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of <h1>Court upholds constitutionality of Estate Duty Act provision on lineal descendants' shares</h1> The court upheld the constitutionality of Section 34(1)(c) of the Estate Duty Act, ruling that it does not violate the Constitution. The inclusion of the ... Business Expenditure, Central Government, Managing Agent, Mercantile System Issues Involved:1. Constitutionality of Section 34(1)(c) of the Estate Duty Act.2. Inclusion of the value of the lineal descendants' share for rate purposes.3. Application of Article 14 of the Constitution in taxation matters.4. Interpretation of the charging section and machinery section of the Estate Duty Act.5. Classification between coparceners with and without lineal descendants.Detailed Analysis:1. Constitutionality of Section 34(1)(c) of the Estate Duty Act:The primary issue was whether Section 34(1)(c) of the Estate Duty Act is unconstitutional. The petitioner argued that this section violates Article 14 of the Constitution as it discriminates between coparceners with lineal descendants and those without. The court, however, upheld the constitutionality of Section 34(1)(c), stating that the classification between coparceners with and without lineal descendants is reasonable and has a rational nexus with the object of the Act. The court referenced various judgments, including those from the Andhra Pradesh and Kerala High Courts, which supported the view that Section 34(1)(c) does not violate Article 14 or 19(1)(f) of the Constitution.2. Inclusion of the Value of the Lineal Descendants' Share for Rate Purposes:The Assistant Controller of Estate Duty included the value of the lineal descendants' share in the joint family property for rate purposes under Section 34(1)(c). The petitioner challenged this inclusion, arguing it was unconstitutional. The court explained that for determining the rate of estate duty, the value of the shares of the lineal descendants must be aggregated with the property passing on the death of the deceased. However, the estate duty itself is levied only on the estate passing on the death of the deceased, not on the aggregated value. The court emphasized that the assessment must be made in accordance with Section 34, ensuring the shares of the lineal descendants are excluded under subsection (2) for the actual levy of estate duty.3. Application of Article 14 of the Constitution in Taxation Matters:The petitioner argued that Section 34(1)(c) creates an unreasonable classification, violating Article 14 of the Constitution. The court referenced several judgments, including Ramanathan Chettiar v. Assistant Controller of Estate Duty and T. R. Jayasankar v. Assistant Controller of Estate Duty, which held that tax laws can classify different groups for rational and reasonable purposes. The court agreed with these precedents, stating that the classification between coparceners with and without lineal descendants is based on intelligible differentia and is related to the object of the Act, thus not violating Article 14.4. Interpretation of the Charging Section and Machinery Section of the Estate Duty Act:The court analyzed the charging section (Section 5) and the machinery section (Section 34) of the Estate Duty Act. It clarified that the charging section imposes estate duty on property passing on death, while the machinery section provides the method for determining the rate of duty. The court held that Section 34(1)(c) does not enlarge the scope of the charging section but provides a method for calculating the rate by aggregating the value of the lineal descendants' shares. This approach ensures that the estate duty is levied only on the property passing on the death of the deceased, not on the aggregated value.5. Classification between Coparceners with and without Lineal Descendants:The court addressed the petitioner's argument that Section 34(1)(c) discriminates between coparceners with and without lineal descendants. It referenced the judgment in V. Devaki Ammal v. Assistant Controller of Estate Duty, which held that such classification is unreasonable. However, the court disagreed with this view, stating that coparceners with and without lineal descendants form different classes, and the legislature has the discretion to select objects of taxation and rates. The court concluded that the classification is reasonable and does not violate the principles of equality under Article 14.Conclusion:The court dismissed the petition, upholding the constitutionality of Section 34(1)(c) of the Estate Duty Act. It held that the section does not violate Articles 14 or 19(1)(f) of the Constitution. The assessment must be made in accordance with Section 34, ensuring the value of the lineal descendants' shares is aggregated only for rate purposes and not for the actual levy of estate duty. The parties were left to bear their own costs.
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