Estate duty on foreign assets, domicile-based classification, and delegated rule-making under the Estate Duty Act

Section 5 of the Estate Duty Act, read with the broad definition of "property" in section 2(15), is explained as extending estate duty to foreign property unless specifically excluded by section 21. The text treats section 21 as an exemption provision, including a domicile-based rule for foreign movable property, and notes that this classification was analysed against article 14 using the distinction between lex situs and lex domicilii. It also states that the rule-making power under sections 21(2) and 85(1) was upheld because the statute laid down the policy and the rules only worked out the nature and situs of assets in line with general law.

---

---

Issues: (i) Whether section 5 of the Estate Duty Act, 1953, read with section 2(15), extended the estate-duty charge to foreign property and whether section 21 merely operated as an exemption provision; (ii) Whether section 21(1)(b), which made the charge on foreign movable property depend on the deceased's domicile in India, was discriminatory and violative of article 14 of the Constitution of India; (iii) Whether sections 21(2) and 85(1) of the Estate Duty Act, 1953, conferred excessive delegation and whether rules 7(c), 8(h) and 9 of the Estate Duty Rules, 1953, were invalid.

Issue (i): Whether section 5 of the Estate Duty Act, 1953, read with section 2(15), extended the estate-duty charge to foreign property and whether section 21 merely operated as an exemption provision.

Analysis: Section 2(15) defined property broadly, and section 5(1) imposed duty on all property passing on death without territorial limitation in its text. Section 21 was treated as a provision carving out exceptions from that general charge by excluding foreign immovable property and, in the case of foreign movables, excluding them unless the deceased was domiciled in India. The constitutional definition of estate duty in article 366(9) and article 245(2) supported the legislative competence of Parliament to legislate with extra-territorial effect where the statute so indicated.

Conclusion: The charge under section 5 was not confined to property situate in India, and section 21 operated as an exemption provision. This issue was decided against the assessee.

Issue (ii): Whether section 21(1)(b), which made the charge on foreign movable property depend on the deceased's domicile in India, was discriminatory and violative of article 14 of the Constitution of India.

Analysis: The provision made a distinction between foreign immovable property and foreign movable property, and within foreign movable property it adopted domicile as the basis of liability. That classification was held to accord with recognised principles governing succession to property, including the distinction between lex situs and lex domicilii, and to rest on a rational basis for estate-duty purposes. The Court found the nexus between domicile and liability to be legally sufficient and not arbitrary.

Conclusion: Section 21(1)(b) was valid and did not offend article 14. This issue was decided against the assessee.

Issue (iii): Whether sections 21(2) and 85(1) of the Estate Duty Act, 1953, conferred excessive delegation and whether rules 7(c), 8(h) and 9 of the Estate Duty Rules, 1953, were invalid.

Analysis: The delegation was upheld because the statute laid down the governing policy and left to rules only the determination of the nature and locality of different classes of assets, a matter necessarily dependent on varying factual situations and settled legal principles. Rule 7(c), which treated a partner's share as movable property notwithstanding that the firm owned immovable property, reflected the general law under the Indian Partnership Act, 1932. Rule 8(h) and rule 9 were likewise consistent with the general law on situs of movable and immovable property.

Conclusion: The rule-making power was validly conferred and rules 7(c), 8(h) and 9 were not invalid. This issue was decided against the assessee.

Final Conclusion: The writ petition failed on all substantial grounds, and the estate-duty assessment including the deceased's share in the foreign partnership assets was sustained.

Ratio Decidendi: Section 5 of the Estate Duty Act, 1953, applies to all property passing on death unless specifically excluded by section 21, and the domicile-based treatment of foreign movable property is a valid and non-discriminatory legislative classification; rules determining the nature and situs of assets are valid where they conform to settled general law.

---