Controller of Estate Duty vs Begum Suraiya Rashid

Sohani, J.—This order will also govern the disposal of Misc. Civil Case No. 29 of 1978.

These applications u/s 64(3) of the E.D, Act, 1953 (hereinafter called " the Act") have been filed by the CED, M. P., for directing the Tribunal to state the case and refer certain questions of law to this court for its opinion.

The material facts giving rise to these applications briefly are as follows :

The non-applicant is the accountable person. She filed a return of estate duty in respect of the estate of deceased Shri Rashiduzzafarkhan, son of Shri Obedullakhan. The accountable person claimed a deduction of Rs. 7,00,000. The contention advanced on behalf of the accountable person in this behalf was that the father of the deceased, late Nawab Obedullakhan, had created a wakf in 1924 and had set aside 4,000 preference shares in the Tata Steel Iron Company for that purpose. Subsequently, these shares were sold by Shri Obedullakhan''s son Nawabzada Saveeduzzafarkhan, the brother of the deceased and neither the income nor the corpus meant for the trust was handed over to the trust. Subsequently, the trustees represented by the Controller of Religious and Charitable Endowments filed a suit for recovery of the trust property and the income therefrom. During the pendency of that suit, parties agreed to refer the dispute to an arbitration by the late Nawab of Bhopal, who made his award on January 9, 1947, in favour of the plaintiff and directed that a sum of Rs. 7,00,000 which was held to be the market value of the shares, be paid within ten years in equal instalments. The payment of that amount was secured by pledging the proceeds of Shyamala Deori Jagir inherited by the deceased and his brother. A decree was passed by the High Court of Bhopal on March 11, 1947, in terms of the aforesaid award. The decree was enforceable against the deceased and Enverzia Sultana, legal representative of Saiduzzafarkhan and, hence, it was urged on behalf of the accountable person that the aforesaid liability of Rs. 7,00,000 should be deducted while computing the estate duty chargeable in respect of the estate of the deceased. This contention was rejected by the Asst. CED on the ground that no legal action had been taken by the aggrieved trust and the deceased had all along considered the liability as non-existing. In this view of the matter, the Asst. Controller disallowed the claim for the deduction of Rs. 7,00,000. On appeal before the Appellate CED, the deduction to the extent of Rs. 3,50,000 was allowed. Aggrieved by that order, the accountable person as well as the Revenue preferred appeals before the Income Tax Appellate Tribunal, Indore Bench. The Tribunal allowed the appeal of the accountable person and dismissed the appeal filed by the Department. The Tribunal held that the entire liability of Rs. 7,00,000 was liable to be deducted in the computation of the estate duty. Aggrieved by that order, the Department submitted two applications for making a reference; but those Applications were rejected. Hence the Department has filed these applications.

Having heard the learned counsel for the parties, we'' have come to the conclusion that the question as to whether there was an existing liability of the estate of the deceased to the extent of Rs. 7,00,000 and whether that liability should have been taken into consideration in the computation of estate duty is a question of law. We, therefore, direct the Tribunal to state the case and refer the following question of law to this court:

" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that there was an existing liability of Rs. 7,00,000 in respect of Obedullakhan Trust deductible in computing the amount of estate duty payable in respect of the estate of deceased Rashiduzzafarkhan ? "

The applications are, accordingly, allowed and the Tribunal is directed to state the case referring the aforesaid question of law to this court for its opinion. In the circumstances of the case, parties shall bear their own costs of these applications.