JAGANMOHAN REDDY C.J. - The Central Board of Direct Taxes referred for our opinion the following question, viz. :
'Whether, on the facts and in the circumstances of the case, the Board were correct in holding that only court-fees paid on that portion of estate of the deceased, on which estate duty was charged can be allowed as a deduction under section 50 of the Act ?'
This question arises in respect of the estate of one Gunda Eswaraiah, who died on June 6, 1958. The deceased, representing his Hindu undivided family consisting of himself and his son, was a partner with another person, in a firm which had contracts with the Garrison Engineers. The deceased was the financing partner and, according to the terms of the partnership deed, all the assets and liabilities of the firm belonged to the deceased except to the extent of the capital share of profits of the other partner. The contract with the Garrison engineers stood in the name of the deceased a sum of Rs. 2,91,000 was due to be paid by the military authorities in respect of works done by the firm. They insisted on the production of a succession certificate before making the payment due from them and the applicant, therefore, spent Rs. 17,688 on court-fees for obtaining the certificate. The Assistant Controller was of the view that under section 50 of the Act, court-fees could be deducted from the estate duty payable on the death of the deceased, only to the extent of the amounts paid in respect of such estate of the deceased as was chargeable to estate duty. He accordingly computed the deductions permissible under section 50 in respect of the court-fees as follows :
Capital of the deceased in the firm...
Half coparcenary share out of the above...
Insurance monies realised
Court-fees at 5% on above
He accordingly allowed deduction of this court-fee only towards the court-fees paid in this case.
The applicant preferred an appeal before the Board under section 63 of the Act against the order of the Assistant Controller where he contended that the entire sum of Rs. 17,688, should be allowed. The Board dismissed the appeal as untenable because, in its view, section 50 did not envisage deduction of the entire amount of the court-fee paid.
Mr. Mallikarjuna Rao contends that under section 34 of the Estate Duty Act, the entire estate has to be aggregated in order to fix the rate in respect of the interest of the deceased and, if this is so, the court-fee paid to recover the amount due to the joint family should also be deducted. Secondly, he contends that the word 'leviable' used in section 50 would indicate fan intention on the part of the legislature to include the entire estate for the purposes of relief under that section. We cannot accept these contentions as being warranted either under section 34 or section 50 of the Act. The relevant portions of section 34 and section 50 read as follows :
'34. (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) and (m) 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 or Aliyasantana law, have also the interest 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 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.'
Section 50 of the Act reads -
'Where any fees have been paid under any law relating to court-fees in force in any State for obtaining probate, letters of administration or a succession certificate in respect of any property on which estate duty is leviable under this Act, the amount of the estate duty payable shall be reduced by an amount which is equal to one half of the court-fees so paid.'
An examination of the provisions of section 34 would show that what is sought to be provided for is the aggregation of the estate of the deceased for the purposes of determining the rate of the estate duty leviable upon it. We cannot accept the contention of Mr. Mallikarjuna Rao that the aggregation of the estate of the deceased for the purposes of fixing the rate would include the share of other coparceners in the property. The entire estate duty deals only with the property which passes on the death of the deceased. Section 5 which is the charging section makes this amply clear when it provides :
'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, 1956, 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'.
Section 2(16) defined 'property passing on the death' to include property passing either immediately on the death or after any interval either certainly or contingently, and either originally or by way of substitutive limitation, and 'on the death' to include 'at a period ascertainable only by reference to the death.'
It may be stated that under the Hindu law, a joint family property belonging to the coparcenary devolves according to certain principles, namely, by the law of survivorship. But this notion has not been affected by a change in 1956 by the Hindu Succession Act whereunder, if a Hindu coparcener dies intestate, he is deemed to have effected partition on the date of his death. Under these provisions, the estate will be ascertained as on that date. We may observe that even before that date the same effect was given under sections 7 and 39 of the Act. Section 7 reads as follows :
'7. (1) Subject to the provisions of this section, property in which the deceased, or any other person had an interest ceasing on the death of the deceased, shall be deemed to pass on the deceaseds death to the extent to which a benefit accrues of arises by the cesser of such interest, including, in particular, a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law.
(2) If a member of a Hindu coparcenary governed by the Mitakshara school of law dies, then the provisions of sub-section (1) shall apply with respect to the interest of the deceased in the coparcenary property only -
(a) if the deceased had completed his eighteenth year at the time of his death, or
(b) where he had not completed his eighteenth year at the time of his death, if his father or other male ascendant in the male line was not a coparcenary of the same family at the time of his death.
Explanation. - Where the deceased was also a member of a sub-coparcenary (within the coparcenary) possessing separate property of its own, the provisions of this sub-section shall have effect separately in respect of the coparcenary and the sub-coparcenary.'
Section 39 provides :
'39. (1) The value of the benefit accruing or arising from the cesser of a coparcenary interest in any joint family property governed by the Mitakshara school of Hindu law which ceases on the death of a member thereof shall be the principal value of the share in the joint family property which would have been allotted to the deceased had there been a partition immediately before his death.
(2) The value of the benefit accruing or arising from the cesser of an interest in the property of a tarwad or tavazhi governed by the Marumakkattayam rule of inheritance or of a kutumba or kavaru governed by the Aliyasantana rule of inheritance which ceases on the death of a member thereof shall be the principal value of the share in the property of the tarwad or tavazhi or, as the case may be, the kutumba or kavaru which would have been allotted to the deceased had a partition taken place immediately before his death.
(3) For the purpose of estimating the principal value of the joint family property of a Hindu family governed by the Mitakashara, Marumakkattayam or Aliyasantana law in order to arrive at the share which would have been allotted to the deceased had a partition taken place immediately before his death, the provisions of this Act, so far as may be, shall apply as they would have applied if the whole of the joint family property had belonged to the deceased.'
Sub-section (3) of section 39 of the Act is sought to be relied upon in support of the proposition that, since the statute authorises the valuation of the entire joint family property, the court-fee payable in respect of a debt due to the entire family is deductible. We think this argument ignores the basic principles upon which estate duty is leviable. The estate duty is leviable only in respect of an interest of a deceased coparcener which notionally is fixed as his share which he would have got, had there been partition on the date of his death. That is the estate or the value of the estate upon which estate duty is leviable under section 5 of the Act. The manner in which the value of the estate has to be fixed has been set out in Parts IV and V in section 34 to section 40 of the Act. In none of these provisions is there anything to warrant the proposition that the rate leviable on the value of the estate of the deceased is aggregated on the entire estate belonging to the Hindu joint family including the shares of the coparceners, who are alive.
In this view, the other contention that because the word 'leviable' is used in section 50, estate duty is leviable on the value of the estate of the deceased is aggregated on the entire value of the including that of the coparceners who are alive, and, therefore, the court-fee paid to recover the amount due to all the coparceners including the one on whose death his share is deductible, does not arise. The court-fee which has to be deducted under section 50 is in respect of any property of the deceased upon which estate duty is leviable under the Act, and from that duty which is leviable, the amount which is equal to the court-fee so paid in respect of the share of the property of the deceased has to be deducted. Thus, the word 'leviable' is used in relation to that which is leviable, had there not been any provision for deduction. It is only after the various variations and deductions that are permissible that estate duty could be levied and till then it can only be described as leviable. We think that the provisions of section 50 do not admit of any doubt and the view taken by the estate duty authorities is clearly warranted.
In this view, our answer to the question is in the affirmative and in favour of the department with costs. Advocates fee Rs. 250.
Question answered in the affirmative.