BHARATKUMAR MANILAL DALAL Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THIS reference raises a somewhat difficult question and our attempt to answer them has caused considerable anxiety to us. The question referred to us for our opinion under S. 64 of the ED Act, 1953, is as under :

(2.) THE question arises in the following tragic circumstances which are not many. The applicant herein who is the accountable person happens to be the grieved father of the unfortunate young man, Munirkumar B. Dalal, who met with the fatal accident in that historic plane crash near Alps on 24th Jan., 1966, enroute to the United States in the course of his return journey after enjoying his brief spell of holiday for about three months in this country during which he got himself married. The deceased had purchased on 8th Aug., 1965, a limited non renewable policy covering certain travel accidents on scheduled airlines from Aetna Life Insurance Company, Hartford, Connecticut, U. S. A., insuring himself against risk of air travel for his journey from U. S. A. to India and back for a maximum sum of 75,000. The accountable person was designated as a beneficiary under the said policy by the deceased. It appears that the deceased had also purchased similarly in July, 1965, a personal accident policy from New India Assurance Company Ltd., insuring himself for a maximum sum of Rs. 1,00,000 against risk of loss of life or limb arising as a result of accident in the course of one year. The deceased had paid only one premium of Rs. 255 under the said policy to the New India Assurance Company. The accountable person was nominated as a beneficiary for receiving the claim amount payable under the said policy in case of death of the insured. The accountable person on learning about the said demise of his son went to the U. S. A. for ascertaining whether his son had effected any policy against the risk of air travel. He could trace the policy after great search and had to incur expenses of travelling, lodging and boarding in the United States. As a sequel to the demise of the said Munirkumar B. Dalal, two sums of Rs. 1,00,000 and Rs. 3,57,808 (after deducting the realisation expenses at 4 per cent) were received from the New India Assurance Company Ltd. and Aetna Life Insurance Company, U. S. A., respectively. In the course of assessment of the accountable person for his liability to pay the estate duty an objection was raised on behalf of the accountable person to the inclusion of the aforesaid two sums in the dutiable estate of the deceased. The contention raised on behalf of the accountable person was that these two sums were not liable to duty under S. 14 of the ED Act since the policies in question were not wholly kept up by the deceased for the benefit of the donee nor the amounts receivable under the said policies could be considered as a property which the deceased at the time of his death was competent to dispose of and, therefore, the said sums were not liable to be subjected to duty under S. 5 or 6 of the said Act. It was also contended that ss. 15 and 16 of the said Act would not be applicable as they relate to annuity or other interest purchased or provided by the deceased. The Asstt. CED negatived all these contentions and held that the claim amounts were not only dutiable under S. 14 but were liable to duty under ss. 5, 6 and 15 of the ED Act.

(3.) THE accountable person, therefore, carried the matter in further appeal before the Tribunal where the same contentions were reiterated. The Tribunal did not agree fully with the Appellate CED and held that S. 5 of the said Act would not be attracted as admittedly the property in the shape of insurance amounts, which the beneficiary named in the policies subsequently received under the policies, did not exist since they came into existence only after the death. The Tribunal also held that S. 6 of the Act was also not applicable as it was not possible to hold that the deceased had disposing power over the amounts received by the beneficiary after his death since what the deceased possessed was only a future interest in the contingent contract, the contingency of accident being most uncertain. The Tribunal distinguished the decision of the Delhi High Court in CED vs. A. T. Sahani (1970) 78 ITR 508 (Del), which followed the decision of the House of Lords in Attorney General vs. Quixley (1929) All ER (Reprint) 696, by pointing out that they were not applicable in the facts of the present case as the insurance policies covered risk on account of accident which were purely in the nature of a contingent contract in which the deceased could have no interest in praesenti till his death in respect of these contracts and it cannot be said that the deceased was entitled to those payments in his lifetime and, therefore, he was not competent to dispose of the amounts which were received by the accountable person who was the beneficiary after the death of the insured. The Tribunal agreed with the Appellate CED that S. 14 was not attracted at all. The Tribunal ultimately, however, upheld the order of the Appellate CED that the aforesaid two sums were liable to be included in the dutiable estate of the deceased because the beneficial interest in the said policies accrued or arose in favour of the accountable person as a result of the death of the insured and, therefore, liable to be subjected to duty under S. 15 of the ED Act. In that view of the matter, therefore, the Tribunal dismissed the appeal of the accountable person. As the Tribunal found the accountable person liable to duty under S. 15 of the Act only, the accountable person sought reference to this Court under S. 64 of the said Act. The Revenue also sought the reference as the Tribunal found that neither S. 5 nor S. 6 nor S. 14 was attracted to the facts of the present case. The question set out hereinabove is, therefore, referred to us at the instance of both the parties.