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Bhawani Shankar Bagaria Vs. Asst. Controller of Estate Duty - Court Judgment

LegalCrystal Citation
Subject;Direct Taxation
CourtGuwahati High Court
Decided On
Case NumberEstate Duty Reference No. 1 of 1974
Judge
ActsEstate Duty Act, 1953 - Sections 5(1), 36, 44, 74, and 74(1)
AppellantBhawani Shankar Bagaria
RespondentAsst. Controller of Estate Duty
Appellant AdvocateJ.P. Bhattacharjee and S.N. Medhi, Advs.
Respondent AdvocateG.K. Talukdar and D.K. Talukdar, Advs.
Excerpt:
- - act allows for certain liabilities but these liabilities are clearly those of the deceased himself. the obligation like the charge created by section 74 of the act can possibly not be considered to be an obligation which came to be attached to the property of the deceased while he was alive. 15. from a perusal of the entire scheme of the act it is seen that there is no liability whatsoever for payment of estate duty so long as the deceased was alive and on his death the property passes in the same condition in which the deceased enjoyed it. 16. we are clearly of opinion that while evaluating the principal value of the property which passes on the death of a deceased under the e. the obligation like the charge created under section 74 of the act which gets attached to the property..... pathak, actg. c.j.1. in this reference under section 64(1) of the estate duty act, 1953 (hereinafter referred to as 'the act'), the following question has been referred to us by the tribunal for our determination at the instance of the accountable person. the question which is said to arise from the order of the tribunal in e.d.a. no. 32(g) of 1970-71, dated august 31, 1973, is: 'whether, on the facts and in the circumstances of the case, the estate duty payable on the property passing on the date of death was a debt and deductible out of the principal value of the estate ?'2. in order to appreciate the scope of the question, it is necessary to refer briefly to the facts and circumstances indicated in the statement of the case. the deceased, shri sardarmal bagaria, died on december 30,.....
Judgment:

Pathak, Actg. C.J.

1. In this reference under Section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as 'the Act'), the following question has been referred to us by the Tribunal for our determination at the instance of the accountable person. The question which is said to arise from the order of the Tribunal in E.D.A. No. 32(G) of 1970-71, dated August 31, 1973, is:

'Whether, on the facts and in the circumstances of the case, the estate duty payable on the property passing on the date of death was a debt and deductible out of the principal value of the estate ?'

2. In order to appreciate the scope of the question, it is necessary to refer briefly to the facts and circumstances indicated in the statement of the case. The deceased, Shri Sardarmal Bagaria, died on December 30, 1961. He was the karta of an HUF by name M/s. Girdharilal Sardarmal. The family consisted of the deceased, his wife and the adopted son. The adopted son is the accountable person. The entire property belonged to the HUF and the Asst. Controller computed the total value of the property and took 1/3rd as the value representing the cesser of interest under Section 7. The assessee had claimed that the estate duty payable on the assessment was also an amount which should be deducted in order to raise the principal value of the estate. This claim was negatived by the Appellate Controller.

3. The assessee being aggrieved by the order of the Appellate Controller preferred an appeal before the Tribunal. On a consideration of the claim of the assessee, the Tribunal rejected the claim of the assessee. The assessee then filed an application under Section 64(1) of the Act for making a reference to this court for our consideration on the aforesaid question.

4. The first ground taken up before the Tribunal was that the estate duty liability determined in the assessment to estate duty was itself a

deductible item and should be subtracted from the gross value of the estate. This claim was made before the Asst. Controller also. It was argued by him that the liability to estate duty is only in respect of the property in its entirety and this liability is embodied in all the properties passing under Section 5. Therefore, it had to be deducted in order to arrive at the correct value of the property passing. The Asst. Controller did not accept the claim. On appeal before the Appellate Controller, the accountable person relied on the decision of the Supreme Court in the case of H.H. Setu Parvati Bayi v. CWT : [1968]69ITR864(SC) . That was a case arising out of the W.T. Act. The Appellate Controller did not accept the contention. He pointed out that wealth-tax and estate duty are two entirely different enactments. Whereas wealth-tax is payable by the individual, estate duty becomes payable on the properties passing on the death. The accountable person, on further appeal before the Tribunal, pressed the same point. It was argued on behalf of the accountable person, drawing an analogy between the wealth-tax and the charging Section 5 of the E.D. Act and submitted that both in wealth-tax and estate duty (enactments) the liability is on the net asset and, for a proper valuation, the liability arising on account of estate duty has to be deducted. It was further pointed out that the definition of 'property' under Section 2, Sub-section (15), makes it clear that property includes any interest in property and the proceeds of sale thereof. Explanation 1 of Section 2(15) makes it clear that a disposition creating a debt is also a property and this property has to be determined under Section 36. It was submitted that Section 36 of the Act and Section 7 of the W.T. Act are in pari materia. It was pointed out that for the purpose of wealth-tax the Supreme Court has decided that wealth-tax liability itself will be deductible. It was submitted that the same principle has been applied for the purpose of deducting income-tax liability in the case of Kesoram Industries : [1966]59ITR767(SC) . It was further contended that the liability to pay estate duty is charged, on the property passing, by virtue of Section 74 of the Act and, therefore, when such properties are being valued under Section 36, the fact that it is charged with the estate duty will have a depressing effect on the value of the properties. For this purpose, reliance was placed on the case of the Mysore High Court in Mrs. Blanche Nathalia Pinto v. State of Mysore [1964] 53 ITR 64. Further, it was conceded that there was a decision of the Madras High Court against this in In re Mrs. Constance Lubeck : [1970]78ITR199(Mad) . It was submitted that the decision of the Mysore High Court is to be followed, being the decision of a Division Bench, whereas the Madras High Court decision is that of a single judge.

5. It was argued on behalf of the department that the claim for deduction is not at all tenable. It was pointed out that estate duty is not a duty on

any particular person. It is a duty on the property passing on the death, irrespective of the person, who will succeed to the properties. It was submitted that under the E.D. Act there cannot be an actual property passing but there will be an estate in respect of the property which changes hands between two persons, and that being determined by the death of the deceased. It was further submitted that Section 44 of the E.D. Act allows for certain liabilities but these liabilities are clearly those of the deceased himself. It is not possible to hold that estate duty is a liability of the deceased.

6. At this stage we may cite the charging section, Section 5 of the Act which runs as follows :

'5. (1) In the case of every person dying after the commencement of this Act, there shall, save as hereinafter expressly provided, be levied and paid upon the principal value ascertained as hereinafter provided of all property, settled or not settled, including agricultural land situate in the territories which immediately before; the 1st November, 1936, were comprised in the States specified in the First Schedule to this Act, which passes on the death of such person, a duty called 'estate duty' at the rates fixed in accordance with Section 35......'

7. This section is based on Section 1 of the U.K. Finance Act, 1894. The phrase 'property passing on the death' which occurs in this section is defined in Section 2(16). The principle on which Section 3 was founded hag been explained by the House of Lords in the case of Earl Cowley v. IRC [1899] AC 198; 1 EDC 193, Lord Macnaghten said that the principle on which the Finance Act, 1894, was founded is that whenever property changes hands on a death, the State is entitled to step in and take toll of the property as it passes without regard to its destination or to the degree of relationship, if any, that may have subsisted between the deceased and the person or persons succeeding. Section 3 gives effect to that principle. Now, it will be clear therefrom that the duty is on the property passing on death.

8. The Tribunal has held that the ratio of the Supreme Court decision in H.H. Setu Parvati Bayi : [1968]69ITR864(SC) is not applicable to estate duty. The Tribunal has stated that the W.T. Act deals with a person and finds out the net asset owned by him on the valuation date. The estate duty merely deals with property which passes on the death, irrespective of persons to whom such property passes. Dealing with Mrs. Blanche Nathalia [1964] 53 ITR 64, the Tribunal has observed that in that case the court was called upon to determine the valuation of certain properties for the purpose of Section 52 and Section 53 of the Mysore Court Fees and Suits Valuation Act, 1958. The Tribunal has observed that the discussion regarding the estate duty in that case was merely incidental and does not apply to

the case in hand. The Tribunal also noticed the decision of the Madras High Court in : [1970]78ITR199(Mad) (Mrs. Constance Lubeck, In re), where referring to Mrs. Blanche Nathalia [1964] 53 ITR 64, it has been observed : 'no doubt these properties are burdened with estate duty liability but the liability cannot reduce the market value. It is a matter of adjustment between the purchaser or the seller on the one hand and the holder of the encumbrance on the other hand in regard to the payment of the amount due under the encumbrance. There is no warrant for the inference that the deductions of the items mentioned in annexure 'B' are only further deductions to be made after meeting the estate duty or any other liability which may not come within the four corners of the items described in annexure' B''. In the ultimate analysis, the Tribunal rejected the claim of the accountable person.

9. Mr. J.P. Bhattacharjee, the learned counsel appearing on behalf of the accountable person, has submitted that as the amount of estate duty payable in respect of the estate left by the deceased was a charge on the estate, it had to be taken into account while determining the market value of the estate. It has been further claimed that in any case the estate duty leviable on the estate of the deceased being a charge on the estate left by the deceased was an encumbrance which had to be allowed as a deduction under Section 44 of the Act while determining the taxable value of the Restate for the purposes of estate duty.

10. In order to appreciate the contention raised on behalf of the accountable person, it is necessary to notice some of the relevant provisions of the Act.

11. Section 5(1) of the Act lays down that in the case of every person dying after the commencement of the Act, there shall be levied and paid upon the principal value of the property ascertained in the manner provided in the Act, which passes on the death of such person, a duty called estate duty, at the rate fixed in accordance with Section 35 of the Act. Section 6 of the Act lays down that the property which the deceased was, at the time of his death, competent to dispose of shall be deemed to pass on his death. Sections 7 to 17 of the Act describe certain other properties and the circumstances in which they would also be deemed, for the purposes of the Act, to pass on the death of the deceased. Section 36 of the Act provides that the principal value of any property shall be deemed 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. Thus, the duty payable in respect of the estate of a deceased person has to be worked out in accordance with the provisions contained in the Act after finding out the principal value of the property left by the deceased, that is, the price of

the property which could, at the time of the death of the deceased, be fetched if the property was, at that time, sold in the open market.

12. In support of his submission, the learned counsel refers to Mrs. Blanche Nathalia Pinto's case [1964] 53 ITR 64, where the Mysore High Court observed (p. 72):

'It is thus clear that the property which vests in the executor for distribution or administration is a property which is burdened with the liability to pay estate duty, and it is the market value of that property which should constitute the basis for the computation of the court-fee payable under Section 53 of the Act. It is difficult to understand how the determination of such market value can discard or ignore the liability on the property or how the determination of the market value can refuse to take into account that liability or the charge for its enforcement......

What is required to be done for the ascertainment of such market value is to ascertain the price which a willing purchaser would pay for the property which is burdened with the liability to pay the estate duty. It being clear that no willing purchaser would pay a price which refuses to take into account the liability on the property, it should necessarily follow that the estate duty payable in respect of the property must necessarily be deducted from the market value at death.'

13. We have already noticed the observation of the Tribunal that the Mysore High Court made the aforesaid observation in connection with the amount of court fees payable on an application for probate under the Mysore State Court Fees Act and the decision does not give a correct clue for determining the principal value of the property passing on the death of the deceased, as required by the Act.

14. Section 5(1) of the Act, which is the charging section, lays down that there shall be levied and paid upon the principal value of the property which passes on the death of a person, a duty called estate duty. According to Section 6 of the Act, the property which the deceased was, at the time of his death, competent to dispose of is considered to be the property which passes on his death. It is seen that the Act envisages levy and payment of estate duty on the principal value of the proprietary interest which the deceased had in the estate at the time of his death. Such proprietary interest has to be estimated under Section 36 of the Act in accordance with the price, which in the opinion of the Controller, it would have fetched if sold in the open maket at the time of the death of the deceased. A close reading of this section indicates that what has to be evaluated is the principal value of the property which passes on the death of the deceased and not the principal value of the property which as a result of the death of the deceased comes to be vested in the hands of his heirs and legal representatives. What passes at the time of death of the deceased is his proprietary

interest in the estate. If that proprietary interest at the time of his death is not subject to any charge or encumbrance, it is the interest of the deceased free of any charge that passes. Bat then due to certain reasons some obligations may get attached to the property which passes as a result of the death of the deceased. In such a case what vests in the hands of the heirs or the legal representatives of the deceased would be properly subjected to such charge or obligation created in respect of the property passing on the death of the deceased. There may be no time lag between the death of the deceased and his estate passing to his heirs and legal representatives, yet there is a clear sequence. The property of the deceased does not pass to his heirs and legal representatives so long as the deceased is alive; it passes only after he dies. In this view of the matter only the obligations which came to be attached to the property while the deceased was alive could be taken into consideration while determining the principal value of the property which passes as a result of his death. The obligation like the charge created by Section 74 of the Act can possibly not be considered to be an obligation which came to be attached to the property of the deceased while he was alive. Such an obligation came to be attached to the property only as a result of the death of the deceased and got attached not to the property as it passed on the death of the deceased but to the property as it came to be vested in the hands of the heirs and legal representatives of the deceased.

15. From a perusal of the entire scheme of the Act it is seen that there is no liability whatsoever for payment of estate duty so long as the deceased was alive and on his death the property passes in the same condition in which the deceased enjoyed it. It is a different matter that while the property passes on the death of the deceased, it, because of the provisions contained in Section 74 of the E.D. Act, becomes burdened with a charge. That charge is something which attaches to the property which happens to vest in the heirs and legal representatives but does not affect the nature of the property that actually passes.

16. We are clearly of opinion that while evaluating the principal value of the property which passes on the death of a deceased under the E.D. Act only such obligation or burden that came to be attached to the property while the deceased was alive can be taken into account. The obligation like the charge created under Section 74 of the Act which gets attached to the property of the deceased, not so long as he was alive, but as a consequence of death, is not to be taken into account in determining its principal value.

17. The learned counsel for the accountable person next contended that even if the amount of estate duty charged by Section 74 on the estate of the deceased is not to be taken into consideration while evaluating its principal

value as provided in Section 36 of the Act, none the less while determining the value of the estate for purposes of estate duty, the accountable person is entitled to an allowance in respect thereof as provided in Section 44 of the Act. Section 44 of the Act runs thus:

'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--...

and any debt or incumbrance for which an allowance is made shall be deducted from the value of the property liable thereto......'

18. It is contended by the learned counsel that the estate duty is either a debt or an encumbrance on the estate which came to be attached to the estate on the death of the deceased. It is not a debt or an encumbrance which falls in any of the Clauses (a) to (d) of Section 44. Accordingly, the accountable person was entitled to have the amount of estate duty deducted while determining the taxable value of the estate left by the deceased. In our opinion, this submission is devoid of any merit. Section 74(1) of the Act, which makes the estate duty a charge on the immovable properties left by the deceased, runs thus :

'74. (1) Subject to the provisions of Section 19, the estate duty payable in respect of property, movable or immovable, passing on the death of the deceased, shall be a first charge on the immovable property so passing (including agricultural land) in whomsoever it may vest on his death after the debts and incumbrances allowable under Part VI of this Act; and any private transfer or delivery of such property shall be void against any claim in respect of such estate duty.'

19. Even if it be taken that the charge regarding the estate duty is an encumbrance on the estate of the deceased, it certainly is not a debt or encumbrance of the nature specified in Section 44 of the Act. If the Legislature intended that the charge created by it under Section 74 would be a debt or encumbrance of the nature specified in Section 44, there was absolutely no point in its providing in Section 74(1) that the liability to pay the estate duty would be the first charge on the property of the deceased after the debts and encumbrances allowable under Pt. VI of the Act. Such a provision clearly indicates that the Legislature did not contemplate the charge of liability regarding the payment of estate duty, on the estate left by the deceased, to be an encumbrance for which an allowance has to be made under Section 44 of the Act. In our considered view, the accountable person cannot claim deduction of the estate duty payable on the estate left by the deceased under Section 44 of the Act.

20. If the Legislature would have intended that the estate duty is deductible for the purpose of evaluation of the taxable value of the estate

definitely the Legislature would have made the provision as it has done in Section 44 for the deduction of the value.

21. The claim of the accountable person is for the deduction of the estate duty payable on the property passing on the death of the deceased under Section 44 of the Act. That is the only section which provides for deductions. The principal value of the property passing on death has to be ascertained in the manner provided by the Act. If estate duty payable on the estate of a deceased does not fall under Section 44 of the Act, the accountable person is not entitled to claim deduction for the same. That the estate duty payable on the estate of a deceased does not come under Section 44 of the Act is clear from Sub-section (1) of Section 74 of the Act. The said sub-section has been set out in the earlier part of this judgment. It provides that, after the debts and encumbrances allowable under Pt. VI of the Act, the estate duty shall be a first charge on the immovable property passing on the death of the deceased. The intention of Parliament that estate duty is neither a debt nor an encumbrance allowable under Pt. VI of the Act is clear from Sub-section (1) of Section 74 of the Act. The debts and encumbrances allowable under Pt. VI of the Act take priority over the estate duty payable. If estate duty is either a debt or encumbrance allowable under Section 44, which occurs under Pt. VI of the Act, Section 74(1) could not have stated that the debts and encumbrances allowable under Pt. VI shall rank above estate duty for which charge is created. Therefore, it is clear that estate duty payable on the estate of a deceased person is neither a debt nor an encumbrance liable to be deducted under Section 44 of the Act.

22. Similar contention was raised in a case before the Gujarat High Court, where the Division Bench in Smt. Shantaben Narottamdas v. CED : [1978]111ITR365(Guj) , negatived the aforesaid contention by an elaborate judgment referring to a number of decisions of various courts including Blanche Nathalia Pinto [1964] 53 ITR 64, Constance Lubeck : [1970]78ITR199(Mad) , Kesoram Industries and Cotton Mills Ltd. v. CWT : [1966]59ITR767(SC) , Pramila v. CED : [1975]99ITR221(KAR) , Setu Parvati Bayi v. CWT : [1968]69ITR864(SC) , Smith (Decd.), In re : Executor Trusteeand Agency Co. of South Australia Ltd. v. IRC [1951] Ch 360; 3 EDC 188.

23. The Division Bench negatived the contention of the assessee. In construing Section 74(1) of the Act, the court observed that the argument was sought to be built up on a foundation of quick sand. In the first place, Section 74(1), on a plain reading, negatives the contention of the counsel for the assessee. It is in terms, inter alia, provided thereby that the estate duty payable in respect of the property passing on the death of the deceased shall be a first charge on the immovable property passing on his death, regardless of in whom the property may vest, only after the debts and incumbrances allowable under Pt. VI (which includes a. 44) of the Act. The court noticed the

two aspects which require to be emphasised: (i) that the charge arises only in respect of the immovable property (and not of movable property), and (ii) the charge will operate only after the debts and incumbrances allowable under Section 44 and other provisions contained in Pt. VI.

24. The importance of the first circumstance, namely, that the charge in respect of the estate duty will operate only in respect of the immovable property cannot be overemphasised. If the argument of the learned counsel for the assessee were right, the entire estate including the movable property passing on the death would, at the very moment of death and the identical moment of passing, be burdened by incumbrance arising in the context of the exigibility to pay the estate duty. Under Section 74(1), however, the charge will operate in respect of only the immovable property and not the movable property. This would introduce a fatal contradiction in the argument, for, if the estate of the deceased were to contain only movable property, Section 74(1) will not be attracted and estate duty payable thereon cannot be deducted from the value of the estate passing on the death of the deceased. The second point of significance is that Section 74(1) itself draws a distinction between the liability to pay estate duty on the one hand and debts and incumbrances to be excluded from the estate on the other. It postulates that the liability to pay the estate duty is not otherwise deductible from the valuation of the estate passing on the death of the deceased. If that was not so, there was no point in providing that the charge will operate only after the debts and incumbrances allowable under Section 44 and other provisions of Pt. VI of the Act are accounted for. Section 74(1) gives a clue to the legislative mind and indicates that the Legislature has proceeded on the assumption that the estate duty payable on the estate passing on the death of the deceased would not fall within the permissible deductions within the meaning of Section 44 of the Act. For this proposition the court relied on a number of decisions.

25. The counsel for the assessee argued before the Division Bench that Section 44 must be interpreted independently of the provisions contained in Section 74 of the Act and that, as provided therein, in determining the value of the estate for the purpose of estate duty, allowance shall be made for debts and incumbrances. It was contended that the expression 'incumbrance' would be attracted in respect of the statutory liability for payment of the estate duty and that, on that account, the amount payable as estate duty deserved to be excluded from the value of the estate. We may quote in extenso the further observation of the Division Bench with which we are in respectful agreement (pp. 372, 373, 374 of [1978] 111 ITR) :

'Now, in the first place, Section 44, inter alia, provides for exclusion of debts and incumbrances in determining the value of the estate passing on the death of the deceased. The question necessarily arises what exactly is meant by 'debts' and 'incumbrances'. The learned counsel for the assessee is unable to show that the expression 'debts' is referable to debts other than debts of the deceased. What must be deducted from the estate passing on the death are the debts of the deceased for the very good reason that it is the surplus of the assets over the liabilities which passes on the death of the deceased regardless of in whose hands it passes. That being the position, the expression 'debts' cannot but refer to debts of the deceased whose estate has passed upon his death. If the expression 'debts' is referable to the estate of the deceased, the expression 'incumbrances' must also, of logical necessity, refer to incumbrances created by the deceased during his lifetime. The expression 'incumbrance' has been defined by Mozley and Whitely in Law Dictionary, sixth edition, at page 173, as meaning--'a charge or mortgage upon real or personal estate'. The Act itself defines the expression 'incumbrance' as 'including mortgages and terminable charges', as per Section 2(10). In Wharton's Law Lexicon, 'incumbrance' has been defined as meaning 'a claim, lien or liability, attached to property'. Now, the liability simpliciter to pay the duty not giving rise to any charge even if created by a statute cannot be said to be an incumbrance. Nor can it be said to have been created by the deceased. A reading of Clauses (a) and (b) of Section 44 reveals that the legislature had in mind the incumbrance created by the deceased. If this was not so, Clause (a) would not have referred to an incumbrance created by disposition by the deceased whilst making a provision for exclusion of certain types of incumbrances from the purview of the first paragraph of Section 44. It is, however, argued that the expression 'incumbrance' must be read and construed in the sense of a burden on the estate passing on the death of the deceased person which burden arises instantaneously with the death of the deceased by virtue of its exigibility to pay tax under Section 5 of the Act. It is no doubt a statutory liability but the mere fact that the liability is created by the statute will not make it a liability coupled with a charge on all the properties, movable and immovable, comprised in the estate of the deceased. A charge will not fasten itself on the properties unless a charge is created by the parties or by operation of law. Even under Section 74 a charge would be created only in respect of the immovable properties and not in respect of the movable properties. What is more, it would not fall within the ambit of the expression 'debts' and 'incumbrances' employed in Section 44 of the Act particularly having regard to the fact that we are of the view that the expression 'debts' is referable to the debts of the deceased and also

that the expression 'incumbrances' is referable to the incumbrances created by the deceased. Besides, there is yet another fundamental fallacy in the argument urged on behalf of the assessee. It is assumed by him that the death of a deceased, passing of the estate and eligibility to tax, all the three take place simultaneously at an identical notional point of time. There is no warrant for this proposition. The taxing event is the passing of the property on the death of a person. And the property which passes on the death of a person is the property in respect of which title is transmitted to the heirs and successors of the deceased on account of the death. (We are, for the present, not concerned with the inclusive definition contained in Section 2(16) of the Act). When does transmission of title then take place So long as the deceased was alive, no transmission of title by operation of law by testamentary succession or intestate succession could have taken place and no property could have passed from his hands to the hands of his heirs and successors. Passing of property can, therefore, take place only upon the death at the instantaneous moment (however small in the time dimension) next after the moment of death. It would happen at that infinitesimal point of time which intervenes between the last breath exhaled by the deceased and the next breath that he might have inhaled if he were not dead. The concept of time itself is a concept of human mind and, therefore, we have to visualise a minimal point of the time when the deceased breathed his last and visualise the very next moment, which is the point of time when passing of the estate takes place. Passing of property must follow the death of necessity, and, therefore, death and passing cannot be simultaneous. We are fortified in the view that we are taking by Smith (deed.), In re : Executor Trustee and Agency Co. of South Australia Ltd. v. Inland Revenue Commissioners [1951] Ch. 360; 3 EDC 188. Danckwerts J., has dealt with this aspect as under :

'It seems fairly clear that it is not until the life tenant is dead that there can be any passing or any liability to duty. It is not the life but the death of the life tenant which attracts the duty; and so long as the life tenant is still alive, even though he or she be in extremis, no claim for duty can possibly be made. It is only when the person in question has expired, after the last breath has left the body, that the property passes and the liability to estate duty arises.

Although, from one point of view, one may regard those events as occurring simultaneously, it seems to me that in fact from a common sense point of view one must treat them as being in some sort of sequence, and, on any view, the ownership of the life tenant cannot be the test, because, as I have said, when the event occurs the life tenant has died. But the question is what happens then.''

26. In K. Bhoomiamma v. CED : [1978]115ITR703(KAR) , it wascontended on behalf of the accountable person that the value of the estate of the deceased has to be determined as on the date of the death of the deceased and it is not really the value of the estate in the hands of the accountable persons subsequently. This contention was rejected by their Lordships of the Division Bench of the Karnataka High Court. The argument advanced in that regard was that the estate duty payable was a first charge on the estate and, therefore, the principal value as determined under Section 36 of the Act should be reduced by the estate duty. The decision of the same court in Smt. V. Pramila v. CED : [1975]99ITR221(KAR) has laid down that the estate duty payable in respect of any estate could not be deducted as a debt under Section 44 of the Act. That decision was sought to be advanced by the learned counsel for the accountable person by stating that the accountable person was not claiming allowance under Section 44 of the Act, but under Section 36 of the Act. The contention was that the estate duty payable should be treated as an encumbrance and the estate in question should be treated as an encumbered estate and valued as such. This argument did not prevail with the court. It has been observed that the estate duty is payable under Section 5(1) of the Act on the principal value of the property passing on the death as computed in accordance with the provisions of the Act and not on the principal value of the estate minus estate duty. Estate duty is not an incumbrance created by the deceased or imposed on his estate by law before his death. It cannot be taken into consideration while assessing the principal value of the estate. The learned counsel for the accountable person relied on the case of Mrs. Blanche Nathalia Pinto [1964] 53 ITR 64 in support of the above contention. The court observed that that decision was rendered in relation to the provisions of the Mysore Court Fees and Suits Valuation Act, 1958, and had no bearing on the question involved in the case. Moreover, in the case of Smt. V. Pramila : [1975]99ITR221(KAR) , it is seen that the above decision had been brought to the notice of the court and it was not relied on in deciding the said case. Therefore, the contention was rejected by the court.

27. There is, therefore, no escape from the conclusion that a passing of the property as well as the exigibility to estate duty both arise at a point of time, however so small, next to the point of time at which death of the deceased takes place. In this view of the matter, the argument advanced on behalf of the assessee cannot survive for one moment.

28. Therefore, we find that so far as the question referred to is concerned, the field is completely covered by the decision of Constance Lubeck : [1970]78ITR199(Mad) , Pramila : [1975]99ITR221(KAR) , CED v. Estate of Late Omprakash Bajaj : [1977]110ITR263(AP) , Blanche Nathalia [1964] 53 ITR 64, Shantaben Narottamdas : [1978]111ITR365(Guj) and CED v. Smt. P. Leelavalhamma : [1978]112ITR739(AP) .

29. There is, therefore, no escape from the conclusion, for the reasons stated above, that a passing of the property as well as the exigibility to estate duty both arise at a point of time, however so small, next to the point of time at which death of the deceased had taken place. In this view of the matter, the argument advanced on behalf of the accountable person cannot survive.

30. In the conclusion, for the reasons stated above, the contention urged by the learned counsel for the accountable person has just to be rejected and the question referred is to be answered in the negative and against the accountable person. We answer the question accordingly.

31. The accountable person will pay costs of the department. Advocate's fee, Rs. 200 (rupees two hundred).

Das, J.

32. I agree.


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