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Judgment
V. Ramaswami, J.—These are references under the Estate Duty Act, 1953. The widow of one deceased, A. V. Srinivasalu Naidu, as an
accountable person, submitted a returned. Two deductions are in question. The first related to a decree debt in OS No. 232 of 1961, on the file of
the court of the Subordinate Judge of Coimbatore and the other a compromise decree against the deceased, A. V. Srinivasalu Naidu, in OS No.
254 of 1956, on the file of the same court, amounting to Rs. 1,75,000.
Shortly stated, the facts in TC Nos. 77 to 79 of 1977 are these : The deceased, A. V. Srinivasalu Naidu, was a partner in a firm called R. G. C.
Naidu & Company, Coimbatore, which were the managing agents company. In respect of certain misappropriations committed by the managing
agents, the managed company filed OS No. 232 of 1961, above referred to, claiming damages in a sum of Rs. 8,27,449, That suit was referred
to, claiming damages in a sum of Rs. 8,27,449. That suit was decreed for a sum of Rs. 5,83,493 in so far as the firm was concerned. The
deceased had one-third share in the partnership firm and his liability was determined at Rs. 1,99,465. However, the accountable person claimed
the entire decree amount as an admissible deduction u/s 44 of the Estate Duty act. Though the Assistant Controller of Estate Duty rejected the said
claim, the Appellate Controller allowed the claim to the extent of one-third as stated above on the ground that the deceased was liable only to that
extent. The Department as well as the accountable person filed appeals before the Tribunal, the accountable person claiming that the entirety of the
decree amount should have been allowed as a deduction and the Department claiming that nothing was deductible on that ground. The Tribunal
confirmed the order of the Appellate Controller. Both the accountable person and the Department filed applications for reference and a
consolidated question has been referred and that forms the first question that has been referred to in TC. Nos. 77 to 79 of 1977.
The deceased appeared to have been in management of certain estate belonging to his nephews. On the ground that the deceased had secreted
certain moneys belonging to the estate of his nephews and that he had not fully accounted for the income derived from the estate, his nephews filed
OS No. 254 of 1956 on the file of the Court of the Subordinate Judge, Coimbatore, claiming a large amount, that is, over Rs. 3,00,000 and also
for accounting. That suit was compromised and the accountable person submitted to a decree for a sum of Rs. 1,75,000. This amount was sought
to be deducted from the estate of the deceased. The Assistant Controller of Estate Duty rejected this claim also on the ground that there is no
evidence to show as to how the said amount of Rs. 1,75,000 was arrived at and whether it was reasonable, on an appeal preferred by the
accountable person, the Appellate Controller of estate Duty, however held that the facts established that there was absolutely no defence for the
defendant, that a compromise was more advantageous and that the decree against the deceased was a real and bona fide one. In that view, he
allowed the deduction of that money also. The appeal preferred by the Revenue to the Tribunal having failed, at the instance of the Revenue, the
second questions in TC Nos. 77 to 79 of 1977 has been referred.
The two questions that are referred to this court in TC Nos. 77 to 79 of 1977 read as follows :
(1) Whether, on the facts and in the circumstances of the case, any portion of the entire amount covered by the decree passed in OS No. 232 of
1961 on the file on the Subordinate Judge, Coimbatore, was admissible as a deduction in computing the principal value of the estate of the
deceased ?
(2) Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,75,000 paid by the accountable person, Smt. Vijayammal, to
compromise the suit filed against the deceased by his nephews in OS No. 254 of 1956 was deductible while computing the principal value of the
estate ?
As already stated, the decree in OS No. 232 of 1961 is a decree against the firm of managing agents. The deceased, of course, had one-third
share in that firm. Learned counsel for the Revenue contended that the decree could be executed against the other partners fully and that ultimately
the deceased or the accountable person may not be liable for anything at all and, therefore, the entire amount should not be allowed. On the other
had, learned counsel for the accountable person contended that since the decree is one against the firm, the liability is joint and several and,
therefore, the decree might be executed against the estate of the deceased fully and in fact execution proceedings have been taken only against the
estate of the deceased. He also contended that the liability is in the nature of a liability for tort, that is for misappropriation of the money and,
therefore, the accountable person may not be able to claim any contribution at all from the other partners. Both these extreme contentions are not
acceptable. We have to find out the rights and liabilities of the deceased may not be able to satisfy the decree or, it may be, the decree-holder may
not proceed against the estate of the deceased. It is also possible that even if the deceased paid the entire amount, he might be able to recover the
contributions from the other debtors or he might not be able to recover anything. But these are all questions which cannot arise at all while
considering as to what was the liability of the estate on the date of the death. We have to theoretically consider the extent of liability of the estate on
the date of the death. There is also a right to recover or get an indemnity in respect of the other shares of the debt from the other partners. In such
circumstances, we have to take it that the liability of the deceased was only to the extent of one-third of the decree amount, viz., Rs. 1,99,465 as
stated already. The Tribunal was, therefore, right in its conclusion that the deduction is allowable only in respect of the said sum. Accordingly, the
answer to the first question will be that only Rs. 1,99,465 being one-third of the decree amount in respect of the decree in OS No. 232 of 1961
will be admissible as a deduction.
So far as the next question is concerned, there can be no doubt that the deceased was in management of the estate of his nephews when they
were minors. He was an accountable person to the income received by decree was in any way unrealistic or that it did not take into account the
exact liability of the deceased. The bona fides in entering into the compromise could not be disputed at this stage. This question is unarguable for
the Revenue. There is no evidence to show that the compromise was not entered into bona fide by the accountable person. In such circumstances,
we have to answer the second question in the affirmative and against the Revenue and it is accordingly answered.
In TC Nos. 77 to 79 of 1977, the accountable person will be entitled to her costs. Counsel''s fee Rs. 500 (Rupees five hundred only) one set.
In TC No. 76 of 1977, the respondent is M/s. A. V. S. Private Ltd., The deceased, his wife, and two others are the only shareholders of the
Company. There is no dispute that it is a controller company within the meaning of section 17 of the Estate Duty Act. The sum of Rs. 1,75,000
paid towards discharge of the decree debt in OS No. 254 of 1956 was stated to have come from that company. It is in these circumstances that
no separate question is referred to this court in TC No. 76 of 1977 and the respondent in this case is only interested in the answer relating to the
second question in TC Nos. 77 to 79 of 1977. In view of this, the answer relating to the second question already given will cover this case also.
There will be no order as to costs in this case.
For the reasons stated in TC Nos. 77 to 79 of 1977, the decision given in those cases will cover the questions in TC Nos. 1354 and 1355 of
1977 also, since the matters are related and same questions as have been referred in TC Nos. 77 and 79 of 1977 have been referred in TC Nos.
1354 and 1355 of 1977 also. Accordingly, TC Nos. 1354 and 1355 of 1977 are disposed of with reference to the answers given to the two
questions referred in TC Nos. 77 to 79 of 1977. There will be no order as to costs in these cases also.