HARENDRA POPATLAL GANDHI Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THE question that has been referred to this Court for our opinion in this reference under S. 64(1) of the ED Act, 1953, runs thus:

(2.) THE question relates to the estate duty assessment of the estate of late Shri Popatlal Hargovindas Gandhi (hereinafter referred to as "the deceased"). He died on 17th Dec., 1954. The applicant, his son, as the accountable person, filed a statement of account before the Asstt. CED, Bombay. After the statement was scrutinised and after the applicant was duly heard, the Asstt. Controller determined the principal value of the estate at Rs. 2,57,603 and the estate duty payable thereon at Rs. 15,640.83. It appears that the properties, passing or deemed to pass on the death of the deceased, comprised assets of free estate as well as property passing under other titles. The assets of the free estate were valued at Rs. 84,001, but the Asstt. Controller found that the said assets were not sufficient to pay off all the liabilities of the free estate amounting to Rs. 1,34,120. In other words, there was a deficit of Rs. 50,119 in the free estate. In addition to this deficit a claim for deduction pertaining to the actual income tax liability was also made by the accountable person which income tax liability came to about Rs. 19,000, but since the actual income tax liability could be allowed only against the free estate, the deficit of Rs. 50,119 got enhanced to Rs. 64,097. The property passing under other titles consisted of moneys payable under fifteen life insurance policies effected by the deceased and assigned to or nominated in favour of the wife of the deceased, aggregating in value to Rs. 2,57,603. In computing the principal value of the estate the Asstt. Controller did not allow the aforesaid deficit in the free estate to be set off against the value of the property passing under other titles.

(3.) MR . Mehta appearing for the assessee had fairly conceded that he had no point to urge against the Tribunal's decision in regard to assigned policies for he fairly stated that the assignment really effected a transfer of the moneys and benefits under the said policies in favour of the wife even during the lifetime of the deceased; but he substantially raised the contention that the Board's decision in regard to the moneys under the nominated policies was clearly erroneous in law and according to him since the value of the property under the nominated policies was admittedly far in excess of the deficit in the free estate, the unsatisfied debts of the free estate should have been allowed to be deducted from out of the value of the nominated policies. In support of his contention he principally relied upon the well settled distinction between an assignment of a policy and a nomination of a policy and a couple of decisions where it has been laid down that by reason of nomination effected by a policy holder under S. 39 of the Insurance Act a mere right to collect the moneys under the said policies is given to the nominee, but the moneys under such policies continue to remain the estate of the policy holder and such estate upon his death is liable to be attached by creditors. We find considerable substance in the contention urged by Mr. Mehta. The question whether under S. 44 of the ED Act insurance moneys were liable to satisfy the unsatisfied debts of the free estate and whether the set off claimed should be allowed or not, has been considered by the Board in its order at page 11 of the record and the reasoning of the Board may be set out in its own words :