Residential house exemption and aggregation under estate duty: exempt property cannot be split, but valid lineal-descendant aggregation still applies.

Where a residential house forming part of HUF property was wholly covered by the statutory exemption and valued below the ceiling, no part of that exempt property could be aggregated for rate purposes under the Estate Duty Act. The article also notes that a binding jurisdictional ruling upholding the validity of the aggregation provision governed the separate issue of a lineal descendant's share in ancestral property, and that a non-speaking dismissal of special leave did not amount to affirmation of that ruling. On that basis, aggregation of the descendant's share remained applicable.

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Issues: (i) Whether the entire value of a residential house occupied by the deceased and forming part of HUF property was exempt under section 33(1)(n) of the Estate Duty Act so that no part could be aggregated for rate purposes under section 34(1)(c); (ii) Whether section 34(1)(c) of the Estate Duty Act could be applied for aggregating the share of the lineal descendant in the ancestral property.

Issue (i): Whether the entire value of a residential house occupied by the deceased and forming part of HUF property was exempt under section 33(1)(n) of the Estate Duty Act so that no part could be aggregated for rate purposes under section 34(1)(c).

Analysis: The residential house belonged to the HUF and was occupied by the deceased for residence. The value of the house was below the statutory ceiling, and the controlling authority followed the view that where the whole house is covered by the exemption, the aggregation provision does not survive for the exempt property. Section 39(3) was relied upon in support of the claim that the entire house could not be split for partial aggregation when the exemption fully operated.

Conclusion: The entire residential house was exempt and no addition could be made by way of aggregation for rate purposes. This issue was decided in favour of the assessee.

Issue (ii): Whether section 34(1)(c) of the Estate Duty Act could be applied for aggregating the share of the lineal descendant in the ancestral property.

Analysis: The validity of section 34(1)(c) had been upheld by the jurisdictional High Court, and the Court treated that pronouncement as binding. The dismissal of a special leave petition without a speaking order was treated as not amounting to affirmation of the High Court's reasoning. On that basis, the share of the lineal descendant remained liable to aggregation for rate purposes.

Conclusion: Section 34(1)(c) was applicable, and the deletion of the addition was reversed. This issue was decided in favour of the Revenue.

Final Conclusion: The exemption in respect of the residential house was sustained, but the aggregation made on account of the lineal descendant's share in the ancestral property was restored, leaving the Revenue successful only in part.

Ratio Decidendi: Where the entire residential house is covered by the statutory exemption, no aggregation for rate purposes can be made in respect of that exempt property; separately, a binding jurisdictional ruling upholding the constitutional validity of an aggregation provision governs its application, and a non-speaking dismissal of special leave does not amount to affirmation of that ruling.

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