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TMI Blog1989 (3) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... te on agricultural lands under section 35(3) of the Estate Duty Act, though the said decision related to the application of the provisions of section 35(1) of the Estate Duty Act and the facts were also different ?" The undisputed facts of the case are these : One M. Nagendra Rao died on August 10, 1974. M. Nalini Rao, his wife, was the accountable person. She rendered account relating to the estate of the late M. Nagendra Rao. The deceased had two sons. The elder son had predeceased Nagendra Rao and his 1/3rd interest in the Hindu undivided family had devolved on the mother, Nalini Rao, the accountable person, under the provisions of the Hindu Succession Act, 1956. As a result, only half of the 2/3rds share interest of Nalini Rao in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 Estate duty on balance 97,972 14,695.00 -------------------- Total (average rate 8.95%) 26,695.00 Less : Rebate under section 33(1)(h) 447.50 Rebate on lineal descendants share 13,938.72 14,386.22 -------------------- 12,309.58 Add : Interest under section 53 105.00 -------------------- 12,414.58 Less : Payment already made 3,700.00 -------------------- Balance payable 8,714.58" -------------------- The order was taken up in appeal before the Appellate Controller of Estate Duty. Before the Appellate Controller of Estate Duty, reliance was placed by the assessee on the judgment of the Kerala High Court in the case of T. R. Jayasankar v. Asst. CED [1972] 83 ITR 445. That was case in which the principal value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue, contended that, as the value of the estate after aggregation for rate purposes under section 34 exceeded Rs. 2 lakhs, sub-section (3) of section 35 was not attracted. In order to appreciate the contention, it is necessary to set out the provisions of section 35 (1), (3) and the Second Schedule to the Act: "35. (1) The rates of estate duty shall be as mentioned in the Second Schedule ... (3) Notwithstanding anything contained in sub-section (1) and the Second Schedule, where any property passing on the death of any person consists wholly or in part of agricultural land and the principal value of the estate does not exceed rupees two lakhs, there shall be allowed by way of rebate (a) in the case of an estate which consists wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al descendants should be taken into account. As stated earlier, in the present case, while the principal value of the estate which passed on to the accountable person was computed at Rs. 1,42,236 for rate purposes, 1/3rd of the share of the lineal descendants which was Rs. 1,55,736 was added and, as a result, the aggregate value for the purpose of fixation of rate was Rs. 2,97,972 though it is inaccurately described in the order of the Assistant Controller as the net principal value. The wording of sub-section (3) of section 35 which comes up for interpretation in this case which is extracted earlier, in our opinion, is clear. The sub-section gets attracted only to cases where the principal value of the estate which passed on to the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arrived at after adding the value of the share of the lineal descendants only for rate purposes as required under section 34 of the Act. What is overlooked is that, for the purpose of sub-section (3) of section 35, what is relevant is only the principal value of the estate which passed on to the accountable person. In this case it is only Rs. 1,42,236. The lineal descendants' interest which is required to be added for rate purposes under section 34 has no bearing on the provisions of sub-section (3) of section 35 of the Act. The non-obstante clause in sub-section (3) refers only to the principal value of the estate passing on the death of any person and not to the value arrived at after adding the value of the share of the lineal descenda ..... X X X X Extracts X X X X X X X X Extracts X X X X
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