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TMI Blog1984 (10) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing question : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of section 34(1)(c) of the Estate Duty Act were operative and applicable to the facts of the case ? " In order to appreciate the questions referred to this court and the answers to be furnished thereto, it is necessary in the first instance to notice the facts of the cases. T.R.C. No. 17 of 1974: One A. G. Changalarayalu, a member of Mitakshara Hindu undivided family (" HUF ") consisting of himself, his wife, Smt. Andal Thayaramma, his son and a daughter, died on April 17, 1964. The HUF owned movable and immovable properties. On the death of her husband, Andal Thayaramma filed a return under the Act before the Assistant Controller of Estate Duty, Bangalore ("ACED"), who by his order dated February 21, 1969 (annexure-A), inter alia, held that a sum of Rs. 1,46,711, being the value of the half share of the lineal descendants of the deceased was agreeable with the estate passing on the death of the deceased for the purpose of the rate of duty payable. Against the said order of ACED and the aforesaid aggregation, with which alone we are presently con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. G. Shivaram, learned advocates appearing for the assessees in T.R.Cs. Nos. 17 of 1974 and 85 of 1975, respectively, relying on certain rulings that will be noticed at the appropriate stages, have urged for answering the questions in favour of their respective parties. We have earlier noticed that in both the cases there were lineal descendants and the value of their shares have been aggregated in determining the rates of estate duty payable by the assessees under the Act. But, the dispute between the assessees and the Revenue is whether the value of the shares of the lineal descendants can or cannot be aggregated under the Act. In order to resolve this short but interesting question, accentuated by the conflicting views expressed by the Tribunal, we consider it proper to independently examine the Act and the material provisions of the Act, viz., ss. 7 and 34. In interpreting the Act and the material provisions, it is pertinent to remember the oft-quoted classical statement of Rowlatt J. in Cape Brandy Syndicate v. IRC [1921] KB 64 at page 71, referred to with approval by our Supreme Court in more than one case,which reads thus: In a taxing Act one has to look merely at what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d provisions made thereto in the Act. Part IV of the Act deals with aggregation of property and rates of duty payable thereon under the Act. Section 34 deals with aggregation. Section 35 deals with the rates of duty whenever there are aggregations under s. 34 of the Act and not otherwise. Section 34 of the Act as originally enacted reads thus " 34. Aggregation.-(1) For determining the rate of estate duty to be paid on any property passing on the death of the deceased, all property so passing, excluding property exempted from duty under clauses. (c), (d), (c), (i) and (j) of sub-section (1) of section 33, but including (i) property on which no estate duty is leviable under section 35, (ii) property exempted from duty under clauses (a), (b), (f), (g), (h) and (k) of section 33, and (iii) agricultural land situate in any State not specified in the First Schedule, shall be aggregated so as to form one estate and the duty shall be levied at the rate or rates applicable in respect of the principal value thereof: Provided that any property so passing, in which the deceased never had an interest, not being a debt or right or benefit that is treated as property by virtue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or rates applicable in respect of the principal value thereof. (2) Where any such estate as is referred to in sub-section (1) includes any property exempt from estate duty, the estate duty leviable on the property not so exempt shall be an amount bearing to the total amount of duty which would have been payable on the whole estate had no part of it been so exempt, the same proportion as the value of the property not so exempt bears to the value of the whole estate. Explanation.-For the purposes of this sub-section, 'property exempt from estate duty' means (i) any property which is exempt from estate duty under section 33 ; (ii) any agricultural land situate in any State not specified in the First Schedule; (iii) the interest of all coparceners other than the deceased in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law. (3) Notwithstanding anything contained in sub-section (1) or sub-section (2), any property passing in which the deceased never had an interest, not being a right or debt or benefit that is treated as property by virtue of the Explanation to clause (15) of section 2, shall not be aggregated with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as substituted by Finance Act, 1954, s. 33(1), and amended by Finance Act, 1972, s. 120(3) is the main exception: this exception (known as the 'small estate') grew by stages from a figure of pounds 1,000 in the original s. 16(3), and the 1954 Act, which increased the amount to pounds 10,000 altered the constitution of the 'small estate' by including in it property settled by the deceased and certain other defined types of settled property and contained a 'marginal ' provision (still operative) where the pounds 10,000 (now pounds 15,000) is exceeded. Formerly there was also an important exception from aggregation (under the proviso to s. 4 of the 1894 Act) for property in which the deceased never had an interest, subject (under s. 33(2) of the 1954 Act) to the partial aggregation inter se of policies of insurance and interests therein where these were free from general aggregation ; but as respects deaths on and after 20th March, 1968, this relief was removed from claims on a gift basis by the Finance Act, 1968, s. 38, and with the elimination of duty on most of such property, the exception was repealed altogether as respects deaths after 15th April, 1969, by the Finance Act, 1969, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough where they exclude property from liability to duty they also exclude it from aggregation." (vide pages 663 & 664). On the same topic, Green's Death Duties (Seventh Edition) states thus : " Amount of duty.-For determining the amount of Estate Duty, all the property liable to Estate Duty on the death is aggregated so as to form one 'estate'. The duty is then ascertained by applying to the aggregate 'estate' an ascending percentage scale of rates in respect of successive 'slices ' of the estate. Under the current scale an 'estate' not exceeding pounds12,500 goes free, and the rates thereafter rise from 25 per cent. (on the 'slice' between pounds12,500 and pounds17,500) to 85 percent. (on the 'slice ' in excess of pounds7,50,000). Finally the amount of duty payable on each item is determined by apportioning the total of the duty on the successive I slices 'making up the aggregate' estate 'rateably according to value among the various components of the 'estate'. Where duty is charged on agricultural property and industrial premises, plant or machinery used in a business, the amount of duty attributable to the property is reduced by 45 per cent. Where the property passing on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these cases. Section 34(1)(b) provides for aggregation of the value of agricultural lands that are not subject to estate duty under the Act. Section 34(1)(c) of the Act provides for the aggregation of coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law as also the interests in the joint family property of the lineal descendants of the deceased member. Under the Act, as it originally stood prior to its amendment by the Amending Act, there were two rates of estate duty, one in the case of property, which consists of an interest in the joint family property of Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law (vide Part 1, Second Schedule to the Act) and the other in the case of other properties (vide Part II of the Second Schedule to the Act). In the case of properties falling under Part I, the first slab exempt from duty was Rs. 50,000 and in the case of properties falling under Part II, the first slab exempt from duty was Rs. 1,00,000. The Amending Act abolished these distinctions and differences, introduced a uniform first exemption slab at Rs. 50,000 and s. 34(1)(c) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this enunciation made in case arising on the death of a Hindu widow before the Hindu Succession Act of 1956 (Central Act 30 of 1956) (" the 1956 Act ") came into force is equally applicable to cases arising on and after the 1956 Act came into force. In his Treatise on Hindu Laze, III edition, on the topic " joint Family and Tax law " dealing with s. 7 of the Act at page 509 of Vol. I, S.V. Gupte has also expressed the same view. In Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440 (SC), on which strong reliance was placed for the assessees to contend that on a combined reading of s. 6 of the 1956 Act and s. 7 of the Act, there would be an actual partition and cesser of interest, the Supreme Court has ruled that s. 6 of the 1956 Act only creates a fictional partition and not an actual partition. We see no merit in the contention of the assessees that Gurupad Khandappa Magdum's case [1981] 129 ITR 440 (SC), has the effect of creating an actual partition in the event of death of coparcener of a joint Hindu family governed by the Mitakshara law and, therefore, there can be no aggregation of the share values of the lineal descendants under s. 34 of the Act. In M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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