CONTROLLER OF ESTATE-DUTY Vs. A C DESIKACHARI

JUDGEMENT

(1.) THIS is a reference under the E.D. Act, 1953 . The deceased's estate included, among other properties, 101 shares in a private limited company. In the same company, the deceased's brother, who figures as the accountable person in this case, held 16 shares. The share capital of the company comprised, in the aggregate, only 250 shares. The deceased was all in all in the company as a director. The Assistant Controller of Estate Duty accordingly considered this company as a "controlled company" within the meaning of s. 17 of the E.D. Act. There is no dispute now about this determination. The Asst. Controller found that for a number of years past, the deceased had been maintaining a current account with this company. THIS current account remained to the deceased's credit right from the beginning unto the last. During the period of three years before his death and even earlier, the deceased had been withdrawing various sums of money at one time or another from this current account for making investments outside.

(2.) THE Asst. Controller took up for consideration the nature of the deceased's current account with the company and also the character of the withdrawals therefrom. This inquiry was undertaken by the Asst. Controller while examining the prospects for applying s. 17 to this case and with a view to finding out whether estate duty liability can be foisted to any extent on the assets of this company as a controlled company, having regard to the relationship between the deceased's current account on the one hand and the company's resources on the other. THE Asst. Controller gave thought to these matters, and ultimately came to the conclusion that the amount to the credit of the deceased in his current account must be treated as a "transfer" of property by the deceased to the company, and the withdrawals from the current account must be regarded as "benefits" accruing to the deceased from the company. On these findings, the Asst. Controller proceeded to fix the quantum of liability for estate duty on the company's assets in accordance with s. 17 of the Act and by following the procedure laid down in the relevant Rules made under the Act for the purposes of that section THE accountable person objected to the levy of estate duty on the company's assets under s. 17 of the Act. His principal contention was that the maintenance of a current account by the deceased even with a controlled company cannot be treated as a "transfer" nor could the withdrawals therefrom be regarded as "benefits". At a later stage, however, when the matter was in appeal before the Tribunal, the accountable person reconciled himself to the position that the deceased's current account did amount to a transfer of property by the deceased to the company.

(3.) THE cardinal error of the Tribunal lay in disregarding the inexorable fact that the withdrawal by the deceased was not, at, one single stroke, of the entirety of the amounts standing to his credit in the current account, but were made at several points of time in several driblets of money. THE expression used in r. 5(2) is not merely "a lump sum" but "a single lump sum" which cannot fit in at all with the facts in the present case where the amount to the credit of the deceased in the current account were subject to a multiplicity of withdrawalsEven though we disagree with the Tribunal's interpretation of r. 5(2), that does not mean the end of the discussion in this reference. For, the main subject of controversy between the accountable person and the Estate Duty Officer is whether the deceased's withdrawals, such as they were, could be regarded as "benefits" or as "periodical payments" within the meaning of r. 5 of the Controlled Companies Rules. Both the standing counsel for the Department and the learned counsel for the accountable person agree that the Tribunal had apparently understood the language of r. 5(2) wider than it has been used by the framers of the Rules. Quite plainly, the Central Board which framed these Rules did not intend to rope in any and every payment within the expression it periodical payment ". If the Central Board had so intended, nothing would have been easier than to say that all payments shall be deemed to be periodical payments excepting a single lump sum payment. What actually has been set out in r. 52) as a rule of interpretation is that the payment, in order to be a periodical payment, must be one of a "series" of payments.