Inclusion of Profits in Estate for Duty Purposes Upheld by Court

The court held that the sum of Rs. 6,75,244 was includible in the estate of the deceased for estate duty purposes. The court reasoned that the deceased had a legal right to receive the share of profits, which accrued monthly, even though the actual amount was determinable after the accounting year. The court rejected the argument that the amount was not part of the estate due to its ascertainment posthumously. The court also considered relevant case law and definitions under the E.D. Act, 1953, concluding that the amount was indeed part of the deceased's property passing on death. The judgment favored the revenue authority, ordering the accountable person to pay the costs of the reference to the Commissioner.

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Issues Involved:
1. Inclusion of Rs. 6,75,244 in the estate of the deceased for estate duty purposes.
2. Allowance of income-tax as a liability in computing the net estate.

Detailed Analysis:

1. Inclusion of Rs. 6,75,244 in the Estate of the Deceased for Estate Duty Purposes:
The primary issue was whether the sum of Rs. 6,75,244, representing the deceased's share of profits, should be included in the estate for estate duty purposes. The deceased was an employee of M/s. Batliboi & Co., entitled to a share of the profits, which was calculable only after the end of the accounting year, i.e., after June 30, 1961. The accountable person argued that this amount was not due on the date of the deceased's death and thus should not be included in the estate.

The Deputy Controller included the amount in the estate, which was upheld by the Appellate Controller, stating that the salary was earned day-to-day, making the inclusion justified. The Tribunal also affirmed this view, stating that the amount accrued at the end of each month of service, making it a debt payable to the deceased.

The court referred to the Supreme Court decision in E. D. Sassoon & Company Ltd. v. CIT [1954] 26 ITR 27, which discussed the accrual of income and the right to receive it. The Supreme Court held that income accrues when the right to receive it is established, even if the actual receipt is later. The court concluded that the deceased had a right to the share of profits for the period he served, making the amount includible in the estate.

2. Allowance of Income-Tax as a Liability in Computing the Net Estate:
The accountable person contended that income-tax on the amount of Rs. 6,75,244 should be allowed as a liability in computing the net estate. This contention was accepted by the Appellate Controller, who directed the necessary deduction for tax liability. The Tribunal reaffirmed this direction.

Court's Conclusion:
The court held that the sum of Rs. 6,75,244 was includible in the estate of the deceased for estate duty purposes. It was reasoned that the deceased had a legal right to receive the share of profits, which accrued monthly, even though the actual amount was determinable after the accounting year. The court rejected the argument that the amount was not part of the estate due to its ascertainment posthumously.

The court also considered the definitions of "property" and "property passing on death" under the E.D. Act, 1953, and relevant case law, concluding that the amount was indeed part of the deceased's property passing on death.

Judgment:
The question referred to the court was answered in the affirmative and against the assessee. The accountable person was ordered to pay the costs of the reference to the Commissioner.

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