INDRASENA REDDY P Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THE above three reference are made to this court under the E.D. Act, 1953 (34 of 1933) (the Act), relevant to the estate of Pingle Venkatrama Reddy, who died on June 3, 1965. THE questions in the reference relate to three life insurance policies obtained by the deceased. Two of the policies relate to a company, by name, Phoenix Assurance Company (Bombay company); the third, relates to the standard Life Insurance Company (the Calcutta company). THE question principally is : Whether the proceeds of the policies should be aggregated with the general estate of the deceased, for determination of rate to ascertain the duty payable under the Act.

(2.) THE three policies the assured obtained for Rs. 50,000 each. On the Bombay policies, the assured on October 13, 1941, and, for the second time on October 15, 1981, (sic) had taken loans from the Bombay company. From the statement of facts, it is not known what sums were borrowed. On the Calcutta company policy, the assured obtained on June 8, 1933, a sum of Rs. 30,000 and on November 17, 1951, another sum of Rs. 58,000. THE undischarged debts on the policies were ascertained to be 71,250. THE assured, during his lifetime, on September 27, 1954, assigned interest in the policies to his seven grandchildren. THE last testament of the deceased was executed on February 4, 1959, and in that, the testator directed that the undischarged debts on the insurance policies be paid from his general estate and not from the proceeds of the policies.

(3.) ON August, (or October) 18, 1975, the Assistant Controller of Estate Duty, it is stated in the course of a discussion with the Revenue representative, was "informed" that the correct method was to aggregate the proceeds of the policies with the general estate of the deceased. The relevant law was indicated in a Gujarat decision showing two tests laid; one (for short) we refer as "disclaimer test"; the other, "test of benefits". We will return to this subject later with more details. Assessments were thereupon reopened. The proceeds of the policies were aggregated with the general estate. The Tribunal on October 27, 1977, confirmed the order of reopening of the assessments. ON facts relevant to the Calcutta policy, it was held, since the assured was not shown to have "exercised interest", the Calcutta policy was ordered to be assessed separately. Relevant to assessment, two questions are referred - whether the reopening of assessment was proper and whether the proceeds of the Bombay policies were to be aggregated was proper and whether the proceeds of the Bombay policies were to be aggregated. Close on the heels of the order of April 30, 1979, the Tribunal stated it had made "mistake" affecting the Calcutta policy. The Tribunal rectified the "mistake" and aggregated also the proceeds of the Calcutta policy. Relevant to the "mistake", three questions are referred, one repeating the question of aggregation under s. 34 of the Act. We find it is convenient to deal with the entire subject in the three reference together and indicate our answers at the end of the order.