SEETHALAKSHMI AMMAL Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THE liability of thirteen life insurance policies to estate duty is in question in this Reference. Whether there was a goodwill and if there was, whether the value, as assessed by the Department for purposes of duty, is supported by material are further questions for consideration. One T.K.V.S. Vidyapcoranachari, whose widow is the accountable person, died on 17th February, 1957. He became divided from his brother on 17th August, 1935, and the "assets, that fell to his share out of the joint family properties he developed with his own efforts so that at his death, the assets belonging to the joint family consisting of himself and his two sons were valued at Rs. 6,25,099. Besides his two sons, both minors, he left his wife and three daughters. THE deceased's one-third share in the joint family properties was admittedly liable to duty. THE Assistant Controller of Estate Duty added to the principal value Rs. 1,42,552 which represented moneys due under thirteen insurance policies taken out on the life of the deceased of which Rs. 94,662 was after his death received by the accountable person and a sum of Rs. 46,000 on policies with the Oriental Government Security Life Assurance Company Ltd., remained to be realised if and when the company admitted the claims. THE balance of Rs. 4,083 related to three policies on the life of the widow, which were effected by the deceased and for which premiums were paid by him. THEy became paid up long before the death of the deceased but the amount under the terms of the policies, was payable only on the death of the widow. THE deceased was one of the quota-holders for the Madurai Mills and the Meenakshi Mills and had built up a lucrative business in yarn. THE Assistant Controller found that a third of the value of the goodwill of the business carried on by the family should be included in the chargeable assets and estimated its value at Rs. 50,000 on the basis that the average annual profits earned in the five years immediately preceding the death of the deceased was Rs. 32,579 and the value of the goodwill should be estimated as equal to 14 years' purchase of the average annual profits. THE widow appealed against these inclusions and partly succeeded. THE Central Board of Revenue considered that the amount of Rs. 4,083 should be deleted from the principal value on the ground that the amount due under the three policies on the life of the widow was only payable on her death. THE appeal failed in respect of the balance of the insurance money and the estimated value of the goodwill for duty.

(2.) THE life insurance policies, the thirteen of them, were all effected on the life of the deceased between 1942 and 1955. Out of them, two were assigned in favour of his wife on 7th May, 1956, and in respect of the rest, there was only a nomination in her favour between June, 1953 and November, 1955. One of the questions raised before the Assistant Controller and the Central Board of Revenue which they decided against the accountable person, was whether on the facts and in the circumstances of the case, the thirteen policies of life insurance and the moneys payable there under were in law joint family properties. This is the first of the eight questions referred to us under Section 64(1) of the Estate Duty Act, 1953.

(3.) THE attention of the Supreme Court was invited to Venkatasubba Roa V. Lakshminarasamma, 1954 AIR(Mad) 222 , and particularly the observation which we have extracted there from. But with reference to this, the Supreme Court stated: