Controller of Estate Duty vs Ramendra Nath Maliah

Ajit K. Sengupta, J.—In this reference u/s 64 of the Estate Duty Act, 1953, the following question of law has been referred to this Court:

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the deceased was enjoying possessory as well as legal right over the property on the basis of the agreement and that the Asstt. Controller could not have rectified his order u/s 61 of the Estate Duty Act, 1953 ?

Shortly stated, the facts are that the deceased K.K. Maliah died on 11 -2-1980. The Assistant Controller in his original order computed the value of the dutiable estate of the deceased at Rs. 3,16,919 which included Rs. 1 lakh, being the value of a residential house. The deceased was a licensee in the said house property and entered into an agreement for purchase of a portion of the same for Rs. 1 lakh. A sum of Rs. 90,000 was paid and the balance of Rs. 10,000 was to be paid at the time of registration. However, deduction u/s 33 of the Act was allowed by the Assistant Controller in respect of the value of the said house property. Subsequently the Assistant Controller passed an order u/s 61 of the Act treating the sum of Rs. 90,000 as an advance made by the deceased as on the date of death and withdrew the deduction allowed u/s 33(1)(n). On appeal, the Appellate Controller confirmed the order of the Assistant Controller.

On further appeal the Tribunal set aside the orders of the lower authorities stating that the law on this point was not settled and as it was a debatable point, the Assistant Controller could not rectify his order u/s 61 of the Act.

None appeared on behalf of the assessee. At our request, Mr. R.N. Bajoria, the learned counsel, has assisted this Court and this Court records its appreciation for the assistance rendered by him.

As indicated, the deceased was a licensee of a house property and entered into an agreement for purchase of the said house property at a consideration of Rs. 1 lakh and paid Rs. 90,000 as advance. The balance amount of Rs. 10,000 was required to be paid at the time of registration. The sale deed could not be executed and registered before the death of the deceased. The Assistant Controller added the value of the above property of the deceased at Rs. 1 lakh and also allowed exemption u/s 33 as it was a residential property of the deceased. The Assistant Controller, thereafter, wanted to rectify the alleged mistake saying that the deceased was not the owner of the property as the conveyance was not registered in his favour. Accordingly, the property did not belong to the deceased. Therefore, the accountable person was not entitled to claim exemption of Rs. 1 lakh u/s 33(1)(n). The question of interpretation of the expression ''belonging to'' was involved in the rectification proceedings. At the material time there was divergence of judicial opinion on this question. Several High Courts took the view that without a registered conveyance, title to the immovable property does not pass. However, in the case of Addl. Commissioner of Income Tax Vs. Sahay Properties and Investment Co. (P.) Ltd., the Patna High Court held that even though the conveyance was not registered, the transferee, who was in possession, should be assessed u/s 22 of the income tax Act, 1961. The Punjab and Haryana High Court in the case of Smt. Kala Rani Vs. Commissioner of Income Tax, held that the income should be includible where the house property was in possession of the assessee and the entire consideration was paid although the sale deed was not executed. This Court in the case of Madgul Udyog Vs. Commissioner of Income Tax, held that even in absence of registration the purchaser could be the owner of such property.

Leave to appeal to Supreme Court was granted against the decision in the case of Mudgul Udyog (supra) which is pending before the Supreme Court. It is, therefore, clear that there is a divergence of judicial opinion on the interpretation of the words ''belonging to''. It is now well-settled that a mistake cannot be a mistake apparent from the record if interpretation of section is involved in such rectification proceeding. There must be a mistake apparent from the record.

For the reason aforesaid, we are of the view that the Tribunal was justified on the facts and in the circumstances of the case in holding that the dispute was not settled till then, whether the property which was not conveyed by registered document belonged to the deceased or not. We are of the view that having regard to the principles laid down by the Supreme Court in the case of T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, the question in this reference must be answered in the affirmative and in favour of the assessee.

There will be no order as to costs.

Sen, J. -I agree.