1985 (8) TMI 99 - AT - Income Tax

Tribunal decision: Superannuation, insurance, salary, telephone deposit included; gratuity excluded.

Khorshed B. Mody. Versus Third Assistant Controller Of Estate Duty.

The Tribunal partly allowed the appeal, upholding the inclusion of amounts received under the superannuation scheme, the insurance policy (pending further ... Property Passing On Death Issues Involved:1. Inclusion of Rs. 1,48,500 received under the Employees' Superannuation Scheme in the principal value of the estate.2. Inclusion of Rs. 66,000 received from an insurance policy taken out by the employer.3. Inclusion of Rs. 9,782 received as gratuity from the employer.4. Inclusion of Rs. 2,752 representing salary for the entire month of January 1976.5. Inclusion of Rs. 5,000 deposit for acquiring a telephone.Detailed Analysis:1. Inclusion of Rs. 1,48,500 under the Employees' Superannuation Scheme:The accountable person, the widow of the deceased, received Rs. 1,48,500 under the Employees' Superannuation Scheme. The contention was whether this amount should be included in the principal value of the estate. The scheme was compulsory for employees, and contributions were made solely by the employer. The Tribunal examined clauses of the scheme, particularly clauses 3(a), 3(d), 5, 6, 7, 8, 9(i), 12, and 16, which outlined the conditions and benefits of the scheme. It was concluded that the amount received by the widow was out of the property that passed on the death of the deceased, making it includible under section 5 of the Estate Duty Act, 1953.Additionally, the Tribunal considered sections 6 and 15. Section 6 was deemed applicable as the deceased had an estate or interest in the funds standing to his credit, making him competent to dispose of the property. Under section 15, the annuity payable to the widow was considered a benefit provided by the deceased through an arrangement with the employer, thus making it includible in the estate.2. Inclusion of Rs. 66,000 from an insurance policy:The widow received Rs. 66,000 from an insurance policy taken out by the employer. The Appellate Controller had confirmed the inclusion of this amount based on the same grounds as the superannuation scheme. However, the Tribunal noted that there was no material on record to verify whether the policy was part of the contract of service or a voluntary act by the employer. The Tribunal directed the Appellate Controller to investigate the facts afresh, considering relevant decisions, including the Madras High Court's decision in Estate of Late R. Ramanujam's case, which distinguished between policies taken as part of service conditions and those taken voluntarily by the employer.3. Inclusion of Rs. 9,782 received as gratuity:The widow received Rs. 9,782 as gratuity from the employer. The Gratuity Rules indicated that the granting of gratuity was at the discretion of the company, and no employee had a right to it. Given this discretionary nature, the Tribunal concluded that the deceased had no beneficial interest in the gratuity amount, and thus, it could not be considered property passing on death. The Tribunal directed the Assistant Controller to delete this amount from the estate's principal value.4. Inclusion of Rs. 2,752 representing salary for January 1976:The deceased died on 15-1-1976, and the widow received Rs. 2,752 as salary for the entire month. The accountable person argued that only the amount attributable to the salary up to the date of death should be included. However, the Tribunal found no evidence of a contract stipulating that the entire month's salary would be payable if service ended mid-month. The Tribunal upheld the inclusion of the full amount, as it was paid as salary of the deceased, forming part of the estate.5. Inclusion of Rs. 5,000 deposit for acquiring a telephone:The deceased had made a deposit of Rs. 5,000 for acquiring a telephone. The Tribunal confirmed the inclusion of this amount in the principal value of the estate, as it represented a deposit made by the deceased, indicating a beneficial interest.Conclusion:The appeal was partly allowed. The Tribunal upheld the inclusion of amounts received under the superannuation scheme, the insurance policy (subject to further investigation), the full salary for January 1976, and the telephone deposit. It directed the deletion of the gratuity amount from the estate's principal value.