Smt. Elsy Thomas vs Controller of Estate Duty

V.V. Kamat, J.—In relation to the proceedings u/s 64(1) of the Estate Duty Act, 1953, in the matter of estate duty assessment of the accountable person claiming as the legal heir of the late Shri K. P. Thomas, who expired on June 10, 1966, we are required to consider the correctness of the valuation of the closing stock which has been fixed on what is presumed to be the market value thereof. Therefore, the question expecting our answer is as follows :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the value of the closing stock of the firm Popular Automobiles was to be enhanced to the extent of the market price obtainable in retail sales ?"

The Assessing Officer-Assistant Controller of Estate Duty, Trichur-dealt with the question and ascertained the value of the closing stock on the basis of the valuation in accordance with the market value.

The first appellate authority-Appellate Controller of Estate Duty-considered the question relating to the enhancement of the value of the closing stock of the firm, Popular Automobiles, by 12.5 per cent and including one-fifth share of the deceased at Rs. 55,624 in the value of the estate. The first appellate authority, following the decision of the Tribunal dated February 16, 1981, took the view that the stock-in-trade would appreciate in value only if all the circumstances were favourable. The reasoning proceeded further to observe that when the stocks were available from distributors, the stock in the firm should not be sold in bulk in the open market at a higher value.

However, the Income Tax Appellate Tribunal considered otherwise. The Tribunal took the view (see paragraph 7 of the order) that the revaluation of the closing stock for the purpose of adding the difference in the value of the principal estate is the proper way and the assets of the deceased will have to be valued at the current prevailing price as on the date of death which is the relevant valuation date. This situation has brought the accountable person before us for the answer to the question posed at the outset.

This court in ITR No. 164 of 1991--Smt. Sajani v. CED 1998 1 ITR 231 559 decided on August 7, 1996 (of which, one of us--myself, delivered the judgment), had occasion to consider the question of an identical nature. This was in a situation where the value of the closing stock was enhanced to the extent of the market price obtainable in retail sales. The court is concerned with the process of valuation of the closing stock and the relevant date in regard thereto would be the date of death of the person in regard to whose estate proceedings are initiated. This court has held therein that fixation and valuation in the matter of closing stock is an undisputed factual situation. No other course is open to us under the circumstances.

For the above reasons, we answer the question in the affirmative, in favour of the Revenue and against the accountable person.

A copy of this judgment, under the seal of this court and the signature of the Registrar, shall be sent to the Income Tax Appellate Tribunal, Cochin Bench, for passing consequential orders.