Krishna Mohan Prasad Sah and Others vs Commissioner of Income Tax

K. Venkataswami, C.J.—The question that has been referred to this court u/s 64(1) of the Estate Duty Act, 1953, reads as follows :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in not, granting exemption of Rs. 1,00,000 for the residential house u/s 33(1)(n) of the Estate Duty. Act, 1953, and limiting it only to the extent of the share of the deceased ?"

Before narrating the facts, we would like to point out that this question appears to be no longer res integra.

Brief facts are the following :

The Assistant Controller of Estate Duty estimated the value of the residential house belonging to the Hindu undivided family of the assessee after allowing depreciation at Rs. 2,05,957. He granted exemption, of Rs. 25,725 in respect of one-eighth share, of the deceased in the, house u/s 33(1)(n) of the Estate Duty Act, 1953 (hereinafter referred to as "the Act"), and added a sum of Rs. 1,54,458, being the value of the shares of the six lineal descendants for rate purpose, u/s 34(1) of the Act. The accountable person, aggrieved by that, moved the Appellate Controller of Estate Duty, without success. Likewise, on further appeal to the Tribunal, the Tribunal also confirmed the view of the Assistant Controller of Estate Duty. Hence the present reference.

It is contended before us by learned counsel appearing for the assessee that having regard to the language employed u/s 39(3) of the Act, the whole, of the house property, under consideration should be deemed to have belonged :to the degeased and, consequently, the exemption u/s 33(1)(n) of the Act as prayed for up to the full extent of Rs. 1,00,000 should have been granted. Learned counsel appearing for the assessee, in fairness, brought to our notice decisions wherein similar issue has been decided against the assessee, and certain decisions which, according to him, support the contention raised before us. We will refer to the decisions at the appropriate place.

Learned counsel appearing for the Revenue, however, submitted that Section 39(3) of the Act is only for the purpose of assessing the principal value of the joint family property, and it is for that purpose alone, the other relevant provisions of the Act are made applicable as far as possible and not for any other purpose, in particular not for seeking exemption u/s 33(1)(n) of the Act. Learned counsel further submitted that the decisions rendered by the Madras High Court consistently are directly on point, that the other decisions cited by learned counsel for the assessee are not directly on the point, and as such, are distinguishable.

The earliest case cited before us on this issue and directly on point is CONTROLLER OF ESTATE DUTY, MADRAS Vs. ESTATE OF LATE R. KRISHNAMACHARI., , wherein the learned judges, after considering an identical question, have answered as follows (the headnote is set out) :

"For the purpose of determining the value of the share of a member of the joint Hindu family and for the purpose of imposing estate duty on his estate after his death, the total value of all the properties valuing each of them separately must first be determined u/s 39(3) and thereafter the properties to the extent to which exemption has been given under the various clauses in Section 33(1) will have to be taken out. The aggregate of the remaining must be divided as if at the time of death there was a partition and the share that would have fallen to the deceased determined. The share so determined will be the share on which duty can be imposed under the Estate Duty Act. If the deceased left behind lineal descendants, the extent of the shares of such lineal descendants has to be aggregated to the share of the deceased in the property in accordance with Section 34(1)(c) and the rate applicable to such aggregated value of that estate will have to be taken into account.

The exemption granted u/s 33(1)(n) relates to property belonging to the deceased. Where the deceased has only an interest in the property, it is only his interest which passes on his death and hence the exemption of Rs. 1 lakh granted u/s 33(1)(n) in respect of residential house will be available on his interest. If the value of the interest of the deceased is more than Rs. 1 lakh, the exemption of Rs. 1 lakh will be available. If, however, the value of the interest of the deceased is less than Rs. 1 lakh, the exemption will have to be restricted to that value."

The above decision was followed in T. Sundaresa Mehta Vs. Controller of Estate Duty, , Controller of Estate Duty Vs. N.L.S.V. Lakshmanan Chettiar, and Controller of Estate Duty, Tamil Nadu-II, Madras Vs. R.M. Venkatachalam, .

In Controller of Estate Duty, Tamil Nadu-II, Madras Vs. R.M. Venkatachalam, , after referring with approval all the earlier decisions, the learned judges have held as follows (headnote) ;

"... the question of exemption is necessarily and inextricably mixed up with the computation of the total value of the property. The provisions of Section 33(1)(n) as of any other exemption provision u/s 33 will have to be applied for the purpose of valuing the total principal value of the joint family property and the aliquot share of the deceased in the property will have to be derived therefrom. All the related steps in the assessment to estate duty, viz., valuation, aggregation and computation, are tied up together for the purpose of effecting the charge. The exemption u/s 33(1)(n) depends necessarily on the process of ascertaining the principal value. Therefore, the exemption u/s 33(1)(n) should be given in respect of the dwelling house from the value of the joint family properties before determining the share of the deceased and that of the lineal descendants both for the purposes of assessment as well as for the purpose of aggregation."

The decision in. CONTROLLER OF ESTATE DUTY, MADRAS Vs. ESTATE OF LATE R. KRISHNAMACHARI., was referred to and applied with approval by the Karnataka High Court in Controller of Estate Duty, Mysore Vs. K. Nataraja, wherein the learned judges, while rejecting an identical contention as the one raised before us by learned counsel for the assessee, have held as follows (headnote) :

"Therefore, where the residential house belongs to a Hindu undivided family governed by the Mitakshara law, only the share of the deceased in such house is exempt from estate duty u/s 33(1)(n). For the purpose of determining the rate of estate duty the value of the share of the deceased in such house has to be excluded from the value of the property passing on his death u/s 34(1)(a), but the value of the shares of all the lineal descendants of the deceased in the coparcenary property including the residential house has to be aggregated u/s 34(1)(c) without any reference to any exemption u/s 33(1)(n) of the Act."

No doubt, the judgment of the Andhra Pradesh High Court in Controller of Estate Duty Vs. Estate of Late Durga Prasad Beharilal (by accountable person and Others), has taken a different view. The learned judges of the Andhra Pradesh High Court, while considering a similar issue, held as follows (headnote) :

". .. the deceased had only one fifth share in the undivided residential house which was exempt u/s 33(1)(n) and value of the balance four-fifths share of the house properly cannot he taken into consideration for the purpose of determination of the net principal value of the estate of the deceased inasmuch as the said four-fifths share belonged to other coparceners. Therefore, the value of the entire house is liable to be excluded from the net principal value of the estate.."

We find from this judgment ( Controller of Estate Duty Vs. Estate of Late Durga Prasad Beharilal (by accountable person and Others), ) that there is no detailed discussion appreciating the language employed in Sections 34 and 39 of the Act, as done in the judgments rendered by the Madras and Karnataka High Courts. Even otherwise, we are inclined to agree with the view taken by the Madras and Karnataka High Courts rather than the view taken by the Andhra Pradesh High Court in the decision in Controller of Estate Duty Vs. Estate of Late Durga Prasad Beharilal (by accountable person and Others), .

The other judgments cited by learned counsel for the assessee are not directly on the point and, therefore, we do not think it is necessary to refer to the same, especially when the law is settled by several decisions of the Madras and Karnataka High Courts with which we agree,

In the result, we answer the question referred to us in the affirmative and against the assessee. No costs.

B.P. Singh, J.

I agree.