Seetharama Reddy, J.
1. The question which arises on reference of the Revenue under s. 64(1) of the E.D. Act is :
'Whether, on the facts and in the circumstances of the case, the rebate under section 35(3) of the Estate Duty Act (hereinafter referred to as 'the Act') is allowable in view of the provisions of section 34 of the Act ?'
2. The Controller of Estate Duty, Hyderabad, applied to the Income-tax Appellate Tribunal to refer the question of law, referred to above, said to be arising out of the order of the Tribunal, dated July 3, 1976, which arises under the following circumstances.
3. The late Sri K. Ganga Reddy died on July 5, 1972, at a time when he was member of the HUF consisting of himself and his six sons. Apart from his share in the joint family property, he also had certain separate immovable and movable properties. The Asst. Controller, while computing the principal value of the estate, took the value of the free estate at Rs. 1,08,530 and the value of the share of the lineal descendants u/s. 34(1)(c) of the Act at Rs. 1,31,753, thereby making the total principal value at Rs. 2,41,283. The estate of the deceased comprised agricultural lands as well, valued at Rs. 78,530. In view of this, the Asst. Controller did not allow any rebate u/s. 35(3) of the Act on the ground that the principal value of the estate exceeded Rs. 2,00,000. On appeal, however, the Appellate Controller reversed the same, holding that the aggregate value of the share of the lineal descendants should not be taken into reckoning while determining the value of the property for the purpose of rebate. Therefore, the countable person is entitled to the relief under s. 35 of the Act. On further appeal, the Appellate Tribunal confirmed the same resulting in the dismissal of the appeal. Hence this reference.
4. Before adjudication, the provisions enacted in ss. 34 and 35(3) of the E.D. Act may be noticed. Section 35(3) of the Act reads thus :
'35. Rates of estate duty on property including agricultural land,-(1) The rates of estate duty shall be as mentioned in the Second Schedule.....
(3) Notwithstanding anything contained in sub-section (1) and the Second Schedule, where any property passing on the death of any person consists wholly or in part of agricultural land and the principal value of the estate does not exceed rupees two lakhs, there shall be allowed by way of rebate -
(a) in the case of an estate which consists wholly of agricultural land, a sum representing one-fourth of the estate duty payable; and
(b) in the case of an estate which consists in part only of agricultural land, a sum representing one-fourth of the estate duty payable on that part of the estate which consists of agricultural land, the duty on such part being a sum which bears to the total amount of estate duty the same proportion as the value of the agricultural land bears to the value of the estate.'
5. Section 34 of the Act runs as under :
'34. Aggregation. -(1) For the purpose of determining the rate of the estate duty to be paid on any property passing on the death of the deceased, -
(a) all property so passing other than property exempted from estate duty under clauses (c), (d), (e), (i), (j), (l), (m), (mm). (n), (o), and (p) of sub-section (1) of section 33;
(b) agricultural land so passing, if any, situate in any state not specified in the First Schedule; and
(c) in the case of property so passing which consists of a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara,Marumakkattayam orAliyasantana law, also the interests in the joint family property of all the lineal descendants of the deceased member;
shall be aggregated so as to form one estate and estate duty shall be levied thereon at the rate 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 interests 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 Explanations 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.
(4) Every estate shall include all income accrued upon the property included therein down to and outstanding at the date of the death of the deceased.
(5) For the purposes of this section, no property shall be aggregated more than once nor shall estate duty in respect thereof be levied more than once on the same death.'
6. It is quite patent from the language of s. 35(3) of the Act, in particular with reference to the non obstinate clause occurring in the said subsection, that what has to be taken into consideration for allowing by way of rebate as postulated under the said sub-section is'property passing on the death of any person', and 'which consists wholly or in part of agricultural land and the principal value of the estate does not exceed rupees two lakhs'. Therefore, it is quite manifest that there is absolutely no scope whatsoever for adding to the said property of the deceased the value of the property owned by the lineal descendants of the deceased. It would be reading something more into the said subsection itself. That apart, it is equally manifest from the language of s. 34 of the Act that the property owned by the lineal descendants to be added is only for the purposes of determining the 'rate' of estate duty to be paid on the property passing on the death of the deceased. Therefore, the intent and the object of the Legislature is quite clear that (for) the rebate, in order to be allowed as contemplated under s. 35(3) of the Act, the principal value of the property to be taken into reckoning is that of the person who dies and on whose death the property passes on, and nothing else. In Devaki Ammal v. Asst, CED : 91ITR24(Mad) , Jayasankar v. CED  83 ITR 445 and Sardarni Virpaul Kaur v. CED , the Madras, Kerala and Punjab High Courts have come to similar conclusion which we have arrived at. In CED v. Madan Lal : 113ITR332(Delhi) , the Delhi High Court held (p. 333) :
'Affirming the decision of the Tribunal, that a reading of section 5 and 35(1) and Schedule II made it clear that the property of the deceased passing on his death being below Rs. 50,000 was not chargeable to estate duty at all, and this fact was not altered by the aggregation of the property passing on his death with the property of his lineal descendants under section 34. The aggregation had to be done only for the purpose of determining the rate at which the property passing on his death should be assessed to estate duty. But this was subject to the condition that, independently of the aggregation, the property should have been liable to estate duty. Since this condition was not fulfilled in this case, the property passing on the death of the deceased continued to be not liable to be charged to estate duty; the state of non-liability was not transformed into a state of liability by the aggregation under section 34.'
7. Hence, we have no hesitation to hold that in order to grant the rebate is visualised u/s. 35(3) of the Act the authority has to take into consideration only the principal value of the property which passes on the death of the deceased and if that does not exceed rupees two lakhs the rebate will have to be allowed. It is thereafter for the purpose of determining the rate of estate duty, the lineal descendants' property and the value thereof will have to be added to the property which passed on the death of the deceased.
8. We, therefore, answer the question in the affirmative stating that the rebate u/s. 35(3) of the Act is allowable notwithstanding the provisions of s. 34 of the Act. The reference is accordingly answered in favour of the assessee.