1971 (11) TMI 42 - HC - Income Tax

Court upholds estate duty notice, dismisses writ petition. Property passing to legal heirs subject to duty.

The court dismissed the writ petition, affirming the validity of the notice issued by the Assistant Controller of Estate Duty. It held that the right to ... Estate Duty Act, 1953 - The legal heir, i.e., the accountable person in this case, has not received compensation in her own individual right but has received the compensation in respect of the lands belonging to the deceased and in her capacity as the legal heir of the deceased, whose lands have been acquired. We, therefore, hold that the right to receive the compensation for the lands acquired by the Government was a valuable right which could be sold in open market. That is 'property' which passed on the death of the deceased. Section 5 of the Estate Duty Act was, therefore, attracted and, in view of the large discrepancy between the award made by the Special Deputy Collector and the civil court, there was a mistake apparent from the record which the assessing officer had jurisdiction to rectify under section 61 of the Act. The impugned notice is, therefore, valid and legal Issues Involved:1. Jurisdiction of the Assistant Controller of Estate Duty to issue a notice under section 61 of the Estate Duty Act.2. Whether enhanced compensation payable to legal heirs is considered property of the deceased.3. The nature of the right to receive enhanced compensation and its relation to the time of the deceased's death.4. Whether the enhanced compensation can be related back to the time of the deceased's death for estate duty purposes.5. The definition and scope of 'mistake apparent from the record' under section 61 of the Estate Duty Act.Detailed Analysis:1. Jurisdiction of the Assistant Controller of Estate Duty:The petitioner argued that the rectification of a mistake should have been made by the Appellate Controller or the Income-tax Appellate Tribunal, as the assessment order had merged with their orders. However, it was held that only the authority which passed the original order could rectify it. Since the valuation of lands was not a subject of appeal, the Assistant Controller of Estate Duty alone had the jurisdiction to rectify the mistake.2. Enhanced Compensation as Property of the Deceased:The petitioner contended that the enhanced compensation payable to legal heirs was not the property of the deceased at the time of his death. The court held that the right to receive compensation, including any enhanced compensation, was an indivisible right that passed to the legal heirs. This right was considered property that passed on the death of the deceased, making it subject to estate duty under section 5 of the Estate Duty Act.3. Nature of the Right to Receive Enhanced Compensation:The petitioner argued that the right to receive enhanced compensation was created after the deceased's death and could not be related back. The court disagreed, stating that the right to receive compensation, including any potential enhancement, existed at the time of the land acquisition and passed to the legal heirs. This right was considered a valuable property right that could be sold in the open market.4. Relating Enhanced Compensation to Time of Death:The court held that the right to receive compensation, including any enhanced compensation, existed at the time of the land acquisition and passed to the legal heirs at the time of the deceased's death. Therefore, the enhanced compensation could be related back to the time of the deceased's death for estate duty purposes.5. Mistake Apparent from the Record:The court examined whether the mistake in the valuation of the lands was apparent from the record. It was held that a mistake apparent from the record is one that is obvious and patent, not requiring a long-drawn process of reasoning. The modification of the award by the civil court was considered part of the record, making the mistake in the original valuation apparent. The Assistant Controller of Estate Duty had jurisdiction to rectify this mistake under section 61 of the Estate Duty Act.Conclusion:The court dismissed the writ petition, holding that the notice issued by the Assistant Controller of Estate Duty was valid and legal. The right to receive compensation, including any enhanced compensation, was considered property that passed on the death of the deceased, making it subject to estate duty. The mistake in the valuation of the lands was apparent from the record and could be rectified under section 61 of the Estate Duty Act. The writ petition was dismissed with costs.