TaxTMI 
TaxTMI 
1994 (11) TMI 131
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....tion 34(1)(c) for the following reasons (at page 31) : "If section 34(1)(c) is construed as a provision for aggregation of the benefits accrued to each of the lineal descendants on the death of the deceased, then on the principle laid down in that case, the validity of the section has to be upheld. In fact, the learned counsel for the petitioner wanted us to construe section 34(1)(c) in the same manner and quash the order of the respondent on the ground that the clubbing of the son's share with that of the deceased in this case is not warranted under section 34(1)(c). But the Revenue very strenuously contends that the object of section 34(1)(c) is to club the coparcenary interest of lineal descendants also with the coparcenary interest of the deceased so as to form one whole estate and that the validity of the section has to be considered in that light. As a matter of fact, the respondent in this case has construed section 34(1)(c) in the manner suggested by the Revenue and has clubbed the half share of the son with the half share of the deceased father so as to form one estate and had applied the rate applicable to such combined estate in his assessment orders and it is that or....
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.... v. CED [1981] 130 ITR 122 ; the Gujarat High Court in Ramniklal J. Daftary v. CED [1982] 136 ITR 422 ; and the Andhra Pradesh High Court in C. Vanajakshi Venkata Rao v. CED [1983] 143 ITR 1014. In many of these judgments the High Courts concerned have noted the judgment under appeal and declined to follow it. For the purposes of understanding the arguments, it may be noted that section 5 of the Estate Duty Act is the charging section ; it states that in the case of every person dying after the commencement of the Act there would be levied and paid upon the principal value of all property specified in the First Schedule to the Act which passed on his death a duty called estate duty ; it was payable at the rates fixed in accordance with section 35. Section 6 states that the property which the deceased was at the time of his death competent to dispose of would be deemed to pass on his death. Section 7(1) states that property in which the deceased, or any other person had an interest ceasing on the death of the deceased, would be deemed to pass on the deceased's death to the extent to which a benefit accrued or arose by the cesser of such interest, including, in particular, a copar....
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....d no part of it been so exempt, the same proportion as the value of the property not so exempt bears to the value of the whole estate. Explanation. -- For the purposes of this sub-section, 'property exempt from estate duty' means-- .... (iii) the interests of all coparceners other than the deceased in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law." On behalf of the Revenue, it was submitted that section 34(1)(c) was not violative of article 14 and reliance was placed upon the judgment of the Madras High Court in the aforementioned earlier judgment in Pl. S. Rm. Ramanathan Chettiar's case [1970] 76 ITR 402, and the judgments of the various High Courts adverted to above. It was also submitted, having regard to the fact that we were concerned with a provision in a taxing statute which had been upheld by so many High Courts over a long period of time, that that uniform understanding of the law should be maintained. Learned counsel for the accountable person pointed out that clauses (a) and (b) of section 34(1) related to property that had actually passed whereas clause (c) related to property which did not pass but,....
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....therefore, that, but for the principle of aggregation envisaged by section 34(1)(c), there would be discrimination. In fact, section 34(1)(c) avoids such a discrimination. To illustrate, suppose there is a Hindu joint family governed by the Mitakshara law consisting of two brothers and one of them dies leaving two sons. Had it not been for section 34(1)(c), each of the sons would be entitled to insist that the rate applicable to the value of the benefit accrued to him would be that corresponding to such value. But, in view of section 34(1)(c), the value of the benefit accruing to each of the two sons would be aggregated and the rate applicable to the aggregated value as ascertained under section 39 would be applied to the value of the benefit accruing to one of the sons of the deceased. By this process precisely the same result is achieved as in the case of a member of a Dayabhaga Hindu family dying, assuming that the family consisted of members as we have assumed in the case of the Mitakshara Hindu joint family. It would follow, therefore, that there is no discrimination whatever brought about by section 34(1)(c) between members of a Mitakshara joint Hindu family and of a Dayab....
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.... had any interest ceasing on his death shall be deemed to pass on the death to the extent to which a benefit accrued or arose by the cesser of such interest. Section 39 provides that that benefit shall be valued, in the event that the deceased was governed by Mitakshara law, on the basis of the principal value of the deceased's share in the joint family property had there been a partition immediately before his death. These provisions are not challenged. Section 34(1)(c) only provides for the rate of estate duty to be levied upon such benefit. For determining that rate the interests of all the lineal descendants of the deceased in the joint Hindu family property are to be aggregated so as to form one estate and estate duty is to be levied at the rate applicable to the principal value thereof. Sub-section (2) of section 34 is put somewhat clumsily. It uses the expression "property exempt from duty" and its Explanation defines the expression to include the interests of all coparceners, other than the deceased, in the joint family property. Where, therefore, the estate referred to in clause (c) of sub-section (1) of section 34 includes the interests of coparceners other than the decea....