TMI Blog1978 (1) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... 1950. In this partition, Sir Seth Hukumchand, his wife, Lady Kanchanbai and Shri Rajkumarsinghji shared the assets each one getting one-third. Shri Rajkumarsinghji, in addition to the one-third share that he got on partition of the HUF, also got from Sir Seth Hukumchand and his wife substantial properties in terms of jewellery and other things and Rajkumarsinghji then executed a deed of partition of his HUF constituted of himself, his wife and five sons. In this partition, he not only partitioned the assets that he got as his one-third share in the HUF of his father but also partitioned the jewelleries and other valuables that he received as gift from his father and mother. Thus, Smt. Premkumari Devi not only got one-seventh share out of the one-third which Seth Rajkumarsinghji got but also got one-seventh share in the jewellery and other valuables which came to Shri Rajkumarsinghji as gift from his father and mother. There was also liability on the HUF of Sir Seth Hukumchand as arrears of income-tax due to the income-tax department and when Shri Rajkumarsinghji partitioned his HUF the liabilities of the income-tax also fell to the share of all the members of the HUF including de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the estate passing on death of the deceased by the Dy. CED. But the Tribunal accepted the contention of the accountable person in second appeal and deleted this amount of Rs. 1,48,959. The deceased had assigned or nominated nine life insurance policies of the value of Rs. 3,92,886 in favour of Rajkumarsinghji on various dates. The Dy. CED included the total value of the policies as property deemed to pass on death of the deceased under s. 14 of the E.D. Act. In appeal before the Appellate Controller, the accountable person took objection in respect of the inclusion of five policies out of the above nine of the value of Rs. 1,79,810 as they were not kept up by the deceased and no premium was paid by her. There was no dispute about inclusion of policies worth Rs. 2,13,075. The Appellate CED, however, held that one-seventh portion of the policies of Rs. 1,79,810 in respect of which premium was paid from the HUF funds, is deemed to pass under s. 14 of the E.D. Act. On further appeal, the Tribunal accepted the contention of the accountable person. Consequently, the department has sought reference to this court on the following questions : "(1) Whether, on the facts and in the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 353 (Guj) are two decisions, one of the Andhra Pradesh High Court and the other of the Gujarat High Court, taking a contrary view. It was however, contended that now with the decisions of their Lordships of the Supreme Court in CGT v. N. S. Getti Chettiar [1971] 82 ITR 599 and CED v. Kancharla Kesava Rao [1973] 89 ITR 261, the matter is concluded and it could not be contended that when in partition one of the members gets less than what she was entitled to, it could be said to be a disposition or a gift. Consequently, it could not be added while determining the value of the property passing on death of the deceased. In CGT v. N. S. Getti Chettiar [1971] 82 ITR 599 (SC), their Lordships of the Supreme Court, after examining the relevant provisions of the Act, held : " We do not think that a partition in a HUF can be considered either as 'disposition' or 'conveyance' or 'assignment' or 'settlement' or 'delivery' or 'payment' or 'alienation' within the meaning of those words in s. 2(xxiv)." Their Lordships further examined cl. (d) of s. 2(xxiv) of the G.T. Act and held that this will not amount to a gift under the partition deed. Similarly, in CED v. Kancharla Kesava Rao [1973 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of premium out of the HUF and have been nominated in the name of Shri Rajkumarsinghji. It was, therefore, contended that it could not be said that these policies were kept up by the deceased and, therefore, s. 14 of the E.D. Act could not be applied. In support of the contentions learned counsel placed reliance on the decisions reported in Seethalakshmi Ammal v. CED [1966] 61 ITR 317 (Mad) and CED v. Smt. Y. Annapurnamba [1972] 84 ITR 756 (Mad). Learned counsel for the department on the other hand placed reliance on a decision reported in Smt. Radha Devi Saraogi v. CED [1968] 68 ITR 521 (Cal) and contended that in this decision the Calcutta High Court has considered the impact of the Insurance Act on a policy which is nominated. It was also contended by learned counsel that in fact the CED applied s. 7 and, therefore, has only added 1/7th of the value of the policies on the basis of the 1/7th share the deceased had in the HUF of Shri Rajkumarsinghji. S. 14 of the E.D. Act is a special provision pertaining to insurance policies and sub-s. (1) of this section runs : "14. Policies kept ub for a donee.--(1) Money received under a policy of insurance effected by any person on his l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely the physical act of getting a policy of insurance but all acts necessary for keeping the policy alive will be comprehended in the phrase. The substantial element that goes to maintain a policy alive, once it is taken out, is, however, payment of premiums. The words 'kept up by him' indicate, to our minds, that the premiums paid should be from his own funds, not merely his own hand that physically makes the remittance of the premiums. In other words, the source of the premiums paid will be determinative of who kept up the policy. " This question again was considered by the Madras High Court in CED v. Smt. Y. Annapurnamba [1972] 84 ITR 756, and their Lordships, following the decision in Seethalakshmi Ammal v. CED [1966] 61 ITR 317 (Mad), held that premiums in respect of policies having been paid by the joint family funds, s. 14 of the E.D. Act cannot be made applicable. The decision on which reliance has been placed by learned counsel for the department is the decision of the Calcutta High Court reported in Smt. Radha Devi Saraogi v. CED [1968] 68 ITR 521. In this decision, the policies were taken out by the karta of a HUF in his own name and assigned to his wife. The premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel for the department placed reliance on the observations in the last paragraph quoted above. It appears that in the facts of that particular case their Lordships felt that the policies should be taken to belong to the joint family in which the deceased had only 1/4th share. But, in the present case, there was a nomination in favour of Shri Rajkumarsinghji and the deceased in whose name the policies were taken was not even the karta of the joint Hindu family. Apart from it, s. 14(1) of the E.D. Act is not applicable even in view of the view expressed by their Lordships in this case. In fact, s. 14 is a deeming provision and if s. 14(1) does not apply it is not possible to hold that a share of the policy value could be said to pass on the death of the deceased by deeming provision. Learned counsel for the department contended that s. 7 comes into operation. S. 7 talks of interest ceasing on the death of the deceased which could be brought in for purpose of calculating the assets that pass on the death of the deceased and sub-s. (2) of that section talks of a member of a Hindu coparcenary with respect to the interest the deceased had in the coparcenary property. These pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HUF was not only 1/21 share but something more than that because what came to Rajkumarsinghji was not only one-third but more than that as practically all the jewellery in the hands of Sir Seth Hukumchand and his wife were gifted away to Rajkumarsinghji. S. 44 of the E.D. Act enacts : "44. In determining the value of an estate for the purpose of estate duty, allowance shall be made for funeral expenses (not exceeding rupees one thousand) and for debts and incumbrances but an allowance shall not be made-- (a) for debts incurred by the deceased, or incumbrances created by a disposition made by the deceased, unless, subject to the provisions of section 27, such debts or incumbrances were incurred or created bona fide for full consideration in money or money's worth wholly for the deceased's own use and benefit and take effect out of this interest, or (b) for any debt in respect whereof there is a right to reimbursement from any other estate or person, unless such reimbursement cannot be obtained, or (c) more than once for the same debt or incumbrance charged upon different portions of the estate, or (d) for debts incurred by or on behalf of the deceased by way of dower, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the prices of jewellery quoted by Gulanikar in Two Acts-Gift Wealth-tax (Fourth Edn. p. 921) during that period the appreciation would be about 8 to 10 per cent. and on this basis if the estimate is considered on the basis of the actual sale which took place in 1960 and the appreciation is accounted for, then the price shown by the authorized valuer would appear to be just and proper. Learned counsel for the department, on the other hand, contended that under s. 36(2) the Controller has the jurisdiction to estimate the value and in so doing it could not be said that he was wrong when he considered the actual sales of the pieces of jewellery although in 1960. S. 36 of the E.D. Act provides : "36. (1) The principal value of any property shall be estimated to be the price which, in the opinion of the Controller, it would fetch if sold in the open market at the time of the deceased's death. (2) In estimating the principal value under this section the Controller shall fix the price of the property according to the market price at the time of the deceased's death and shall not make any reduction in the estimate on account of the estimate being made on the assumption that the w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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