JAMNABEN G MISTRY Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THE question canvassed at the time of hearing of this matter is limited to what would be the consideration to a purchaser of the property if it is sold in the open market in the context of section 36 of the Estate Duty Act, 1953. Section 36 provides that the principal value of any property shall be estimated to be the price which, in the opinion of the Controller, 'it would fetch if sold in the open market at the time of the deceased's death'. It is contended that a prudent willing purchaser before offering the price would estimate the value of the property by taking into consideration all the relevant factors including the contingent payments which are required to be made to the to the employees such as gratuity, bonus, etc.

(2.) THE question is required to be decided in the context of an order passed by the Income -tax Appellate Tribunal that the provision for gratuity is not a debt and, therefore, not deductible under section 44 of the Estate Duty Act. The Tribunal further rejected the claim of deduction of estate duty in the computation of the taxable estate.

(3.) RE . : Question No. 1 : In the case of P. Leelavathamma v. CED : [1991]188ITR803(SC) the Supreme Court held that estate duty falling upon property passing on the death of the deceased is not deductible in computing the net principal value of the estate for the purpose of the Estate Duty Act, 1953. The estate duty falling upon property passing upon the death of the deceased had not become a debt or encumbrance until the death of the deceased and is, therefore, not deductible. The same view is taken by this court in the case of Shantaben narottamdas (Smt.) v. CED : [1978]111ITR365(Guj) . In that case, the court held that the estate duty is not to be deducted in the computation of the taxable estate. In this view of the matter, in our view, the Tribunal was right in law in holding that the accountable person was not entitled to the deduction of estate duty in the computation of the taxable estate. Hence, question No. 1 is answered in the affirmative, i. e., in favour of the Revenue and against the assessee.