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Issues: Whether the value of shares held by a deceased domiciled in the United Kingdom in a Pondicherry company was includible in the estate for levy of estate duty, having regard to the de jure transfer of Pondicherry to India and the subsequent extension of the Estate Duty Act to Pondicherry.
Analysis: Estate duty under section 5 of the Estate Duty Act, 1953, is attracted on death after the commencement of the Act and applies to property passing on death. Section 21(1) operates only as an exception for property situated outside India. On the de jure transfer, Pondicherry became part of India, so property situated there could not claim the foreign-property exemption. The Regulation extending the Act to Pondicherry was intended to govern estates of persons domiciled in Pondicherry and did not postpone the charging provision for a person domiciled outside India whose property was in India.
Conclusion: The shares were includible in the estate and the question was answered against the accountable person and in favour of the revenue.
Final Conclusion: The reference was disposed of by holding that estate duty was leviable on the Pondicherry shares because the exemption for foreign property did not apply once Pondicherry formed part of India.
Ratio Decidendi: For a deceased not domiciled in India, estate duty under section 5 attaches to property situated in India, and section 21(1) exempts only property situated outside India; a later territorial extension of the Act does not defer that charge for property already within India.
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