1973 (12) TMI 15 - HC - Income Tax

Court excludes Pondicherry shares from estate for estate duty

The court concluded that the shares held by the deceased in Best & Company, Pondicherry, were not includible in the estate for estate duty purposes. ... Estate Duty Act, 1953 - Estate Duty Act was made applicable to Pondicherry from 1-4-1963, whether it is applicable to a person who is domicile outside Pondicherry and vide on 2-2-1963 - ' Whether, on the facts arid in the circumstances of the case, the Appellate Tribunal was right in holding that the value of the shares held by the deceased, Mr. H. R. Goosey, in M/s. Best & Company (Pondicherry cherry) (Private) Ltd., Pondicherry, is not includible in the estate of the deceased for purposes of levy of estate duty.? ' - Question answered in the negative Issues Involved:1. Applicability of the Estate Duty Act to shares in Pondicherry held by a deceased domiciled in the United Kingdom.2. Interpretation of the term 'commencement' of the Estate Duty Act concerning Pondicherry.3. Relevance of the de jure transfer of Pondicherry to India.4. Applicability of Section 21 exemption of the Estate Duty Act to properties in Pondicherry.Issue-wise Detailed Analysis:1. Applicability of the Estate Duty Act to shares in Pondicherry held by a deceased domiciled in the United Kingdom:The court examined whether the shares held by the deceased in Best & Company, Pondicherry, should be included in the estate for estate duty purposes. The Assistant Controller of Estate Duty argued that since Pondicherry became part of India on August 16, 1962, the shares should be included. The Tribunal, however, held that Indian laws, including the Estate Duty Act, became applicable to Pondicherry only from April 1, 1963, the date on which the Act was extended to Pondicherry. Therefore, the shares held in Pondicherry were not includible in the estate of the deceased.2. Interpretation of the term 'commencement' of the Estate Duty Act concerning Pondicherry:The court discussed the definition of 'commencement' as per section 3(13) of the General Clauses Act, meaning the day the Act comes into force, which was October 15, 1953. The deceased died after this date, and the Estate Duty Act was applicable to his estate. The court noted that the Act's extension to Pondicherry on April 1, 1963, was relevant only for properties of persons domiciled in Pondicherry.3. Relevance of the de jure transfer of Pondicherry to India:The court provided a historical context, noting that Pondicherry was a French settlement and became part of India de jure on August 16, 1962. The Supreme Court had previously held that Pondicherry was not part of the territory of India before the de jure transfer. After the de jure transfer, Pondicherry was included in the First Schedule of the Constitution of India, making it part of the Indian territory.4. Applicability of Section 21 exemption of the Estate Duty Act to properties in Pondicherry:Section 21(1) of the Estate Duty Act exempts properties situated outside India from estate duty if the deceased was not domiciled in India. The court noted that the original wording of Section 21 referred to 'territories to which this Act extends,' which was later amended to 'outside India.' The court held that after the de jure transfer, Pondicherry became part of India, and therefore, properties in Pondicherry were not exempt under Section 21. The court emphasized that the Estate Duty Act's extension to Pondicherry was necessary for charging estate duty on properties of persons domiciled in Pondicherry, but not for those domiciled outside Pondicherry.Conclusion:The court concluded that the shares held by the deceased in Best & Company, Pondicherry, were includible in the estate for estate duty purposes. The question referred was answered in the negative, in favor of the revenue, and the revenue was entitled to its costs.