1984 (3) TMI 169 - AT - Income Tax

Appeal dismissed: Leave salary not subject to estate duty. Criteria for property passing on death clarified.

The Tribunal dismissed the appeal, ruling that the amount paid as leave salary to the deceased's widow was not subject to estate duty as it was considered ... Leave Salary, Property Passing On Death Issues:1. Whether an amount representing payment of leave salary could be subjected to estate duty.Analysis:The appeal in this case revolved around the question of whether an amount of Rs. 11,697, paid as leave salary to the deceased's widow, should be subjected to estate duty. The Assistant Controller contended that the amount was an asset passing on death and should be taxed accordingly.Upon appeal, the Appellate Controller referred to a Circular of the Board and determined that the payment in question was an ex gratia payment and not property passing on death. The revenue argued that any property within the disposing capacity of the deceased should be deemed to pass on his death under section 6 of the Estate Duty Act, relying on a decision of the Madras High Court.Conversely, the accountable person's counsel cited a judgment of the Andhra Pradesh High Court, emphasizing that specific conditions needed to be met for property to be deemed to pass. The revenue contended that the circular's observations were not applicable to estate duty matters.The Tribunal analyzed the concept of 'property passing on death' under the Estate Duty Act, citing relevant judicial interpretations. It was established that property must have existed before the deceased's death for it to pass on death. The Tribunal highlighted that in this case, the leave salary, being an ex gratia payment, did not constitute property passing on death as it was not a due payment to the deceased.Ultimately, the Tribunal dismissed the appeal, concluding that since there was no property of the deceased prior to his death, the leave salary did not pass on his death. The judgment underscored that even a right to nominate beneficiaries would not create an interest in property unless specific conditions were met, as outlined in the Andhra Pradesh High Court's decision.In summary, the Tribunal's decision clarified the distinction between property passing on death and ex gratia payments, emphasizing the need for property to exist before the deceased's death for it to be subject to estate duty.