1982 (1) TMI 50 - HC - Income Tax

Court rules deceased's trust share taxable, Madho Kunj property valuation upheld. Residential house exempt.

The court ruled in favor of the revenue, confirming the inclusion of the deceased's share in the trust property for estate duty assessment. The valuation ... Beneficiary, Estate Duty, Exemptions, Trusts Issues Involved:1. Inclusion of deceased's share in Lala Man Mohan Das Trust.2. Valuation of Madho Kunj property.3. Exemption of residential house from estate duty.Detailed Analysis:1. Inclusion of Deceased's Share in Lala Man Mohan Das Trust:The first issue pertains to whether the deceased's share amounting to Rs. 1,27,098 in the Lala Man Mohan Das Trust should be included in the estate for estate duty purposes. The Tribunal found that there was no dispute that the deceased's family had a share in the trust property and that this share passed on his death. The Tribunal held that the value of the deceased's share had to be included in the estate duty assessment. The accountable person argued that the share was not included in the deceased's wealth-tax assessment and thus should be excluded from the estate duty assessment. However, the Tribunal concluded that the deceased had a present continuing interest in the trust property, which passed on his death and was not a contingent interest. Therefore, the authorities rightly added the value of such an interest to the deceased's estate.2. Valuation of Madho Kunj Property:The second issue concerns the valuation of the Madho Kunj property. The Asst. Controller valued it at Rs. 4,87,682, which was reduced to Rs. 3,86,660 by the Zonal Appellate Controller. The Controller capitalized the net annual value at 20 times and added the value of the excess open land. The Tribunal upheld this valuation but modified the capitalization rate to 15 times the net rental. The accountable person contended that the excess land could not be sold as it was earmarked for a park by the municipality. The Tribunal rejected this argument, stating that even if reserved for a park, the appellant would receive market value as compensation. The Tribunal found the value of Rs. 3 per sq. foot reasonable. However, the accountable person argued that the Tribunal misunderstood the factual position and that the excess open area was actually 72,460 sq. ft., not 1,00,000 sq. ft. The Tribunal was directed to re-hear the appeal on this matter due to potential factual misapprehensions.3. Exemption of Residential House from Estate Duty:The third issue involves the exemption of the residential house from estate duty under Section 33(1)(n) of the E.D. Act. The property was valued at Rs. 20,000, and the accountable person argued that the entire value should be exempt as it was the deceased's residence. The authorities below excluded only the deceased's share. The Tribunal held that the entire value of the residential house should be excluded for rate purposes. Section 34(1) provides that property exempt under certain clauses, including Section 33(1)(n), should not be aggregated for determining the estate duty rate. Therefore, the value of the residential house could not be included for rate purposes, even if it consisted of a coparcenary interest.Judgment:The court answered the first two questions in favor of the revenue and against the assessee, confirming the inclusion of the deceased's share in the trust property. The fourth and fifth questions were answered in favor of the assessee, confirming that the entire value of the residential house should be exempt. The third question was left unanswered, and the matter was remanded to the Tribunal for re-hearing regarding the Madho Kunj property. Each party was directed to bear its own costs, and the counsel for the department's fee was set at Rs. 200.