TMI Blog1990 (7) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in respect of the estate of the deceased should be deducted ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that tax liability with reference to annuity deposit was not a burden and/or charge on such annuity deposit ? Estate Duty Reference No. 24 of 1976: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in admitting an additional ground of appeal filed by the accountable person claiming deduction on account of estate duty liability from the principal value of the estate of the deceased which was never raised by the accountable person before the Assistant Controller of Estate Duty or the Appellate Controller of Estate Duty in the course of the assessment or the appeal proceedings before them ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that, in the computation of the principal value of the estate of the deceased, the estate duty payable in respect of the estate of the deceased should be considered? Estate Duty Reference No. 34 of 1976: 1. Whether, on the facts and in the circumstances of the case, the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue, submitted that the ground having not been raised before the Assistant Controller nor before the Appellate Controller, the accountable person could not be heard to say that he was aggrieved by their orders in so far as deduction in respect of the estate duty liability from the principal value of the estate was not allowed. Fairly admitting that this court had taken a view that legal questions could be raised for the first time before the Tribunal in cases referred to and relied upon by the Tribunal in its order, he pointed out that the situation had materially changed in view of the Supreme Court decision (See [1978] 111 ITR 1 ). Learned counsel for the assessee, on the other hand, besides strongly relying on the order of the Tribunal, submitted that the Supreme Court decision was not applicable in this case and, in any event, the ratio thereof supported the view taken by the Tribunal. In this context, counsel referred to the observations made by their Lordships of the Supreme Court in the penultimate paragraph of the judgment. Reference was also made to an Andhra Pradesh High Court decision in the case of CIT v. Gangappa Cables Ltd. [1979] 116 ITR 778, in which it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to make a claim though there was evidence on record to support it, or a case where a claim was made but no evidence or insufficient evidence was adduced in support. In the present case neither any claim was made before the Income-tax Officer, nor was there any material on record supporting such a claim. Thus, to say the least, the question of admissibility of a ground for the first time before the appellate authority where the material in support of the ground is already on record or a ground which raises a pure question of law, the adjudication of which does not require any material at all was left open by the Supreme Court. Considering the question in this background, it appears to us that the Tribunal's reliance on this court's decisions in CIT v. Breach Candy Swimming Bath Trust [1955] 27 ITR 279, New India Life Assurance Co. Ltd. v. CIT/CEPT [1957] 31 ITR 844, CIT v. Hazarimal Nagji and Co. [1962] 46 ITR 1168, Beharilal Ramcharan Cotton Mills Ltd. v. CIT [1966] 62 ITR 212 and J. S. Parkar v. V. S. Palekar [1974] 94 ITR 616 in support of the admission of the additional ground was fully justified. In this connection, it is desirable to note that the Andhra Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exact extent of the estate duty liability in the total estate duty liability pertaining to a particular property. That apart, if what is contended by counsel for the assessee is accepted, section 44 may, to that extent, become redundant. In any event, that was not the case of the accountable person before the Tribunal nor has the Tribunal referred to this court such a question of law. Though reference is not made to any section in the question, the question raised clearly is whether estate duty payable in respect of the estate of the deceased should be deducted from the principal value of the estate. Thus, the answer to this question will have to be decided with reference to section 44 or at best section 74 of the Estate Duty Act. In this context, reference may usefully be made to the two Supreme Court decisions in the case of Kesoram Industries and Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 and H. H. Setu Parvati Bayi v. CWT [1968] 69 ITR 864, strongly relied upon by counsel for the accountable person. In both the cases, the provision involved was section 2(m) of the Wealth-tax Act, 1957. Wealth-tax is payable on net wealth. This expression is defined in section 2(m) as me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty liable thereto. In the premises, even if it is assumed that the liability to estate duty, the passing on of the property on death and the death occur at the same moment, the estate duty liability cannot be allowed as deduction as the estate duty liability cannot certainly be said to have been created by the deceased. Section 74, to our mind, has also no application. As stated earlier, the principal value of the estate liable to estate duty is computed under Parts V and VI. The method of collection of duty is provided in Part VII. In case of difficulty in collection of duty, a charge on the property is created under Part VIII. Section 74 falls in Part VIII. In the scheme of things, estate duty payable within the meaning of section 74 would be one about which a demand notice under section 73 has been served. No action for recovery of the estate duty can be taken against an accountable person unless a demand notice in the prescribed form is served. This event must, of necessity, occur after the death. Besides, the estate duty is a first charge on immovable property after adjustment of all debts and encumbrances. The charge is, thus, an event subsequent to the death. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing on the death of the deceased. The debts and encumbrances allowable under Part VI of the Act take priority over the estate duty payable. If estate duty is either a debt or encumbrance allowable under section 44, section 74(1) could not have stated that the debts and encumbrances allowable under Part VI shall rank above estate duty for which charge is created. Therefore, it is clear that estate duty payable on the estate of a deceased person is not liable to be deducted under section 44 of the Act. The Andhra Pradesh High Court, in the case of CED v. Estate of Late Omprakash Bajaj [1977] 110 ITR 263 followed the Karnataka decision and took the same view. The Gujarat High Court also, in Smt. Shantaben Narottamdas v. CED [1978] 111 ITR 365 followed the Karnataka decision and took the same view. The Madras High Court in CED v. Dr. Rajah Sir M. A. Muthiah Chettiar [1984] 149 ITR 510 also held that the estate duty payable on the estate of the deceased was not the liability of the deceased. It was the liability of the accountable person and that, under section 44 of the Estate Duty Act, the liability of the deceased alone was deductible. The Allahabad High Court also, in Govind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceeds of the transfer bears to the gross proceeds of such transfer. There is no dispute that certain properties had to be sold to enable the accountable person to discharge the estate duty liability and that income under the head Capital gains arising from the transfer of such property was assessed to tax. However, income-tax is leviable on the total income of an assessee. This being so, the accountable person, as an assessee, was charged to tax on the basis of his total income which included income under the head Capital gains. The question that arose for consideration was how the tax paid on capital gains should be determined for the purpose of claiming deduction from the estate duty payable under section 50B of the Estate Duty Act. It was the case of the accountable person that the proper method would be to first determine the tax payable by the assessee on his total income other than income under the head Capital gains and to reduce the income-tax so payable from the total income-tax payable determined by the Income-tax Officer on his total income including the income under the head Capital gains . In fact, the Income-tax Officer had certified that such an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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