PETITIONER:
H.H. VIJAYABA RAJAMATH AND ANR.
Vs.
RESPONDENT:
THE CONTROLLER OF ESTATE DUTY, KARNATAKA, BANGALORE
DATE OF JUDGMENT: 08/07/1997
BENCH:
S.C. AGARWAL, D.P. WADHWA.
ACT
HEADNOTE
JUDGMENT
JUDGMENTD.P. Wadhwa. J.
This is assessee’s appeal against the judgment dated February 27, 1980 of the Karnataka High Court in two reference cases arising under section 64(1) of the Estate Duty Act, 1953 (for short the Act’) In the first reference the Income-tax Appellate Tribunal, bangalore Bench referred the following five question to the High court for its opinion an in the second reference one question was so refarred. These are as under:
" T.R.C. No 122/75.
(1) Whether, on the facts and in
the circumstances of the case, the
value of gold was rightly included
in the principal value of the
estate of the deceased?
(2) If the answer to the above
question is in the affirmative,
whether the correct value to be
included is on the basis of the
market value of gold prevailing in
India as on the date of death or
the international price of gold as
on that date?
(3) Whether, on the facts and in
the Circumstance of the cases, the
Tribunal was right in law in
holding that the market value of
the annuity deposits was to be
included in the principal value of
the estate of the deceased?
(4) Whether, on the facts and in
the circumstances of the case, the
Tribunal was justified in
confirming the disallowance claimed
by the accountable persons under
section 48 of the Act in respect of
the death duty paid in U.K.
interest paid on to Lloyds bank in
U.K., and loss on devaluation ?
(5) Whether, on the facts and in
amount of Rs. 51, 000/- which
became payable to the advocate and
the chartered accountant of the
deceased subsequent to the date of
death is allowable as a deduction
under section 36(1) of the Estate
Duty Act"?
T.R.C. 81 of 1977.
" Whether on the facts and in the
circumstances of the case. The
principal value of the estate of
the deceased had to be determined
under section 36 of the Act having
regard to the death duty paid in
United kingdom and the estate duty
payable under the Act"?
Mr. G.C. Sharma, learned senior advocate for the appellants, has however confined his submissions to the question of law as stated in question No. (4) in T.R.C. No. 122/75 and did not press other questions all of which however have been answered against the appellant.
For convenience sake we again set out the question No.4 as under:
"(4) Whether, on the facts and in
the circumstances of the case, the
Tribunal was justified in
confirming the disallowance claimed
by the accountable persons under
section 48 of the Act in respect of
the death duty paid in U.K.. ,
interest paid on death duty in
U.K., interest payment to Lloyds
bank in U.K. , and loss on
devaluation ?"
Under this question, the appellants who are accountable persons claimed the following deductions under Section 48 of the Act:
Pound Sterling
"Death duty paid in U.K.
Interest paid on delayed payment of that duty.
Interest and service charges
paid to lloyds Bank
Solicitor’s fee paid in
London.
This Case relates to the assessment of the estate duty of the estate of late H.H. Rajkuverba Dowgar Maharani Saheb of Gondal who died on October 14, 1968 leaving behind extensive properties both in England and in India. The appellants are her two daughters and are accountable persons under the Act. It is not disputed that for death duty paid in the United Kingdom relief had already been afforded to the appellants by virtue of an agreement entered into between India and United kingdom for avoidance or relief of double taxation with respect to estate duty under section 30 of the Act. The contention however was that under section 48 of the Act this amount of estate duty paid in U.K. be treated as cost of realising or administering foreign property and thus allowable under section 48 of the Act. While Section 30 applies to the case of reciprocating country, section 49 provides for allowance for duty paid in a non - reciprocating country. Section 30, 48 and 49 may be reproduced a as under:
"30. The central Government may
enter into an agreement with the
Government of any resiorocating
country for the avoidance or relief
of double taxation with respect to
estate duty leviable under this
Act. and under the corresponding
law in force in the reciprocating
country and may, by notification
in the official Gazette, make
such provision as may be necessary
for inrolementing the agreement.
Explanation - The expression "
reciprocating country" for the
country which the central
Government may, by notification
in the official Gazette, declare
to be a reciprocating country.
48. Whether the controller is
satisfied that any additional
expense in administering or in
realising property has been
incurred by reason of the property
being situate out of India. he
may make an property on account of
such expense not exceeding in any
case five per cent on the value of
the property.
49. Where any property passing on
the death of the deceased is
situate in a non-reciprocating
country and the controller is
satisfied that by reason of such
death any duty is payable in that
country in respect of that
property, be may, subject to such
rules as may be made by the Board
in this behalf, make and allowance
of the whole or any part of the
amount of that duty from the
value of the property.
Explanation.- In this section, the
expression "non -reciprocating
country" means any country other
that India which has not been
declared to be a reciprocating
declared to be a reciprocating
country for the purposes of this
Act."
At this stage itself we may note Article VI of the Agreement for avoidance of double taxation under section 30 of the Act entered into between the Government of India and the Government of united kingdom of Great Britain and Northern Ireland. It is as under:
"Article VI. (1) Where one
Contracting Government imposes
duty or any property which is nor
situated in its territory but is
situated in the territory of the
former Government shall allow
aqainst so much of its duty ( as
other wise computed) as is
attributable to that property a
credit ( not exceeding the amount
of the duty so attributable ) equal
to so much of the duty imposed in
the territory of the other
contracting Government as is
attributable to such property.
(2) Where each contracting
Government imposes duty on any
property which is situated.
(a) in the territory of both
Governments, or
(b) outside both territories.
each Government shall allow
against so much of its duty ( as
otherwise computed) as is
attributable to that property a
credit which bears the same
proportion to the amount of the
other contracting Government ’s
duty attributable to the same
property, whichever is the less,
as the former amount bears to the
sum of both amounts.
(3) For the purposes of this
Article, the amount of the duty of
a contracting Government
attributable to any property
shall be ascertained after taking
into account any credit, allowance
or relief, or any remission or
reduction of duty, otherwise
than in respect of duty payable in
the territory of the other
Contracting Government."
On the basis of the provisions as contained in Sections 30, 48 and 49 and Article VI of the agreement aforesaid question No. 4 was answered in the affirmative in favour of the revenue and against the accountable persons. Mr. Sharma, learned counsel for the appellants, accountable persons, submitted that section 30 had nothing to do with the computation of income and that scope of section 30 and 48 was different. He said section 30 only provided for the avoidance or relief of double taxation with respect to estate duty leviable under the Act. and under the corresponding law in force in the reciprocating country while section 48 provided for allowing any additional expense incurred in administering or realising property by reason of the property being situated out of India. According to Mr. Sharma, the estate duty paid in U. K. would be an additional expense allowable under section 48 of the Act. We, however, do not think that Mr. Sharma is right in his submission. As a principle, in P. leelavatnamma vs. Controller of Estate Duty (1991) 188 ITR 803 it has been held by this court that estate duty falling upon the estate passing on the death of the deceased is not deductible in computing the net principal value of the estate for the purposes of the Act. Section 49 of the Act contradicts the stand taken by Mr. Sharma. This section applies where any property passing on the death of the deceased is situate in a non-reciorocating country and the controller of estate duty may make an allowance of the whole or any part of the amount of the estate duty payable in the non-reciprocating country from the value of the property. That would, however, be subject to certain rules with which we are not concerned. If we read sections 48 and 49 together it is difficult to appreciate the argument of Mr. Sharma that where there is an agreement under Section 30* of the Act the estate duty payable in the reciprocating country is nevertheless to be deducted or given an allowance from the value of the property left by the deceased. It is not the case of the appellant that under section 30 of the Act in terms in terms of the agreement between the two Governments, i.e. the Government of India and the Government of United kingdom, relief has not been granted to the appellants under Article VI of the agreement. allowance of the estate duty paid in U.K.. was given in the estate duty payable in this country. An amount of pound sterling 75,320,12 as the death duty paid in U.K. cannot be treated as an expense for which the appellants are entitled to claim as an additional expense in administrating or in realising the property falling under section 48 of the Act. The appellants are only entitled to deduction of the death duty paid in England out of the estate duty payable as computed by the authorities under the Act in this country. it is difficult to accept the argument of the appellant that relief granted by way of avoidance of double taxation is not a relief under the provisions of the Act and that there is a distinction between the relief under the agreement entered into by virtue of the provision of section 30 and the relief to be given under section 48 of the Act.
As regards the interest paid on delayed payment of the death duty in England and interest on service charges paid to the Lloyds Bank, the Tribunal has held that no material was produced " either before the lower authorities or before us to show that these amounts would not have been incurred if the property was in India and not in U. K. In this connection it is necessary to note that the property in U.K.. consisted of certain deposits and war bonds which could be easily realised. We see no justification for allowing the claim in respect of these two items ." This finding of the Appellate Tribunal has not been questioned by the appellants. so far as the amount of pound sterling 4, 855.55 towards solicitor ’s fee in London is concerned the Appellant controller of Estate Duty held that it was an additional expense in administrating or in realising the property by reason of the property being situate outside India and deduction was therefore allowed.
Accordingly, we do not find any merit in these appeals and the same are dismissed. No costs.