1. The following question of law has been referred to us for opinion under Section 64(1) of the Estate Duty Act, 1953, hereinafter called the Act :
'Whether, on the facts and in the circumstances of the case, the Board was right in holding that estate duty was payable on the death of the deceased under the provisions of the Estate Duty Act, 1953, on the value of non-agricultural property at the rate applicable to the principal value of the estate which would include the value of agricultural land in Pepsu which was not liable to duty but was liable to inclusion in the value of the estate ?'
2. It has arisen in the following circumstances. Col. Raghbir Singh died on 7th January, 1953, leaving property, both agricultural and non-agricultural. On his death, his widow, Shrimathi Virpaul Kaur, furnished an account of that property to the Assistant Controller of Estate Duty, Patiala. The agricultural property was situated in the former State of Pepsu and the same was exempt from estate duty at the time of the death of the deceased. The Deputy Controller of Estate Duty, who completed the assessment, determined the net principal value of the estate of the deceased at Rs. 10,63,217 and this amount included the value of the agricultural lands, which was Rs. 9,44,060. The assessee filed an appeal before the Central Board of Revenue and objected to the valuation of the property made by the Deputy Controller. It was also said that the value of the non-agricultural property did not exceed rupees one lakh and, therefore, no duty was leviable thereon. The Board remanded the case to the Deputy Controller for making further enquiries regarding the disputed question of valuation of the various properties. After the report was received, the Board allowed some reductions in respect of the valuation made by the Deputy Controller, with the result that the principal value of the estate of the deceased was reduced to Rs. 9,79,486 and the value of the agricultural lands comprised therein was reduced to Rs. 8,73,820. The Board overruled the other contention of the assessee to the effect that no duty was leviable under Section 35 read with the Second Schedule to the Act, because the estate of the deceased consisted of two types of properties, one on which estate duty was leviable and the other, namely, agricultural land, which was exempt from the payment of the estate duty and the value of the former was less than rupees one lakh. It held that under Section 34(1) of the Act, all properties passing on death, including exempted agricultural lands in the Pepsu State, had to be aggregated in the first place for determining the principal value of the estate and the rate of duty appropriate thereto. When that was done, the principal value exceeded rupees one lakh and there was, therefore, a definite rate of duty applicable to the estate of the deceased. The duty was, however, to be levied on the dutiable portion of the estate, the rest being exempt, but at the rate applicable to the aggregate estate.
3. The charging section in the Act is Section 5, the relevant portion of which reads :
'5. Levy of estate duty.--(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 States specified in the First Schedule tothis Act, which passes on the death of such person, a duty called 'estate duty' at the rates fixed in accordance with Section 35. ... '
4. Under this section, the estate duty is levied on the principal value of all the properties left by the deceased, including agricultural land situate in the States specified in the First Schedule to the Act, at the rates fixed in accordance with Section 35.
5. It may be mentioned that the Pepsu State does not find mention in the First Schedule to the Act. That being so, the agricultural land situated in that State will rot be included for the purpose of levying duty on the estate of the deceased.
6. Section 34 deals with the determination of the rate of estate duty. The portion of this section, with which we are concerned, says :
'34. Aggregation.--(1) For the purpose of determining the rate of estate duty to be paid on any property passing on the death of the deceased, all property so passing, excluding--. . . . but including--. . . .
(iii) agricultural land situate in any State not specified in the First Schedule shall be aggregated so as to form one estate and the duty shall be levied at the rate or rates applicable in respect of the principal value thereof :....'
7. This section, as I have already mentioned, comes into play for fixing the rate of estate duty, and, for that purpose, agricultural lands situate in Pepsu and belonging to the deceased will be included.
8. Then comes Section 35, which concerns the rates of estate duty on property, including agricultural land, and it reads :
'35. Rates of estate duty on property including agricultural land.--(1) The rates of estate duty shall be as mentioned in the Second Schedule : Provided that no such duty shall be levied upon--....'
9. A combined reading of these sections would show that if the value of non-agricultural property of a deceased person exceeds rupees one lakh, then the same would be chargeable to estate duty. The rate at which the said duty would be leviable would be arrived at after including the agricultural land situate in Pepsu belonging to the deceased, but which was not liable to duty otherwise. The same would, however, be included for the determination of the principal value of the estate of the deceased and on that basis the rate of estate duty would be fixed.
10. Learned counsel for the assessee could not urge anything against the above analysis of the sections. He, however, contended that there was a clerical error in respect of the valuation made by the authorities regarding the chargeable portion of the estate of the deceased. This point is, however, for the Board to decide in accordance with law.
11. In view of what has been said above, the question referred to us for opinion is answered in the affirmative in favour of the department. The parties are, however, left to bear their own costs in this court.