TMI Blog1991 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ined nor paid ; (b) the value of such disputed claim for additional compensation, although neither determined nor paid, on the date of death was not nil; (c) the assessee was not entitled to any further deduction apart from discounting to cover the risk and hazards of litigation including the possibility of the claim being altogether rejected in respect of lands at Ramrajatala, Sodepur and Panihati even though, on the date of death, such additional compensation had neither been determined nor paid and there was no certainty whether it was at all payable ; (d) the deduction of one-third granted in respect of Sukchar land to cover the risk of hazards and litigation, etc., was quite fair and reasonable. 2. Whether, on the facts and in the circumstances of the case and on an interpretation of the agreement with the Port Trust, the Income-tax Appellate Tribunal was justified in law in holding that the monthly tenancy held by the deceased in the property at Chintamani Dey Ghat Road belonging to the Port Trust should be included as property passing on death and liable to duty under the Estate Duty Act, 1953 ? 3. Whether, on the facts and in the circumstances of the case, the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be part of the dutiable estate, such right to additional compensation should be valued at 50 per cent. of the additional compensation awarded in view of the discount factor for the risk and hazard of litigation. Before the Appellate Controller of Estate Duty, the same contentions were pressed, but the Appellate Controller pointed out that the right to receive the additional compensation for Ramrajatala land was sold in public auction and, therefore, the discounted present value of the right as on the date of death of the deceased would have to be determined and he worked out such discounted value at Rs. 5,28,720 or the date of death, adopting the rate of interest at six per cent., the statutory rate under the Land Acquisition Act. He allowed a further discount of one-third of the said discounted present value determined by him as cover for the risk and hazard of litigation. So the value of the right on the date of death of the deceased came down to Rs. 3,52,480. Similarly, the land at Sodepur vested in the Government of India on February 15, 1957, and the compensation was received by the Hindu undivided family, but the additional compensation of Rs. 1,40,646 was awarded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swer is to be found in the decision of the Supreme Court in Mrs. Khorshed Shapoor Chenai v. Asst. CED [1980] 122 ITR 21. There, the Supreme Court held that, where lands are compulsorily acquired under the Land Acquisition Act, there are no two rights, one a right to receive compensation and the other a right to receive extra or further compensation ; the claimant has only one right which is to receive compensation for the lands at the market value on the date of the relevant notification, and that the right to receive compensation that had accrued to the deceased is property and would pass on the death of the deceased, Therefore, the question whether the right to receive additional compensation for acquisition of property is property or not has become purely academic. There cannot be any dispute that a valuable right that accrued to the deceased during his lifetime would also be property that would pass on death. The only question is how the valuation of such right should be determined. The Supreme Court in Mrs. Khorshed Shapoor Chenai [1980] 122 ITR 21 laid down a very broad guideline to the effect that the estimated value of the right to receive the compensation can never be belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hazard was considered superfluous and was negatived. We, however, fail to see the matter in the light the Tribunal viewed it. The auction took place on May 19, 1972, while the deceased died on July 8, 1966. Therefore, the uncertainty and the hazard six years ago would be far greater than they were on the date of auction. Secondly, on the date of death, no additional compensation was at all fixed but, on the date of auction, there was something material and tangible to guide the auction-purchaser, the decree of the court awaiting execution. Doubtless, the degree of the element of risk was heavier on the date of death than on the date of auction. Therefore, we hold that the further deduction of one-third granted by the Appellate Controller stands to reason. The question whether a higher percentage as discount would be fairer is a question of fact-finding. We, therefore, answer questions Nos. 1(c) and 1(d) by saying that the Tribunal should have allowed further deduction of one-third as granted by the Appellate Controller. The second question relates to the includibility of monthly tenancy as property passing on death and its liability to duty. Shortly stated, the facts are that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther such subletting was lawful and authorised needs to be determined. Unfortunately, the Tribunal has arrived at its conclusion without looking into the agreement or other vital aspects. We are unable to come to any opinion as to the includibility of the interest of the deceased in the tenanted property in the absence of the said agreement. It is not, therefore, possible to answer the second question. We, therefore, decline to answer the question and the matter is remanded to the Tribunal so that it can examine the matter and decide afresh in accordance with law. The third question relates to the assessee's claim for deduction in respect of the estate duty liability in determining the principal value of the estate of the deceased. It was argued by learned counsel for the assessee that the estate duty is a liability embedded in the estate by reason of the said duty being the first charge on the property under section 74 of the Estate Duty Act. It was alternatively argued that the estate duty liability, as an ingrained element of the estate, should be considered as a hazard or jeopardy having a depressing or detracting effect on the value of the estate adversely influencing a will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 ITR 228 (SC) has been adopted. The Supreme Court in Khorshed Shapoor Chenai [1980] 122 ITR 21, propounded a similar principle under the Estate Duty Act. Therefore, Raghubar Narain Singh [1984] 146 ITR 228 offers no new light. CWT v. Maharaja Kumar Kamal Singh [1984] 146 ITR 202 lays down that, where the assessee has incurred tax liability or is likely to incur tax liability attributable to the asset, the estimate of such liability should go into the estimation of the value of the asset. The crucial aspect on the facts in that case is that the decision refers to the need for a discount for the possibility of tax dues incurred by the assessee and holds that it is necessary to take into account a fair estimate of such possibility before a proper estimate of the value of the assessed money receivable by the assessee is prepared. The decision was delivered in the light of section 7 read with section 2(m) of the Wealth-tax Act, 1957. For the charge of wealth-tax, what is necessary is first to ascertain the items of property falling within the definition of section 2(e) as assets. Then comes section 7, a machinery for valuing such assets ; after such assets are valued, the aggregate val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he death of the deceased, the estate duty cannot be a debt or encumbrance deductible under section 44. Section 5, the charging section shows that the estate duty as a liability appears only on the holder dying and not before. Therefore, it does not come within the ambit of section 44. True, the estate duty is a first charge on the property liable thereto by virtue of the provisions of section 74, but that does not transform it into a debt or encumbrance during the lifetime of the deceased because of its not being existent until the death of the person. As a matter of fact, no encumbrance or debt is liable to be deducted from the principal value of the estate except such encumbrance or debt as is created by the deceased before his death. All the High Courts have uniformly held that estate duty was payable under section 5(1) on the principal value of the estate as determined in accordance with the provisions of the Act. Neither the said section nor any other provision says that estate duty was payable on the principal value of the estate as reduced by the estate duty payable thereon and the duty would, therefore, not be a deductible debt as has been urged by the assessee. The view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onounce any provisions of the statute ultra vires the Constitution. The accountable person wanted the Controller of Estate Duty (Appeals) to hold against the inclusion of the shares of the lineal descendants following the decision of the Madras High Court in the case, viz., V. Devaki Ammal v. Asst. CED [1973] 91 ITR 24, pronouncing the provision of section 34(1)(c) as discriminatory and violative of the equality clause, viz., article 14 of the Constitution. The plea was not, however, accepted by the said Controller (Appeals). It is not, therefore, correct to say that the question of inclusion or non-inclusion of the shares of the lineal descendants does not arise from the order of the first appellate authority. It does arise. It is well-settled that the High Court, in its advisory capacity in reference, cannot determine the question of vires of the legislation by Parliament as the same is not justiciable by the Tribunal. But the question whether the shares of the lineal descendants in the ancestral property owned by a Mitakshara joint Hindu family should be included in the principal value of the estate for aggregation under section 34(1)(c) remains to be determined. We have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en followed in N. Krishna Prasad v. Asst. CED [1972] 86 ITR 332 (AP), Smt. Komanduri Seshamma v. Appellate CED [1973] 88 ITR 82 (AP), Hari Ram v. Asst. CED [1975] 101 ITR 539 (P H), Sirigeri Thippamma v. Appellate CED [1986] 158 ITR 548 (Kar) and R. C. Vaish v. CED [1989] 180 ITR 283 (All). There is a host of decisions delivered by the other High Courts upholding the vires of section 34(1)(c). Therefore, the question of vires of section 34(1)(c) is a question on which there is a cleavage of judicial opinion. The Madras High Court itself is of two opinions on the issue. Therefore, the principle laid down by the Bombay High Court in CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589 cannot operate and bind the Tribunal compelling it to ignore the provision of section 34(1)(c). The minority Madras view in V. Devaki Ammal [1973] 91 ITR 24 is of no consequence. On the other hand, on the merits, the includibility of the value of the share of the lineal descendants in dutiable estate for rate purposes has been upheld by umpteen number of cases, namely, CED v. K Nataraja [1979] 119 ITR 769 (Kar), ITAT v. Madan Mohan [1979] 119 ITR 781 (All) (Appx.), CED v. Smt. Andal Thayaramma [1985] 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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