CONTROLLER OF ESTATE-DUTY Vs. D RAJASEKARAN KAMAK

JUDGEMENT

(1.) THE following question of law has been referred to this court by the Income-tax Appellate Tribunal, Madras, for its opinion at the instance of the Controller of Estate Duty, Madras "Whether, on the facts and in the circumstances of the case, Rs. 19, 500, being the value of the accountable person's half share in the family residential house, should be excluded in computing the value of his share in the family properties, for the purpose of section 34(1)(c) of the Estate Duty Act ?" *One Thiru Kamak Dharmaraj Nadar died on September 19, 1970. He was the karta of the HUF consisting of himself and his only son, D. Rajasekaran Kamak.

(2.) THE deceased was carrying on business of purchase and sale of iron, steel, hardware, building materials, etc., as sole proprietor thereof. Besides, he was also selling the goods manufactured by certain other companies. He had executed a will bequeathing all his properties to his only son, the accountable person.THE Asst. Controller, by his order dated November 27, 1971, determined the principal value of the estate as Rs. 4, 03, 449 and levied a duty of Rs. 36, 992.65. In so doing, he included Rs. 83, 629 as the value of the share of the lineal descendant in the property of the HUF under s. 34(1)(c) of the E.D. Act (hereinafter referred to as "the Act"). In computing the value of such share at Rs. 83, 629, the Asst. Controller had included Rs. 19, 500 being the value of his half share in the family residential house, after rejecting the contention of the accountable person that the value of his half share in the family residential house should not be included in the value of his half share of the joint family properties.Aggrieved by such assessment, the accountable person preferred an appeal to the Appellate Controller reiterating the contention that the value of his half share in the family residential house should not be included in computing the value of his half share in the properties of the HUF.

(3.) THOUGH the residential house belonged to the joint family and was used for the residence of all the members of the joint family, for the purpose of determining the principal value of all the properties of the joint family, the house should be deemed to belong to the deceased and the exemption provision has to be applied. Section 33(1)(n) gives an exemption of Rs. 1, 00, 000 if the house is situate in a place where the population is more than 10, 000, or of the value of the entire house in any other case. In this case, the value of the house has been found by the Asst. Controller to be Rs. 39, 000. In view of s. 33(1)(n), the entire sum of Rs. 39, 000, being the value of the residential house, will stand exempted and it cannot be included in the principal value of the joint family properties. Here the deceased's half share in the house has been exempted but the half share belonging to the lineal descendant has not been exempted and the accountable person is aggrieved by the inclusion of his half share in the house for rate purposesThe question of valuation of the deceased's share while he died as member of the joint family came up for consideration before this court as well as before other High Courts and somewhat differing opinions have been expressed. In CED v.Estate of late R.Krishnamachari this court laid down that for the purpose of determining the value of the share of the deceased member of a joint Hindu family and for the purpose of imposing estate duty on his estate after his death, the total value of the properties valuing each of them separately must first be determined under s. 39(3) and thereafter the properties to the extent to which exemption has been given under s. 33(1)(n) will have to be taken out and then the aggregate of the remaining must be divided as if at the time of death there was a partition and the share that would have fallen to the deceased determined and the share so determined will be the share on which duty can be imposed under the Act and that if the deceased left behind lineal descendants, the extent of the shares of such lineal descendants has to be aggregated to the share of the deceased in the property in accordance with s. 34(1)(c) and the rate applicable to such aggregate value of the estate will have to be taken into account. However, after laying down the said proposition consistently with s. 39(3), the Bench has taken the view that since the share of the deceased alone in the residential house passes on death, the exemption under s. 33(1)(n) should be limited to his interest if it is more than one lakh of rupees.