Minal A. Mehta vs Controller of Estate Duty

G.T. Nanavati, J.—The Income Tax Appellate Tribunal has referred the following three question to this court for its opinion u/s 64 of the Estate Duty Act, 1953 :

"1. Whether the share of the lineal descendants of the deceased are required to be aggregated for the rate purposes for computing the principal value of the estate u/s 34(1)(c) of the Estate Duty Act ?

Whether the estate duty payable on the estate is liable to deducted as a prior charge on the estate under-section 74 or even otherwise, for the purpose of computation of the principal value of the estate ?

Whether Rs. 24,000 being 80 per cent of Rs. 30,000 is liable to be added to the principal value of the estate as the value of outstanding professional fees on the date of death of the deceased ?

Briefly stated the facts are that A. B. Mehta, who was an advocate, died on October 13, 1973. The above three question arose during the estate duty assessment proceedings pertaining to the estate of the deceased. The points that arise for our consideration and the opinion in this reference are now covered by the decision of this court and the decision of the Supreme Court. This court in Gunvantlal Keshavlal Vs. Controller of Estate Duty, Gujarat, , has held that the entire HUF property has to be taken into account for the purpose of working out the value of the interest of the lineal descendants of the deceased for the purposes of section 34(1)(c) of the Act. This court also held that the interest of all the lineal descendants of the deceased in the joint family property or HUF property has to be aggregated so as to form one estate and the estate duty has to be levied thereon at the rate or rates applicable in respect of the principal value thereof. In view of the decision of this court, question No. 1 will have to be answered in the affirmative.

Question No. 2 is with respect of deduction of estate duty as a prior charge on the estate u/s 74 of the Act. The decision of this court in Gunvantlal Keshavlal Vs. Controller of Estate Duty, Gujarat, covers that point also, as it has been held therein that the estate duty payable on the estate passing on death is not deductible from the value of the estate. In P. Leelavathamma (Smt) Vs. Controller of Estate Duty, Andhra Pradesh, Hyderabad, , the Supreme Court has also held that estate duty falling upon property passing on the death of the deceased is not deductible in computing the net principal value of the estate for the purpose of the Estate Duty Act. Therefore, question No. 2 will have to be answered in the negative.

The third question referred to us is with respect to outstanding professional fees. This point is also covered by two decisions of the Supreme court. In Commissioner of Wealth-tax, Orissa Vs. Vysyaraju Badreenarayana Moorthy Raju, , the Supreme has held that the value of a property on a legal plane refers to the value of the right in that property. What accrues as a right also falls to be included in the assets of an assessee under the Wealth-tax Act, 1957. The system of accounting, mercantile cash or hybrid, is of no relevance for the purpose of determining the assets of the assessee. In Henry Joshua Silverston and Dipti Kumar Basu Vs. Commissioner of Wealth-tax, , the Supreme Court confirmed the decision of the Calcutta High Court in Dipti Kumar Basu Vs. Commissioner of Wealth Tax, , wherein it was held that the outstandings due to a firm of solicitors from its clients constituted assets the value of which had to be included in the assets of the firm for the purpose of ascertaining the interest of a partner of the firm therein for computing his net wealth for the purpose of Wealth tax under the Act, it would not make any difference because an asset is property and whatever the Supreme Court has observed with respect to assets in that case will equally apply to property for the purpose of the Act. Therefore, the third question will have to be answered in the affirmative.

In the result, the three questions are answered as under :

Question No. 1 - In affirmative, i.e., against the assessee.

Question No. 2 - In the negative, i.e., against the assessee.

Question No. 3 - In the affirmative, i.e., against the assessee.

No order as to costs.