Estate duty valuation must ignore a statute void from inception and use hypothetical open market price for principal value.

For estate duty valuation under section 36 of the Estate Duty Act, the principal value must be estimated on the basis of what the property would fetch in a hypothetical open market sale at the date of death. A statute declared void ab initio cannot be treated as a continuing legal restriction on that valuation, because it is deemed never to have existed. The Gujarat HC therefore accepted that the Land Acquisition (Bombay Amendment) Act, 1948 had to be ignored once held non est from inception, and the Tribunal was justified in valuing the land on an open market basis. The reference was answered against the assessee and in favour of the Revenue.

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Issues: Whether, for determining principal value under section 36 of the Estate Duty Act, 1953, the Tribunal was right in disregarding the Land Acquisition (Bombay Amendment) Act, 1948 after it had been declared void from inception, and in valuing the land on the basis of the hypothetical open market sale price.

Analysis: The valuation provision requires estimation of the price the property would fetch if sold in the open market at the time of death. The expression contemplates a hypothetical market sale and not an actual sale, and restrictions or consequences flowing from a statute that is void ab initio cannot be treated as continuing legal fetters on valuation. Once the Bombay Amendment Act was held by the Supreme Court to be incompetent and non est from inception, it had to be treated as never having existed on the statute book. The court also held that the presence of the section 4 notification did not alter the position, since on the relevant date the land was in fact capable of being valued on the footing of an open market and the subsequent cancellation of the notification reinforced that the agreed and actual sale price reflected the proper principal value.

Conclusion: The valuation adopted by the Tribunal was upheld. The answer to the referred questions was against the assessee and in favour of the Revenue.

Ratio Decidendi: For estate duty valuation under section 36, a statute declared void from inception is to be ignored as non est, and the hypothetical open market price must be determined on that legal basis rather than on the footing that the void law continued to operate.

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