1984 (6) TMI 86 - AT - Income Tax

Tribunal Upholds Proportionate Relief in Estate Duty Appeals

The accountable person's appeal [ED Appeal No. 46 (Bom.) of 1983] was dismissed, while the departmental appeal [ED Appeal No. 50 (Bom.) of 1983] was ... Average Rate Of Tax, Capital Gains Tax, Estate Duty Issues Involved:1. Relief under section 50B of the Estate Duty Act.2. Computation of relief under section 50B regarding sale of assets by HUF.3. Relief under section 50B for capital gains tax paid by Hemant Family Trust No. 2.4. Relief under section 50 of the Estate Duty Act for probate fees.5. Basis of capital gains tax relief-actual capital gains tax payable vs. net average rate of tax.Detailed Analysis:1. Relief under section 50B of the Estate Duty Act:The accountable person contended that the Appellate Controller erred in not directing the Assistant Controller to correctly grant relief under section 50B and section 50 of the Estate Duty Act. This was a general ground and did not require separate consideration.2. Computation of relief under section 50B regarding sale of assets by HUF:The accountable person argued that the Appellate Controller wrongly restricted the relief under section 50B to one-third of the capital gains tax paid by the HUF. The deceased's interest in the HUF property was one-third. The Assistant Controller computed the relief at Rs. 1,12,426, which was one-third of the capital gains tax paid on the sale of shares and Borivili land. The Appellate Controller upheld this computation, stating that the relief should be proportionate to the deceased's interest in the HUF property.The accountable person argued that the entire HUF property should be considered for estate duty, relying on sections 7, 34(1)(c), and 39 of the Act. The departmental representative countered that estate duty is only leviable on the deceased's interest in the HUF property. The Tribunal agreed with the departmental authorities, stating that the deceased's interest in the HUF property is property under section 2(15) and is liable to estate duty. The relief under section 50B should be one-third of the capital gains tax computed in proportion to the utilization of the sale proceeds.3. Relief under section 50B for capital gains tax paid by Hemant Family Trust No. 2:The accountable person argued that the Appellate Controller erred in restricting the relief to two-thirds of the capital gains tax paid by the trust. The Tribunal upheld the Controller's decision, stating that only one-third of the deceased's interest in the trust corpus has been deemed to pass and estate duty is leviable thereon.4. Relief under section 50 of the Estate Duty Act for probate fees:The Assistant Controller allowed proportionate relief under section 50 for probate court fees paid. The Controller accepted the claim for full relief, but the departmental representative argued that relief should be proportionate to the deceased's interest in the HUF property. The Tribunal set aside the Controller's order and restored that of the Assistant Controller, agreeing that relief should be proportionate.5. Basis of capital gains tax relief-actual capital gains tax payable vs. net average rate of tax:The department argued that relief under section 50B should be based on the net average rate of tax rather than the actual capital gains tax paid. The Tribunal disagreed, stating that since the assets were sold primarily to pay estate duty, the capital gains tax should be treated as the last item of income in the total income of the respective assessees. The Tribunal upheld the Controller's decision to allow relief based on the actual capital gains tax payable.Conclusion:- The accountable person's appeal [ED Appeal No. 46 (Bom.) of 1983] was dismissed.- The departmental appeal [ED Appeal No. 50 (Bom.) of 1983] was partly allowed.- The other departmental appeal [ED Appeal No. 51 (Bom.) of 1983] was dismissed.