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TMI Blog1984 (12) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... uction. The case of the department, as made out by Shri Srivastava, is that such a deduction is not allowed as per the provisions of the Estate Duty Rules, 1953. Now, the deduction allowed by the Appellate Controller should not be viewed as a separate deduction for expenditure on conveyance. Since the agreement for sale itself has a condition that half of the stamp duty expenditure would be borne by the deceased, in effect, such expenditure goes to reduce the sale price of the property. Therefore, as a matter of fact, the property has been sold for a price mentioned in the conveyance deed after the deduction of the share of the stamp duty. In our opinion, that is the proper way of looking at the transaction. We will, therefore, uphold the finding of the Appellate Controller on this point. 3. In ground No. 2 the question is, whether the premium paid in certain insurance policies within two years of the death could be considered as gift under section 9(1) of the Estate Duty Act, 1953 ('the Act'). The deceased had taken nine insurance policies for various amounts. The beneficiaries mentioned therein are his wife and children. These policies were covered by the Married Women's Propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by section 6 of the Married Women's Property Act. Section 6 creates a trust in favour of the beneficiaries. The amount covered by the policy would be available to the beneficiaries only after the policy had matured. Till then, the interest of the beneficiaries is contingent. They have no cause for action apart from what is given to them in the Act. 7. Now, it is clear that when a policy is taken, a trust is created and the premia paid are the trust monies. The premia are not paid to the beneficiary but to the trustee, i.e., in this case, the insurance company. The beneficiary has no interest in the amount of the premia paid. He may or may not have a right, which is a contingent right, to have the policy amounts on its maturity. Even before maturity, he may be able to transfer such future right, mortgage or surrender or disclaim. But when he does it, it is the right in respect of the policy monies that is so disposed or transferred. It is not the right in respect of the amount representing the premia paid. The beneficiaries do not have any right in respect of the instalment or the premia payable by contract between the insurer and the insured. So, there is 'no immediate gift inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the department has not brought to assessment the policy monies, they can use all the arguments available to them in supporting the assessment order. Now, either section 14 or section 15 would apply to the facts of the case. It would be difficult to resist the department's contention that it is not dutiable. But, even if it is dutiable, section 34(3) of the Act would compel the department to treat the policy monies as a separate estate. Now since the property passing is less than Rs. 50,000 the estate would be below dutiable limit. 10. Section 34(3) reads as follows : " (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 any property, but shall be an estate by itself, and the estate duty shall be levied at the rate or rates applicable in respect of the principal value thereof. " 11. Two ingredients have to be satisfied before the benefit is made available. First, the deceased should never have had an interest in the property. Second, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the provisions of section 34(1)(c) had been the subject-matter of High Courts' decisions. Barring the Madras High Court, all other High Courts had considered this issue and have held in favour of the department. Therefore, the Appellate Controller is in error in holding that section 34(1)(c) cannot be invoked. 16. Shri Nair for the accountable person supported the finding of the Appellate Controller on quite different grounds. He did not press the issue on the question of the validity of the section. But, according to him, the section is rendered unworkable. He first submitted that neither section 5 nor even section 7 of the Act, which are the charging sections in the Act, covered the property which would legitimately belong to persons other than the deceased. According to him, the charging sections do not cover the lineal descendants' share in the joint family property. If there is no charge created, then the mere existence of a machinery section in the statute is of no consequence. 17. We are unable to accept this submission. It is not correct to say that the lineal descendant's share in property has been charged to estate duty. What is charged is only those properties wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been a partition immediately before his death. It is, therefore, clear that section 39 contemplates a notional partition of the joint family property immediately before the death of the deceased in order to ascertain the principal value . . . ." 20. It would be seen from the above question that, according to the High Court, section 39 would be the machinery by which the principal value of the joint family property would be ascertained for the purpose of section 34(1)(c) also. 21. The Court further observed : ". . . In order to ascertain the shares of the lineal descendants of Hanuman Prasad a notional partition of the smaller Hindu undivided family is also contemplated between Satyanarayan and his son, Bhagawati Prasad . . . ." 22. Thus, according to the High Court, section 39 gives the machinery for the purpose of ascertaining the shares of the lineal descendants. We may mention that the above decision is the only authority which has considered the issue of ascertainment of the shares for section 34(1)(c). Shri Nair, no doubt, is right in his contention that the High Court has not considered the limitations built in section 39 itself, that is, its applicability of section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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