1984 (3) TMI 99 - AT - Income Tax

Inclusion of Outstanding Fees in Estate Value Upheld for Estate Duty Assessment

The Appellate Tribunal upheld the inclusion of outstanding fees receivable in the principal value of the estate for estate duty assessment. It emphasized ... Cash Basis, Net Principal Value, Principal Value Of Estate Issues:1. Inclusion of outstanding fees receivable in the principal value of the estate for estate duty assessment.2. Whether the deceased chartered accountant had a right to fees for services rendered even without written contracts or raised bills.3. Applicability of accounting basis and legal principles to determine property passing on death for estate duty assessment.Detailed Analysis:1. The judgment dealt with the issue of whether outstanding fees receivable by a deceased chartered accountant should be included in the principal value of the estate for estate duty assessment. The accountable person argued that the fees were not includible as the deceased maintained accounts on a cash basis and there were no written contracts or bills raised during his lifetime. However, both the Assistant Controller and the Appellate Controller held that the fees were property passing on death and should be included in the estate value. The Appellate Tribunal upheld this decision, emphasizing that the right to fees had accrued to the deceased, and the fees were realized within a reasonable period after death.2. The judgment further delved into whether the deceased had a right to fees for services rendered, even in the absence of written contracts or raised bills. The learned counsel for the assessee argued that without contracts or bills, the outstanding fees should not be included in the estate value. However, it was established that there was an implied agreement between the deceased and his clients for payment of fees, as services were rendered and fees were paid posthumously. The Tribunal concluded that the deceased, being a professional, would naturally expect payment for services rendered, and the clients' subsequent payments indicated the outstanding fees were rightfully due to the deceased.3. Lastly, the judgment discussed the applicability of accounting basis and legal principles in determining property passing on death for estate duty assessment. It was noted that the system of accounting, such as cash basis, was not crucial for estate duty assessment, and what mattered was whether the property had passed on the death of the deceased. Referring to relevant legal provisions and precedents, the Tribunal held that the fees receivable from clients should be included in the estate value. Additionally, a higher discount of 25% was allowed on the outstanding fees, considering potential litigation for fee recovery.In conclusion, the Appellate Tribunal upheld the inclusion of outstanding fees receivable in the principal value of the estate for estate duty assessment, emphasizing the deceased's right to fees for services rendered, even without formal contracts or raised bills. The judgment clarified the relevance of legal principles over accounting basis in determining property passing on death for estate duty assessment and allowed a higher discount on outstanding fees due to potential litigation for recovery.