KANDASWAMI PILLAI A Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THESE two references have been heard together, because they turn on the interpretation of Section 46(1) of the Estate Duty Act and its application to the facts in each. In the first of the references, the questions are :

(2.) ON January 21,1959, A. Arunachalam Pillai died. He was one of the members of a Hindu undivided family, the others being his two brothers. The Assistant Controller of Estate Duty, Coimbatore, valued the properties of the family at Rs. 14,30,822 and the one-third share of the deceased at Rs. 4,75,941, for purposes of levy of estate duty. The estate duty payable was assessed at Rs. 49,983'13. Several years prior to the death of Arunachalam Pillai, the family had made a gift of certain agricultural lands to three female members of the family: (1) Nagarathnammal, (2) Saraswathi Ammal and (3) Sivakami Ammal. The family managed the properties for the ladies, and receipts and outgoings were exhibited in a separate account. In May, 1957, the agricultural lands were sold and a sum of Rs. 16,500 was realised and credited in favour of the three ladies. Thereafter, a sum of Rs. 5,500 was paid to each of the two ladies, Nagarathnammal and Sivakami Ammal, towards their share of the sale proceeds. At the death of Arunachalam Pillai, the balance due to Saraswathi Ammal remained with the family to her credit. This amount was claimed as a liability eligible for deduction under Section 44(a). The claim was not admitted in view of Section 46(1)(a) read with Section 39. The Assistant Controller applied Section 46(2) in respect of the sum of Rs. 11,510 paid to the two ladies, with the result the total sum of Rs. 16,500 was taken to pass on the death of Arunachalam Pillai. The accountable person having failed at further stages of the revenue, at his instance, the reference has been made by the Central Board of Direct Taxes of the said two questions.

(3.) THE argument for the assesses, in the first of these references, is two-fold. THE first is that the consideration for the debt being the sale proceeds and not the property itself derived from the family, the debt is not hit by Section 46(1)(a), and the second is that, in any case, only if there is an intention on the part of the donor, at the time of making the gift, to get back the property comprised therein at a later date but in the form of a liability that the provision will apply. It seems to us that neither of these contentions can be sustained. "Property" has been defined in the Act so as to include its sale proceeds. " Property" in Clause (a) of Section 46(1) should, therefore, be taken to represent its sale proceeds as well. If that be so, the debt, the consideration for which are the sale proceeds, will squarely fall within the ambit of Section 46(1)(a). As regards the second contention, what is urged is that, if full effect is given to the words "given therefor, in the context, it should mean that only cases of the type with the intention aforesaid present would fall within the mischief of Section 46(1)(a).