TMI Blog1979 (11) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... der r. 73 of the Indian Airlines Corporation Employees' Service Rules and Establishment Orders. The accountable person claimed exemption in respect of the compensation amount of Rs. 74,960 on the ground that the same was not property that passed on to her on the death of her husband since the deceased had no vested or contingent interest in it. Rejecting the claim of the accountable person and relying upon the decision of the Delhi High Court in CED v. A. T. Sahani [1970] 78 ITR 508, the Asst. Controller included the sum of Rs. 74,960 in the estate of the deceased. The appeals by the accountable person to the Appellate Controller and the Income-tax Appellate Tribunal were without success. Hence this reference. The contention of Sri C. Trivikrama Rao on behalf of the accountable person is that the deceased captain did not acquire any right in respect of the compensation amount of Rs. 74,960 paid by his employer after his death to his wife, the accountable person, at any time during his lifetime till his death. The amount is not payable automatically. The employer has discretion under r. 73 to pay the same only when the accident is not attributable to the deceased's own negligence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th s. 2(15) which defines " property " and s. 2(16) which defines the expression " property passing on the death ". The expression " 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 the expression " on the death " includes " at a period ascertainable only by reference to the death ". The definition is an inclusive one. The term " passes " means changes hands. As observed by the Supreme Court in CED v. Hussainbhai Mohamedbhai Badri [1973] 90 ITR 148, " what is relevant in determining the scope of the expression property passing on the death of the deceased is the change in the beneficial interest and not title." Mahendra Rambhai Patel v. CED [1967] 63 ITR 645 (SC) is an authority for the proposition that in determining whether a particular property " passed " on the death of a deceased what has to be seen is whether that deceased had any beneficial interest in that property and whether that interest " passed " to some one on his death. Therefore, the true test is whether the deceased had any beneficial interest in the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be satisfied first. There is no connection or nexus with regard to the payment of compensation under r. 73 to the deceased employee's legal representative or representatives. No right to claim compensation would accrue under r. 73 to an employee who died in an air accident while on duty or to an employee for whose personal belongings loss or damage is caused while travelling on duty. The payment is directly payable to the legal representatives. The right to receive the payment under r. 73 accrues only to the legal representatives after the death of the employee. No beneficial interest can be said to have vested in the deceased employee before or at the time of his death in respect of the compensation payable to his legal representatives after his death. Neither compensation nor right to receive compensation would accrue to the deceased employee before his death. Section 6 cannot be applied to the case on hand as it cannot be said that the deceased had a right in the property at the time of his death or was competent to dispose of the compensation amount of Rs. 74,960. By the time of his death it did not accrue either to him or to his legal representatives. The compensation of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h under the Motor Vehicles Act or under any such similar provision would not form part of the estate of the deceased. In the present case, there is no guarantee that the Corporation would certainly pay any sum either to the nominee or to the legal representatives of the deceased, as the conditions envisaged in r. 73 have to be satisfied. The right to nominate a person or persons who would be entitled to receive compensation payable by the Corporation under r. 73 cannot be equated to a right, if any, of the deceased to dispose of the compensation amount at the time of his death. The competency to dispose of the property within the meaning of s. 6 would mean the right of the deceased at the time of his death to do so as he pleases with regard to such property. The deceased employee of the Corporation was not competent to dispose of the compensation amount due and payable to his legal representatives except to nominate his or her own nominee or nominees to receive the amount due and payable under r. 73 after his death. This view of ours gains support from the decision of a Division Bench of the Jammu and Kashmir High Court in CED v. Kuri Lal Jain [1974] 93 ITR 435, wherein the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule (iv) whereby it was provided that the Corporation shall pay compensation for the death of a pilot, a maximum of 36 times his monthly basic pay if such death occurred in the circumstances mentioned in the abovementioned Service Rules or while travelling on duty... In accordance with the terms of the aforesaid agreement between the deceased and his employer, a sum of Rs. 68,300 was received by his widow as compensation." Therein it was held that the payment of compensation was not gratuitous nor did it depend upon the discretion of the Corporation. But it is a compulsory payment which the Corporation is bound to make on the happening of a certain event to the heirs of the deceased. Therefore, there is a direct nexus between the right of the deceased as an essential condition of his service to have that compensation paid to his legal representatives and the right of his legal representatives to receive that payment. The right of the deceased in the circumstances was held to be interest in property as in the case of a claim since he had a right to nominate a person to whom the payment should be made which indicates the power of disposition over the property. In the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, he had interest in the policy. He was entitled to nominate whomsoever he liked to receive the amount as beneficiaries under the policy. The property in the nature of interest was in existence in the lifetime of the deceased which passed on his death to his beneficiaries nominated or to his legal representatives, as the case may be, and, therefore, it is dutiable under s. 7 of the Act. Indisputably, the deceased had a right and interest in the property under the insurance policies which he could have disposed of earlier. However, we are unable to agree with the views of the Madras as well as Gujarat High Courts that the right to nominate the beneficiaries under the insurance policy alone amounts to interest in property. Therein s. 15 of the Act was attracted as admittedly premiums had been paid on the insurance policies. Hence, those two decisions would not in any way come to the aid or assistance of the revenue. In CED v. Estate of Late R. Ramanujam [1977] 108 ITR 273 (Mad), it was held that the receipt of compensation by the legal representatives of the deceased employee of a company under a personal accident insurance policy obtained voluntarily by the employer company from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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