M CT MUTHIAH Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THIS is a reference under section 64(1) of the Estate Duty Act, 1953 (hereinafter called "the Act"). THIS reference arises out of the estate duty assessment of the estate of late M.Ct.M. Chidambaram Chettiar (hereinafter referred to as "the deceased"), who died in an aircrash on March 13, 1954. He was survived by his wife and two sons by name M Ct. Muthiah and M.Ct. Pethachi. In the account of the estate which was filed by the two sons of the deceased it was claimed that the deceased was a member of a joint Hindu family consisting of himself and his two sons and that accordingly the deceased had an interest to the extent of one-third in the properties which ceased on his death. Apart from the one third share in the family properties which was declared in the accounts there were included amongst other assets in the free estate, moneys received on various policies of insurance on the life of the deceased totalling Rs. 2, 36, 779. In computing the principal value of the estate the DeputyController of Estate Duty, who was the assessing officer, included a sum of Rs. 2, 00, 000 received from the United India Fire and General Insurance Company Ltd. on a personal accident insurance policy taken out by the deceased on his life on February 21, 1954, treating it as property passing on the death of the deceased. It was contended by the accountable persons that the said sum of Rs. 2, 00, 000 accrued only on the death of the deceased, that this was not the property of the deceased during his lifetime or at the time of his death and that, therefore, it did not pass or deem to pass on his death under any of the provisions of the Act.

(2.) THE amount was payable only to the legal representatives which the legal representatives could claim as their own property and not as the property passing from the deceased. THE amount became payable to the legal representatives under one of the terms of the policy itself and not on any disposition by the deceased as the policy itself is unassignable. Even if it is assumed that the property subsisted in the policy, there was no passing on the death as there was no change in the title or possession of the property taking place on his death. It was further contended that even if the said sum was dutiable it should have been charged as a separate estate in itself and not aggregated with the other items of property passing on the death of the deceased.THE assessing authority held that the deceased was competent to dispose of the moneys payable under a will, that he could nominate a person to receive the money in spite of the clause in the policy restraining assignments and in fact he had nominated M.Ct. Muthiah as the person entitled to receive the money, that the deceased was competent to make a will and direct the manner of distribution of the moneys in any way he pleased and that, therefore, the amount was dutiable. He also held that the amount was aggregatable with the rest of the estate. For this view he relied on the decision in Attorney-General v. Quixley.THE other dispute related to the deceased's share in the joint family property. According to the accountable persons the share of the deceased was only to the extent of one-third in the joint family property. But the assessing authority took the deceased's share in the said properties at one-half.

(3.) THE insurance is designated as personal accident insurance. Under the terms of the policy, the company has agreed upon proof of title to its satisfaction, to pay to the legal representatives of the insured or to the insured himself, as the case may be, such sum as according to the table of benefits contained in the schedule thereof.THE schedule gives the table of benefits as follows : Rs.Section A on death or permanenttotal disablement 2, 00, 000Section B on permanent partialdisablement 1, 00, 000Section C on temporary totaldisablement for each week of itscontinuance not exceeding 52 1, 200Section D on temporary partialdisablement for each week ofits continuance not exceeding 52 300THE policy was issued subject to certain conditions, one of which is that the policy is unassignable. THEre are a number of other conditions attached to the policy. In these additional conditions the following are some which are relevant. Condition 3 sets out the cases when the policy will be considered void. Condition 12 provides that the company may, at any time, terminate the policy by giving seven days' notice in writing to that effect. If the policy is so terminated the company shall return to the insured a part of the last premium paid proportionate to the unexpired residue of the period in respect of which the same was paid. Under condition 13, if the policy becomes void under any of these conditions, all premiums paid thereon shall be forfeited to the company.THE learned counsel for the accountable persons relied on the provisions of the policy in support of his contention that the sum of Rs. 2 lakhs was only payable on death and that the amount is payable only to the legal representative and it did not form part of his estate.