TaxTMI 
TaxTMI 
2002 (8) TMI 89
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....e deceased G. A. Phadke died on May 26, 1973. He was the managing director of Typewriter and Office Appliances India Private Limited which was a controlled company. While assessing his estate to duty under the Estate Duty Act, the assessing authority invoked section 17 of the Act and added a part of the value of the company to his estate by treating the remuneration of the deceased, the dividend received by him for three years, and other benefits received by him, such as commission and perquisites for three years, as benefits accruing to the deceased in that period, the accrual of which benefits resulted in the assets of the company determined in accordance with the other portions of section 17 being includible in his estate. That view o....
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....act application of section 17. Though section 17 does not define "transfer" an expanded meaning has been ascribed to that term by rule 4 which equates "disposition" with "transfer" and this disposition in turn is defined in broad terms by rule 2(6) of the Estate Duty (Controlled Companies) Rules. Nevertheless a pre-condition for attracting section 17 is a transfer. As there is no transfer of property to the controlled company more particularly, of benefits due to the deceased from the company no part of the value of assets of that company can be included in the estate of the deceased. To ascertain the true scope of section 17, it is instructive to peruse the explanatory notes attached to the Estate Duty Bill, 1952 (Bill No. 92 of 1952). ....
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....cording to this provision, the estate duty payable would be not on the market value of 50,000 ordinary shares but on such proportion of the assets of the company, as the aggregate amount of benefits accruing to the deceased for the three years ending with his death bear to the income of the company for the same three years. Thus, if the income of the company for the last three years were Rs. 3 lakhs, and the dividend declared on ordinary shares is Rs. 90,000, then the benefits enjoyed by the deceased are: Rs. ....
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....efits therefrom. The section clearly was not intended to treat the fruit of labour of any individual who by floating the company and contributing his skill and labour as a director or as other officer of the company received remuneration for the services rendered by him to such company, as exigible to estate duty. Mere delay in drawal of the remuneration would not have the effect of his transferring to the company the undrawn salary thereby attracting the mischief of section 17. Here all that is stated by the assessing authority is that the deceased had become the managing director of a controlled company and had drawn remuneration, perquisites and benefits therefrom. That by itself will not attract section 17 of the Estate Duty Act. Mor....