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Issues: Whether compensation of Rs. 42,000 paid to the deceased passenger's dependants under the Carriage by Air regime was liable to estate duty as property passing on death under the Estate Duty Act.
Analysis: Under section 5 of the Estate Duty Act, duty is chargeable only on property that passes on the death of the deceased. Sections 2(15) and 2(16) extend the concept of property and property passing on death, but the amount in question came into existence only after the death of the passenger and had not existed, even contingently, during his lifetime. The liability under the Indian Carriage by Air Act, 1934 and its Schedules was a compensation right enforceable by specified family members for death of the passenger; it was not property of the deceased estate. Section 15 of the Estate Duty Act was also inapplicable because it deals with annuities or interests purchased or provided by the deceased and not with death compensation payable to relatives.
Conclusion: The compensation did not pass on the death of the deceased and was not chargeable to estate duty.
Final Conclusion: The reference was answered in favour of the assessee, and the department's claim to estate duty on the compensation failed.
Ratio Decidendi: Compensation payable only to the deceased's relatives under a death-liability scheme, which comes into existence after death and was not an existing interest of the deceased during lifetime, is not property passing on death for estate duty purposes.
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