RASIKLAL LALLUBHAI SHAH Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THE Income -tax Appellate Tribunal has referred the following two questions of law for the opinion of this court under section 64 of the Estate Duty Act, 1953 :

(2.) THE reference arises out of proceedings in respect of assessment to estate duty of the estate of one Ratilal Lallubhai Shah (hereinafter referred to as 'the deceased') who died on March 9, 1968. It would be convenient to set out the relevant facts pertaining to each question separately while dealing with the said question.

(3.) THE accountable person claimed a deduction in respect of the said debt and contended that in determining the value of the estate of the deceased for the purpose of estate duty, allowance should be made for the full amount of such debt under section 44 of the Act. The Assistant Controller of Estate Duty was of the view that the debt to the extent of Rs. 50,000 was artificially created by making a havala entry and that to that extent the provisions of s. 46 of the Act were attracted resulting in abatement of the debt to the extent of the said sum. Alternatively, he was of the opinion, that the amount of Rs. 50,000 amounted to gift by the deceased to the HUF and the provisions of s. 10 of the Act were attracted inasmuch as the gifted amount remained with the deceased and he was not entirely excluded from the possession and beneficial enjoyment of the same. The accountable person preferred an appeal against the aforesaid decision to the Appellate CED. The contention of the accountable person before the appellate authority was that after making the havala entry in his personal books regarding the throwing of Rs. 50,000 into the common hotchpot of the HUF, the deceased had made a declaration on the very day stating that he had transferred a sum of Rs. 50,000 to the HUF out of his self -acquired property and that he claimed no right, title or interest in the said property. A copy of the declaration was produced before the appellate authority. Besides, contended the accountable person, there was clear transfer of the sum of Rs. 50,000 by the deceased to the HUF as evidenced by the entries in his personal books of account and in that manner the deceased had clearly divested himself of the said amount in favour of the HUF. On these grounds it was urged by the accountable person that the transaction did not amount to gift and that the provisions of s. 10 were inapplicable. The finding of the Asst. CED to the effect that the provisions of s. 46 were attracted was also challenged before the appellate authority. The Appellate CED upheld the contention of the accountable person in so far as it related to the transaction in question being not one of gift. However, he concurred in the decision of the Asst. CED that the provisions of s. 46 of the Act were attracted and that the debt was liable to abatement to the extent of Rs. 50,000. On further appeal, the Income -tax Appellate Tribunal found that the modus operandi adopted by the deceased revealed that at a point of time when he was indebted to the HUF to the extent of Rs. 1,24,831 in S.Y. 2021, he credited a sum of Rs. 50,000 by way of havala entry on December 15, 1964, in the said loan account maintained by him in his own books of account and that, consequently, the debt of the deceased to the HUF swelled to Rs. 1,86,003 in the course of the same year. The whole transaction, in the opinion of the Tribunal, amounted to giving a sum of Rs. 50,000 to the HUF and then borrowing it back from the HUF and, under such circumstances, s. 46 was clearly applicable and it was rightly applied. The appeal of the accountable person was, therefore, dismissed. At the instance of the accountable person, however, a case was stated as to the first question for the opinion of the court.