1968 (11) TMI 15 - HC - Income Tax

Court upholds estate duty authorities' decision on property inclusion, disallows liabilities, assesses costs.

The court ruled in favor of the estate duty authorities, upholding the inclusion of properties settled in trust and gifted properties in the estate under ... Estate Duty Act, 1953 - assessee, a businessman setted immovable properties in favour of a trust by executing a conveyance in favour of the trustees - in case of settlement and in case of gifting, the assessee had complete control over the properties and hence the properties had not passed to the trustees - therefore, properties are includible in the estate of the deceased Issues Involved:1. Inclusion of Rs. 85,000 value of properties settled in trust under section 10 of the Estate Duty Act.2. Inclusion of Rs. 1,65,253 value of properties gifted by the deceased under section 10 of the Estate Duty Act.3. Disallowance of liabilities totaling Rs. 6,857, Rs. 20,721, and Rs. 2,701 in computing the principal value of the estate.Issue-wise Detailed Analysis:1. Inclusion of Rs. 85,000 value of properties settled in trust under section 10 of the Estate Duty Act:The first question addressed whether the properties settled in trust for the Surajmal Poonan Chand and Pratap Chand Charities should be included in the estate under section 10 of the Estate Duty Act. The court examined whether a trust was genuinely created. The trust deed indicated that the deceased intended to donate properties valued at Rs. 1,50,000 for charitable purposes. However, the court found no evidence of a formal conveyance transferring the immovable property to the trustees. The court held that a valid trust requires the property to be conveyed to all trustees, which was not done in this case. Therefore, the deceased had not divested himself of the property, and it was rightfully included in the estate. The court concluded that section 10 applied, and the estate duty authorities correctly included the properties valued at Rs. 85,000 in the estate.2. Inclusion of Rs. 1,65,253 value of properties gifted by the deceased under section 10 of the Estate Duty Act:The second issue questioned the inclusion of properties gifted by the deceased valued at Rs. 1,65,253 in the chargeable estate. The court noted that the gifts, except one, were made a day before the Estate Duty Act came into force. The Assistant Controller found that the deceased retained control over the gifted properties, collected rents, and used the income for personal purposes. The court agreed with the findings, stating that there was no evidence of exclusive possession and enjoyment by the donees. Therefore, the court upheld the inclusion of the gifted properties in the estate under section 10, as the deceased continued to enjoy the benefits of the properties.3. Disallowance of liabilities totaling Rs. 6,857, Rs. 20,721, and Rs. 2,701 in computing the principal value of the estate:The third issue involved the disallowance of certain liabilities in computing the principal value of the estate. The court examined the disallowed liabilities, including Rs. 6,857 due to Smt. Leelavathi, Rs. 20,721 in various accounts, and Rs. 2,701 on account of the Surajmal Poonam Chand and Pratap Chand Charities. The Board held that these liabilities were traceable to the original gifts given by the deceased and were excluded under section 46 of the Estate Duty Act. The court found that the accumulated rents were credited to the personal accounts of the donees in the books of the deceased. The Assistant Controller relied on section 46(1)(b), which disallows liabilities in respect of properties derived from the deceased. The court agreed with the Board's conclusion, stating that the liabilities were rightly disallowed as they were in respect of properties derived from the deceased.Conclusion:In conclusion, the court answered all three questions in the affirmative and against the assessee. The properties settled in trust and the gifted properties were rightfully included in the estate under section 10. The disallowed liabilities were correctly excluded under section 46. The court upheld the findings of the estate duty authorities and the Board, and the assessee was liable for the costs with an advocate's fee of Rs. 250.