ARUNACHALAM RM Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THE following question is referred by the Income-tax Appellate Tribunal, Madras Bench " B ", Madras, under the provisions of Section 64(1) of the E.D. Act, 1953 (hereinafter referred to as " the Act "), at the instance of the accountable person, for the opinion of this court:

(2.) THE accountable person is one Sri RM. Arunachalam, who is the adopted son of Smt. AR. RM. Umayal Achi, who passed away on August 20, 1964. THE accountable person is also the residuary legatee by the will dated July 20, 1961, executed by the said Umayal Achi. During the hearing of the appeal before the Tribunal, an additional ground was raised with the permission of the Tribunal, and it was contended on behalf of the appellant that immediately on the death of Umayal Achi taking place, the estate duty became a charge on the property and if the true market value of the estate had to be estimated under the provisions of Section 36 of the Act, the estate duty payable would have to be deducted and that the estate duty payable should itself have been allowed as a deduction in computing the principal value of the estate. This plea was opposed by the departmental representative who drew inspiration from the ratio of the judgment of this court in In re Mrs. Constance Lubeck [1970] 78 ITR 199 and it was contended that no such deduction was permissible. THE Tribunal agreed with the contention of the revenue and rejected the plea of the assessee. Hence, this reference.

(3.) IN CED v. Estate of Late Om Prakash Bajaj , the Andhra Pradesh High Court took the view that the estate duty payable on an estate is not a "debt or incumbrance " within the meaning of Section 44 of the Act and, hence, it is not deductible while computing the principal value of the estate and that the liability for payment of the estate duty is a personal liability of the accountable person and not a liability of the estate itself and, hence, it cannot be said that it is a debt contemplated by Section 44 of the Act.