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Chekka Punikeswara Rao Ajjaram Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Hyderabad
Decided On
Judge
Reported in(1984)10ITD876(Hyd.)
AppellantChekka Punikeswara Rao Ajjaram
RespondentWealth-tax Officer
Excerpt:
.....ch. somaraju (the assessee's father) was not included in the net wealth. 2. excess deduction of estate duty payable on the death of shri ch. somaraju was allowed to the assessee.notice under section 35 was issued calling upon the objections of the assessee, for which the assessee filed his objections. according to the assessee, the accounting year for the assessment year 1980-81 was closed on 30-9-1979 and his father died on 3-8-1979. admittedly, the amount due under the insurance policy taken by the late father of the assessee was paid on 21-3-1980. therefore, according to the assessee, it falls outside the accounting year and so the amount is not liable to be included in his hands for the assessment year 1980-81. the stand of the revenue was that the right to receive the matured.....
Judgment:
1. The assessee is common in both these appeals and the appeals relate to consecutive assessment years and, hence, they can be taken up together and disposed of by a common order. The appeals relate to the assessment years 1980-81 and 1981-82. The former of the appeals arises out of an order by the WTOunder Section 35 of the Wealth-tax Act, 1957 ('the Act'), whereas the regular assessment order was passed by the WTO for the assessment year 1981-82, which is the foundation for the latter appeal.

2. Now let us deal with the former of the appeals first. Originally, the assessment for 1980-81 was completed by the WTO on 29-11-1980, accepting the returned net wealth of the assessee at Rs. 4,20,700.

Subsequently, the WTO found the following two mistakes which, according to him, are mistakes apparent from record : 1. Life insurance amount received on the death of Shri Ch. Somaraju (the assessee's father) was not included in the net wealth.

2. Excess deduction of estate duty payable on the death of Shri Ch.

Somaraju was allowed to the assessee.

Notice under Section 35 was issued calling upon the objections of the assessee, for which the assessee filed his objections. According to the assessee, the accounting year for the assessment year 1980-81 was closed on 30-9-1979 and his father died on 3-8-1979. Admittedly, the amount due under the insurance policy taken by the late father of the assessee was paid on 21-3-1980. Therefore, according to the assessee, it falls outside the accounting year and so the amount is not liable to be included in his hands for the assessment year 1980-81. The stand of the revenue was that the right to receive the matured amount under the life insurance policy taken by the late father of the assessee arose on the death of his late father, i.e., on 3-8-1979 and so the mere fact that the actual payment was received under the policy on 21-3-1980 was of no consequence and it does not assume any importance whatsoever and, hence, inasmuch as in the original assessment the amount received by the assessee under the policy was not included, that constitutes an apparent mistake on record. Both the WTO as well as the AAC did not accept the contention of the assessee and the view that the non-inclusion of the policy amount in the assessment of the assessee for 1980-81 constitutes apparent mistake on record, is upheld by both the lower authorities. Now, on behalf of the assessee, the same contention raised before the lower authorities on the assessee's behalf is repeated. The question is when the assessee purports to follow cash system of accounts, whether the date of accrual, which is crucial in the mercantile system of accountancy, should be ignored for the purpose of ascertaining the wealth of the assessee in a particular assessment year. To put it more clearly even though the accrual of the liability arose in a particular assessment year, the mere fact that the actual payment was received in an accounting year relevant to subsequent assessment year would take out the accrued income from the net wealth of the assessee for the former assessment year. The Andhra Pradesh High Court in CWT v. Pachlgolla Narasimha Rao [1982] 134 ITR 640 held as follows : Accrued interest is 'property' as defined in Section 2(e) and is liable to be valued as an 'asset' for the purpose of computation of net wealth. The fact that the assessee is maintaining his accounts on the cash basis and has not received the interest is not relevant.

The analogy of the I.T. Act cannot be extended to the W.T. Act because the W.T. Act by means of Section 2(m) read with Section 2(e) defines what constitutes 'net wealth' and 'an asset'. The indicia of ownership is enough to qualify the accrued interest as an asset. (p.

641) The ratio found in the last sentence of the above quotation is crucial for our purposes. Applying the above ratio, it can be seen that since the father of the assessee died on 3-8-1979, the right to receive the matured amount under the policy accrued to the assessee. That means, he became the owner of the amount payable under the policy. Therefore, the said ownership is enough to enable the WTO to include the policy amount in the wealth of the assessee. Therefore, in our opinion, the original assessment of the WTO suffers with an apparent mistake on record for not including the amount paid under the policy. Therefore, we do not see any valid reason to interfere with the order of the lower authorities on this point.

3. The next point is regarding the alleged excess allowance allowed to the assessee on the ground that he had paid the estate duty consequent on the death of his father. As already stated, the father of the assessee died on 3-8-1979. Before his death, he executed a will dated 7-9-1978. There is no dispute that the total value of the property held by the father of the assessee was Rs. 7,10,380. There is also no dispute that the father of the assessee bequeathed only an amount of Rs. 71,653 to the assessee under the terms of the will. Admittedly, the total estate duty liability was Rs. 1,33,879. The assessee claimed full deduction of Rs. 1,33,879under Section 2(m)(iii) of the Act. The WTO granted the exemption for the whole of the estate duty amount in his original assessment completed for the assessment year 1980-81.

Subsequently, it was realised that it was a mistake and only a proportionate estate duty payable on Rs. 71,653 obtained by the assessee under the terms of the will only should be allowed, i.e., according to the department. An amount of Rs. 14,503 representing the estate duty payable over Rs. 71,653 obtained by the assessee under the terms of the will should have been allowed as a deduction and the further deduction of Rs. 1,19,069 allowed under the original assessment order is a mistake apparent on record. In the explanation offered by the assessee for the notice issuedunder Section 35, he had put forward the following contentions: 1. He had brought the full facts at the time of the original assessment and after due consideration of those facts only, the original assessment was passed.

2. As the only son of his father, he felt it to be his pious obligation to discharge the whole of the estate duty liability.

3. Estate duty demand was actually served on him and hence he was forced to pay the demand. He also made it clear that he had debited the proportionate estate duty liability in the accounts of the legatees under the will dated 7-10-1981 and he is prepared to return the amounts realised as his wealth as and when the proportionate estate duty liability was realised from the co-legatees.

The lower authorities did not find any merit in this contention. Shri Y. Ratnakar, the learned counsel appearing for the assessee, laid great stress on the provisions of Section 76 of the Estate Duty Act, 1953 ('the 1953 Act'), which is as follows : If a person accountableunder Section 53 pays any part of the estate duty in respect of any property not passing to him, it shall, where occasion requires, be repaid to him by the trustees or owners of the property.

It is argued by him that the assessee is, undoubtedly, an accountable person and he discharged the whole of the estate liability raised against the estate of his father. Therefore, according to the above provision, the 1953 Act contemplated certain occasions where one accountable person paying more than what is due from him and in such cases the Legislature empowered the person who overpaid to recover the excess from the co-legatees of the will. Even if this argument is to be accepted, the excess amount paid would have to be considered as a debt due to the assessee from other accountable persons and, therefore, it.

certainly does form part of the net wealth of the assessee as the debt due to the assessee is one of the assets in his hands. Further, the duties and liabilities of the accountable persons were clearly givenunder Section 53(1) of the 1953 Act, which reads as follows : 53. Persons accountable and their duties and liabilities.-(1) Where any property passes on the death of the deceased- (a) every legal representative to whom such property so passes for any beneficial interest in possession or in whom any interest in the property so passing is at any time vested.

(b) every trustee, guardian, committee or other person in whom any interest in the property so passing or the management thereof is at any time vested, and (c) every person in whom any interest in the property so passing is vested in possession by alienation or other derivative title.

shall be accountable for the whole of the estate duty on the property passing on the death but shall not be liable for any duty in excess of the assets of the deceased which he actually received or which, but for his own neglect or default, he might have received: The above section makes it very clear that the accountable person is obliged to pay only such duty which ban be ascribed to the assets which he had actually received or but for his neglect or default, he might have received. He is not under legal obligation to pay estate duty over assets which he did not receive from the deceased. Thus, it makes very clear that the assessee, first of all, is not under an obligation to pay the whole of the estate duty of Rs. 1,33,879. He is obliged to pay estate duty only on Rs. 71,653 received by him under the terms of the will towards estate duty. Therefore, in our opinion, the excess payment is not legally recoverable by the revenue from the assessee towards estate duty payable on the death of Ch. Somaraju, the assessee's father. Assuming, without admitting, that it is also payable by the assessee, the excess payment becomes the value of the debts due to the assessee from the co-legatees under the will. So, in either view of the matter, allowing Rs. 1,19,069 towards estate duty in the original assessment, in our opinion, forms a mistake apparent on record and we, therefore, hold that the lower authorities are quite correct in withdrawing that excess allowance by the orders passedunder Section 35.

It is no doubt true that the rectification cannot be made if a mistake on a point of law can be made out on a long-drawn process of reasoning, on a point on which there can be two conceivable opinions. But in this case, we hold that the mistakes are obvious and there cannot be any conflicting opinion on the mistakes sought to be made out before us.

Thus, even after giving adequate opportunity to the assessee's counsel, we are of the opinion that the appeal bears no merit and, hence, it is dismissed.

4. The only point in dispute in this appeal relating to the assessment year 1981-82, for which the valuation date is shown as 31-3-1981, is whether the assessee is entitled to claim deduction of estate duty only on Rs. 14,503, as estate duty liability over Rs. 71,653 received by him under the terms of his father's will stated above or whether he is entitled to claim exemption for the whole of the estate duty liability of Rs. 1,33,572 said to have been paid by him on a demand raised against him towards estate duty liability on his father's estate. We have fully thrashed out this very subject in our orders for the assessment year 1980-81. We follow the same orders while disposing of this appeal for the assessment year 1981-82 and we hold that the assessee is rightfully entitled to Rs. 14,503 only towards estate duty liability, which is proportionate to his value of the bequest he received, Rs. 71,653, under the terms of his father's will. We hold that for the detailed reasons given by us while disposing of the appeal for 1980-81, the amount of Rs. 1,19,069 cannot form part of the legitimate deduction to which the assessee is entitled to. Therefore, we fail to see any valid ground in this appeal and, hence, it is dismissed.


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