Jaganmohan Reddy, C.J.
1. The Income-tax Tribunal has referred the following question for our determination, viz., whether the Appellate Tribunal is justified in law in adopting a period of 8 years as the basis for the valuation of the mines instead of four years
2. The estate of the deceased Ramanamma, who died on September 5, 1956, comprised among other properties a mica mining lease which she had obtained from the Government for a period of 30 years under a lease dated October 30, 1939. When she died on Septembers, 1956, it is apparent that she had owned the mining lease for 17 years and the unexpired lease would have run for further 13 years, but for the Mines and Minerals (Regulation and Development) Act, 1948 (53 of 1948) (hereinafter called 'the Act'), by and under which rules were framed in exercise of the powers conferred under Section 7 to alter the terms of the lease and the period of the lease granted prior to the date on which the Act came into force. It may also be stated that under the provisions of the Act any leases granted after the commencement of the Act would only enure for a period of 20 years and the rules which the Government were authorised to frame would reduce the period or alter the period so as to bring it in conformity with the provisions of the Act, which would necessarily mean a reduction of the period when it exceeded beyond 20 years. Section 7 which empowers the Government to frame rules is as follows :
7. (1) The Central Government may, by notification in the Official Gazette, make rules for the purpose of modifying or altering the terms and conditions of any mining lease granted prior to the commencement of this Act so as to bring such lease into conformity with the rules made under Sections 5 and 6 :
Provided that any rules so made which provide for the matters mentioned in Clause (c) of Sub-section (2) shall not come into force until they have been approved, either with or without modifications by the House of the People. (2) The rules made under Sub-section (1) shall provide--
(a) for giving previous notice of the modification or alteration proposed to be made thereunder to the lessee, and when the lessor is not theCentral Government, also to the lessor and for affording them an opportunity of showing cause against the proposal;
(b) for the payment of compensation by the party who would be benefited by the proposed modification or alteration to the party whose rights under the existing lease would thereby be adversely affected; and
(c) for the principles on which, the manner in which and the authority by which the said compensation shall be determined.'
3. It may be stated that under Sections 5 and 6, the Central Government was given power to make rules in respect of mining leases and mineral development. Under clause (c) of Sub-section (2) of Section 5 rules could be framed by the Central Government for the maximum and minimum area and the period for which any mining lease may be granted and the terms on which leases in respect of contiguous areas may be amalgamated. It is thus clear that the Central Government could frame rules under Section 7 read with Section 5 fixing the period of the leases granted prior to the commencement of the Act in order to bring it in conformity with the provisions of the Act. Such rules were in fact framed and placed before the House of the People and were approved by it. Thereafter, a notification was issued on September 4, 1956, containing the Mining Leases (Modification of Terms) Rules, 1956, which were published in the Gazette on September 15, 1956. Rule 4 of these Rules empowers the Controller, after following the prescribed procedure by giving notice, to issue an order making such modifications and alterations in the terms and conditions of the existing mining lease as may be necessary for the purpose of bringing it in conformity with the Mining Concessions Rules. Pursuant thereto the Controller issued a notification on June 27, 1959, reducing the period of the lease entered into prior to the commencement of the Act to a period of 21 years. The Deputy Controller of Estate Duty took the view that on the death of Ramanamma on September 5, 1956, there being no rules and there being no notification reducing the terms of the lease to 21 years the unexpired pptftion in respect of the mining lease was 13 years and not, as claimed by the accounting party, four years. The Deputy Controller of Estate Puty said that the deceased herself had valued it in 1954 and that the lease would run for 15 1/2 years. This valuation was made in connection with the partition dispute in which a consent decree was passed. The Deputy Controller stated that 2 1/2 years after the consent decree in September, 1956, the unexpired portion of the lease was only about 13 years. Accordingly, the valuation of the mines and machinery as on the date of the death of the deceased will be computed in accordance with the figures given by him. Evidently, there is no dispute as to the manner of computation or in respect of the terms of the unexpired lease for which the micamine has been valued. The argument of the auditor that on June 27, 1959, the Controller of Mining Leases for India had fixed the period of the lease at 21 years from October, 1939, and, therefore, only four years and not 13 years remained was rejected on the ground that the rules first came into effect on September 15, 1956, which was after the death of the deceased and is not relevant to the valuation of the mine. The Appellate Controller, however, reduced it to four years. But the Appellate Tribunal, in our view, without laying down any principle, neither accepted the four years nor 13 years, but arbitrarily, fixed 8 years as a reasonable period of the unexpired lease. The learned advocate for the department is unable to sustain this 8 year period, though he contends that the valuation of the unexpired lease must be taken as on the date of the death of the deceased which according to him is 13 years. This question is not before us. We cannot consider this question as the Tribunal has not referred this specific matter to us for our opinion. Even otherwise it is apparent that the valuation which the Estate Duty Officer has to take into consideration for fixing the net value of the estate is the market value as on the date of death. It is apparent that not only was the Act in existence on the date of the death of the deceased but it had empowered the Government to frame rules, to alter and modify the terms of the lease entered into prior to the coming into force of the Act. This however would leave the term of the lease in a state of flux. Immediately thereafter, rules were framed called the Mining Concession Rules, Rule 40 of which fixed 30 years for mining leases of iron ore and bauxite and 20 years in respect of any other mineral. It is apparent therefore that the rules to be framed under Section 7 for bringing the term of the mining lease entered into prior to the commencement of the Act in conformity with the Act and the Sub-clauses made thereunder would necessarily indicate that any period beyond 20 years in so far as mica lease is concerned, would be reduced. No doubt there was no indication as to what was the period to which it would be reduced, but any person to whom the unexpired portion of the lease was offered would certainly have to consider the risk of its reduction. That risk would certainly affect the valuation. Merely because at the time of the partition between the parties a certain valuation has been fixed, is no indication that on the date of the death of the deceased when the draft rules had been passed by Parliament and were awaiting publication, the period would be reduced by a notification as soon as these rules would be published. The action to be taken under those rules was imminent and any person who would be called upon to make an offer for the unexpired portion of the lease would certainly take the possibility of the reduction into consideration. In any case it cannot be said that the mining lease would be allowed to continue for 13 years, nor is there any evidence toshow that any person offering to purchase the unexpired portion of the lease would value it on the basis of 8 years. The Tribunal has merely guessed as reasonable the period of 8 years. In our view the proper basis would be what in fact the Government has by the notification dated June 27, 1959, fixed as the period of lease beginning from the date on which the lease was in fact effected, i.e., in 1939. In other words, the period of the lease is to terminate 21 years from the date of its commencement in 1939. The notification, it will be observed, has given a retrospective effect because it altered the terms of the original lease. In these circumstances even if the assessment had been completed on the basis of the unexpired period being 13 years, the accounting party in appeal could successfully urge that in view of the notification the unexpired portion is only 4 years, and ask for a modification of the order on that basis, viz., that the unexpired portion is only four years on the date and that valuation should be made accordingly. Accordingly, our answer to the question is that the Appellate Tribunal is not justified in law in adopting a period of 8 years as the basis for the valuation of the mines. The proper valuation it should adopt is four years. The reference is answered accordingly, with costs in favour of the accountable person. Advocate's fee Rs. 250.