Controller of Estate Duty vs Ashok Kumar and Mahesh Chander

Iqbal Singh, J.—The facts, in brief, are as under :

Mehar Chand Modi died on September 14, 1979. He made a gift of Rs. 25,000 on March 31, 1977, to Mahesh Chander, on which tax of Rs. 900 was paid. The claim of the Revenue was that it passed on the death of the deceased u/s 8 of the Estate Duty Act being gift mortis causa. The claim was rejected by the Tribunal on the ground that no evidence was brought on the record that it was a gift mortis causa.

A reference application was made by the Controller of Estate Duty, Patiala, to the Tribunal to draw up a statement of the case and to refer the following questions, said to be of law, arising out of the Tribunal''s order dated September 17, 1984, in E. D. A. No. 20 of 1981 relating to the principal value of the estate passing on the death of the late Shri Mehar Chand Modi of Nabha to this court for its opinion :

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the value of the gift was not includible in the estate of the deceased ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the provisions of Section 33(1)(o) are not attracted in this case ?"

After hearing the submissions of the Revenue and the accountable person, the Tribunal took a view that the provisions of Section 33(1)(o) cannot be brought to it unless the property passed u/s 8 of the Act and, therefore, modified the questions as under and referred the same to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of Section 33(1)(o) of the Estate Duty Act will come into play only when the property was chargeable to estate duty u/s 8 of the Estate Duty Act ?"

We have heard learned counsel for the parties.

The contention of Mr. R.P. Sawhney, senior advocate, appearing for the Revenue, is that the gift was includible in the principal value of the deceased u/s 8 of the Estate Duty Act and that it was not necessary that it should be included in the principal value of the estate before exemption was claimed. Relying upon the provisions of Section 33(1)(o) of the Estate Duty Act, he further stated that the gifts made within five years of death to the relatives are not exempted and, therefore, the same were includible in the principal value of the estate. Learned counsel in this regard took us to Sections 9, 10, 27 and 33(1)(o) of the Estate Duty Act.

The contention of counsel for the accountable person is that unless the estate was held to be includible in the principal value of the estate, the provisions contained in Section 33 will not be attracted. In our opinion, the provisions u/s 33(1)(o) come into play only when the property is chargeable to estate duty and Section 33 deals with the exemptions and this argument arises only if estate duty is payable. The gifts made by the deceased do not fall under the provisions of Sections 8, 9, 10, which deal with gifts made by the deceased. Learned counsel for the Revenue has not been able to point out any provision under the Act which made the amount gifted as chargeable to estate duty and, thus, there is no question of complying with the provisions of Section 33(1)(o) of the Act because this provision will apply only if the amounts gifted are otherwise liable to estate duty. We, therefore, hold that the provisions of Section 33(1)(o) are not attracted in this case. The Tribunal was right in law to hold that the provisions of Section 33(1)(o) will come into play only when the property was chargeable to estate duty u/s 8 of the Estate Duty Act.

Accordingly, the reference is answered in favour of the Revenue.