runs thus : "(15) ' property ' includes any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale and also includes any property converted from one species into another by any method ; ...... (16) ' property passing on the death ' includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and ' on the death ' includes ' at a period ascertainable only by reference to the death '. " By way of illustration section 6 clearly provides that a property which the deceased was at the time of his death competent to dispose of shall be deemed to pass on his death. Although this section is not exhaustive, yet it is clearly illustrative a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty passing on the death and observed as follows : " The expression ' property passing on the death ' includes, according to the definition contained in the 22nd section of the Act, property passing either immediately on the death or after any interval either contingently or certainly, and either originally or by way of substitutive limitation, and the expression ' on the death includes ' at a period ascertainable only by reference to death '. The expression ' passing on the death ' is not further defined, but is evidently used to denote some actual change in the title or possession of the property as a whole which takes place at the death. For the purpose of this section it is absolutely immaterial to whom or by virtue of what disposition the property passes." Similarly, in Nevill v. Commissioners of Inland Revenue, while construing section 5 of the U.K. Finance Act of 1894 and the proviso thereto, Lord Viscount Cave, with whom the majority of Lords agreed, observed as follows : " But by the proviso any ' property so passing in which the deceased never had an interest ' is exempted from aggregation ; and as the deceased, although he undoubtedly had an interest in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is any change in the beneficial possession or enjoyment of property '." It was aptly pointed out by their Lordships that the crucial point for determination is not the mere change of source or title but the change of beneficial possession or enjoyment. This was also stressed by Lord Evershed M.R. in In re Parkes' Settlement : Midland Bank Executor and Trustee Co. Ltd. v. Inland Revenue Commissioners : " I agree with counsel for the trustees that prima facie there must, in order to give rise to a valid claim for duty, whether under section 1 or section 2 of the Finance Act, 1894, be a change not merely of source or title, but of possession or enjoyment." Similarly, a Division Bench of the Madhya Pradesh High Court stressed that before the property passes to the heirs there must be a changing of hands. Their Lordships observed as follows : " Coming to the question whether muafi is property which passed on the death of Narayan Rao within the meaning of section 5 of the Act we are of opinion that, as the muafi lapsed on the death of Narayan Rao, it did not pass on his death. The word ' passes ' as it occurs in section 5(1) of the Act means ' changes hands ' Nevill v. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atyansarayana v. Assistant Controller of Estate Duty. The nearest case that we have been able to find appears to be Murat Singh v. Controller of Estate Duty . In this case the facts or rather the principles deducible are more or less the same as in the present case. What happened was that a displaced person from West Pakistan named Harchand Singh had applied for compensation under the Displaced Persons (Claims) Act, 1950. The claim of Harchand Singh was being investigated into by the concerned authority and had been registered and verified, but before the coming into force of the Displaced Persons (Compensation and Rehabilitation) Act under which Harchand Singh would have been entitled to receipt of compensation, he died. It was held by their Lordships that even though the claim was verified under the previous Act, since it was not received by the deceased, it was not exigible to estate duty. In this connection their Lordships made the following observations : " There can thus be no manner of doubt that any legal rights that came into being in the matter of receiving compensation by displaced persons who had left their properties in Pakistan were created by the Act of 1954 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have come into existence during the lifetime of the deceased, but accrued for the first time only after their death and that too since the death took place in a particular mode. In these circumstances there is no movement of property from one hand to another or a change from one person to another. The deceased had not even a contingent interest because the compensation had to be paid not to the deceased but to their heirs on their death. Thus, it is clear that if at all the property passed, it passed directly from the Airlines Corporation to the heirs of the deceased and the erstwhile estate of the deceased was not at all involved. To put the matter more succinctly the position would be that the deceased was not in possession of the property, had no interest in it and, therefore, the heirs could not get the property merely by virtue of the death of the deceased, for they got the property only because the death took place in a particular manner, namely, in a plane crash. Thus, in our opinion, it cannot be said by any stretch of imagination that the compensation received by the dependants of the deceased would be property in the hands of the deceased or even of the deceased whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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