1993 (1) TMI 135 - AT - Income Tax

Tribunal decision: Estate Duty Act appeal partly allowed, gift inclusion upheld. Car valuation and repair expenses confirmed.

Dr. PV. Joshi. Versus Assistant Controller Of Estate Duty.

The Tribunal partly allowed the appeal, upholding the inclusion of Rs. 55,000 under Section 9 of the Estate Duty Act as a gift inter vivos within the ... Fixed Deposit Issues Involved:1. Inclusion of Rs. 55,000 under Section 9 of the Estate Duty Act, 1953.2. Valuation of the motor car.3. Disallowance of miscellaneous liability of Rs. 1,000.Detailed Analysis:1. Inclusion of Rs. 55,000 under Section 9 of the Estate Duty Act, 1953:The accountable person contested the inclusion of Rs. 55,000 in the estate's principal value, arguing that the dissolution of the trust and the transfer of funds to the granddaughter did not constitute a gift within two years of the deceased's death under Section 9 read with Section 22 of the Estate Duty Act. The trust was created in 1974 for the benefit of the granddaughter, with the corpus fund held in trust until she turned 21. However, the trustees, at the settlor's request, dissolved the trust prematurely in 1983, transferring the corpus to the granddaughter.The Assistant Controller of Estate Duty included the Rs. 55,000 under Section 9, deeming it a gift made within two years before the deceased's death. The Appellate Controller upheld this decision, viewing the transfer as a gift by the settlor, influenced by his anticipation of death.The Tribunal agreed with the revenue's stance, concluding that the premature dissolution and transfer were orchestrated by the settlor, amounting to a gift inter vivos within the vulnerable period of two years before death, thus attracting Section 9 of the Estate Duty Act. The Tribunal emphasized that the trust's premature dissolution was a tax planning device to avoid estate duty, and the transaction was not bona fide.2. Valuation of the Motor Car:The accountable person valued the deceased's motor car at Rs. 8,000, arguing that it was off the road and had incurred repair expenses. The Assistant Controller valued the car at Rs. 20,000, considering the repairs added value to the car. The Appellate Controller confirmed this valuation, noting that the repair expenses indicated an enhanced value.The Tribunal upheld the car's valuation at Rs. 20,000 but allowed the claim of Rs. 9,000 for unpaid repair expenses as a liability. The Tribunal reasoned that the car's appreciated value was due to the incurred repair expenses, which should be allowed as a deduction from the estate.3. Disallowance of Miscellaneous Liability of Rs. 1,000:The accountable person claimed Rs. 1,000 for miscellaneous liabilities such as newspapers, grocery, and household expenses. The Assistant Controller and the Appellate Controller rejected this claim due to a lack of evidence.The Tribunal confirmed the disallowance, noting that the accountable person failed to provide proof of the claimed liabilities. The burden of proving the liability was on the accountable person, which was not discharged.Conclusion:The appeal was partly allowed. The Tribunal upheld the inclusion of Rs. 55,000 under Section 9 of the Estate Duty Act, confirming that the premature dissolution of the trust was a gift inter vivos within the vulnerable period. The valuation of the motor car at Rs. 20,000 was upheld, but the Tribunal allowed the claim of Rs. 9,000 for unpaid repair expenses as a liability. The disallowance of the miscellaneous liability of Rs. 1,000 was confirmed due to a lack of evidence.