Income Tax Appellate Tribunal - Hyderabad
Sardar Harbans Singh vs Assistant Controller Of Estate Duty on 27 June, 1990
Equivalent citations: [1990]34ITD82(HYD)
ORDER
1. The miscellaneous application has been filed by the assessee against the order of the Tribunal in E.D.A. Nos. 3 and 4 (Hyd.)/1983. The facts of the case are that deceased Sardar Manmohan Singh died on 5-6-1977 in a car accident while proceeding from Bangalore to Mysore. His father Sri Harbans Singh filed an estate duty return on 14-2-1978 declaring the principal value of the estate of the deceased at Rs. 2,08,374. The accountable person in this case for self as well as for the wife was Sardar Harbans Singh. The accountable person was paid a sum of Rs. 2,01,750 against the Insurance Policy from the Life Insurance Corporation of India. The father of the deceased Sardar Harbans Singh was the nominee under the said policy. The accountable person took a plea that deceased did not acquire any interest in the money paid after his death and, therefore, policy money does not pass on the death of the deceased Under Section 5 of the Estate Duty Act. The Assistant Controller relying on Bharatkumar Manilal Dalai v. CED [1975] 99 ITR 179 (Guj.) held that Sections 5 and 6 of the E.D. Act are applicable and, therefore, the amount received by the accountable person is includible in the estate of the deceased. On appeal, the Appellate Controller following the decision in M.Ct. Muthiah v. CED [1974] 94 ITR 323 (Mad.) held that the deceased had no estate vested in himself but he had only a right to dispose of the benefits arising out of the policy. There is no devolution of interest in such a case, from the deceased to another person. From the inception of the original contract, money is payable only to the nominee or to the legal representative and as such Section 5 of the E.D. Act is not applicable. However, he held that Sections 6 and 15 of the E.D. Act are applicable.
2. The Tribunal after considering the arguments and various case laws cited by the respective parties and following the decisions of the Madras High Court (supra) and Harendra Popatlal Gandhi v. CED [1978] 112 ITR 41 (Bom.) held that Sardar Harbans Singh, the representative of the accountable person, is nominated under the policy and though the money was received by the nominee after the death of the deceased, the money does not cease to be part of the estate of the deceased and the nominee cannot be treated as owner of that money.
3. It would be relevant to mention that the decision of the Madras High Court in M.Ct. Muthiah's case (supra), which was followed in the present case, was reversed by the Supreme Court in M.Ct. Muthiah v. CED [1986] 161 ITR 768 and thereafter the assessee filed a miscellaneous petition against the order of the Tribunal on 30-6-1987. The Hyderabad Bench 'B' heard the misc. petition and found that important questions are arising out of the misc. application of the assessee and, therefore, vide their order dated 24-11-1988 they referred the following two questions for the consideration of the Larger Bench to the President through the zonal vice-president:
1. Whether the second sentence in the penultimate para at page 791 of the decision rendered by the Hon'ble Supreme Court in 161 ITR page 768, constitutes the ratio or an obiter of the Hon'ble Supreme Court, as contended by the learned Departmental Representative or only constitutes an unnecessary or a casual observation which does not have to be credited even with the status of an obiter as contended by the learned advocate for the assessee?
2. In view of the answer on the above question, whether the decision of the Tribunal dated 30-11-1988 suffers from either a mistake or an error, an error apparent on record which can be rectified under Section 61 of the Estate Duty Act.
On the recommendation of the zonal Vice-President, the President constituted a Larger Bench and, accordingly, the said misc. application has been heard.
4. Sri Satyanarayana, the learned counsel of the accountable person, stated the facts in detail and urged that the matter was decided following the decision of the Madras High Court (supra) which has been reversed by the Supreme Court, money received from the Life Insurance Corporation against the accident was not includible in the state of the deceased. Sri Satyanarayana relying in CIT v. Shri Agastyar Trust [1984] 149 ITR 609 (Mad.), Karamchand Premchand(P.)Ltd. v. C/H1975] 101 ITR 46 (Guj.) and Sumatilal Chimanlal Shah v. CED [1982] 138 ITR 143 (Guj.) urged that the decision of the Supreme Court is binding on all the subordinate courts under Article 141 of the Constitution of India and, therefore, the law decided by the Madras High Court was not the correct law and hence, the mistake should be rectified. He further referring to Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, WTO [1975] 100 ITR 651 (Guj.) and Bombay Motors v. CIT [1986] 157 ITR 69} (Raj) urged that on the basis of the Supreme Court decision, the order can be rectified Under Section 254(2) of the Act. He further referring to the decisions in Standard Radiators v. CIT [1987] 165 ITR 178 (Guj.), CIT v. Purtabpore Co. Ltd. [1986] 159 ITR 362(Cal.), CIT. Hindustan Zinc Ltd. and Kil Kotagiri Tea & Coffee Estates Co. Ltd. v. ITAT [1988] 174 ITR 579 (Ker.) urged that even rectification is possible on the basis of the Hon'ble High Court decision. He further relied on R. Kuppuswamy Mudaliar & Sons v. Board of Revenue [1980] 45 STC 152 (Mad.),M.K Govindaraju Chetty v. CTO [1968] 22 STC 46 and AAC v. N. Kuppanna Gounder [1975] 35 STC 170 (Mad.). He further relying in J.M. Bhatia, AAC v. J.M. Shah [1985] 156 ITR 474 (SC) and CIT v. R.M. & Co. [1984] 148 ITR 353 (AP) urged that an order which is inconsistent with the provision of the subsequent amendment of law with retrospective effect, must be deemed to suffer from a mistake apparent from the record and is liable to be rectified. He further relied on the commentary on Constitution by H.M. Seervai, second edition. He also referred to penultimate paragraph at page 791 of M.Ct. Muthiah's case (supra) and explained the situation under which the said observation was made and urged that the observation made by Hon'ble Supreme Court was just a casual observation and neither it was the ratio of the decision nor obiter dicta. He also relied in CIT v. Smt. Minal Rameshchandra [1987] 167 ITR 507 (Guj.) and CIT v. Smt. T.P. Sidhwa [1982] 133 ITR 840 (Bom.).
5. The learned departmental representative, Sri Rao, referred to the question for consideration of the Bench and urged that matter has been concluded by the Supreme Court by considering the issue in the penultimate paragraph at page 791 and, therefore, there is no mistake in the order of the Tribunal and hence, the order of the Tribunal should be maintained.
6. The deceased died in a car accident and the nominee received a sum of Rs. 2,01,750 from the Life Insurance Corporation of India. The accountable person pleaded before the Assistant Controller that the deceased did not have any interest in the amount and, therefore, it was not includible. The plea was rejected and the Assistant Controller relying in Gujarat High Court decision (supra) held that the deceased had interest and, therefore, it was includible. However, the Appellate. Controller following the decision of the Madras High Court (supra) held that Section 5 was not applicable but Sections 6 and 15 of the E.D. Act were applicable. The Tribunal followed the decision of the Madras High Court (supra) and, accordingly, the matter was decided.
7. In the meantime, the Madras High Court decision in M.Ct. Muthiah's case (supra) was taken up by the Honble Supreme Court. It would be relevant to mention that against the decision of the Madras High Court, the accountable person as well as the department went in appeal before the Supreme Court. Civil Appeal No. 2086 of 1974 was filed by the accountable person, whereas, Civil Appeal No. 67 of 1975 was filed by the Revenue before the Supreme Court. Three questions were referred for the decision of the Hon'ble High Court in Madras case (supra). They were -
1. Whether the deceased was competent to dispose of the moneys payable under the accident policy and whether the sum of Rs. 2,00,000 is includible in the principal value of the estate?
2. If the sum of Rs. 2 lakhs was liable to be assessed to duty, whether the said amount could be aggregated with the other properties or should be assessed as an estate by itself?
3. Whether the share of the deceased, Chidambaram Chettiar, in the property of the joint family at the time of his death was one-half or one-third of the property?
8. The High Court by the judgment under appeal answered the first question in favour of the Revenue and against the accountable person and second and third questions were answered against the Revenue and in favour of the accountable person. In such a situation, the department as well as the accountable person filed appeals before the Supreme Court. The Supreme Court answered the first question against the Revenue and in favour of the accountable person and observed at page 791 as follows :-
The fact that a person can nominate a beneficiary will not tantamount to a disposition of the property. In any event, that disposition vested in the nominee or the legal representative aright in the property. It did not pass on the death of the deceased. In the premises, we are unable to accept the High Court's conclusion on the first question and we are in agreement with the views of the High Court of Jammu and Kashmir in CED v. Kasturi Lal Jain [1974] 93 ITR 435 (J&K). The first Appeal No. 2086 of 1974 is allowed and question No. 1 is answered in the negative.
9. Then the Supreme Court took up the appeal of the department in Civil Appeal No. 67 of 1975 and indicated that question No. 2 of the said appeal need not be answered. As there was an appeal by the department, they indicated that had it been necessary to answer this question we would have treated this as a separate estate from the other estate of the deceased and the value of this could not be aggregated. The department relying on this observation indicated that the view taken by the Madras High Court is correct.
10. Sri Satyanarayana, the counsel of the accountable person, has cited some of the decisions to show that the decision of the Supreme Court is binding. It is well established that decision of the Supreme Court is binding on all the Courts under Article 141 of the Constitution. (See ACCE v. Dunlop India Ltd. [1985]154 ITR 172 (SC Hindustan Machine Tools Ltd.(No. 3) v. CIT[l989] 175 ITR 220 (Kar.), Shenoy & Co. v. CTO [1985] 155 ITR 178 (SC) and Dhrangadhra Municipality v. Dhrangadhra Chemical Works Ltd. [1988] 174 ITR 77 (Guj.). There could not be any dispute on this issue. The counsel of the accountable person has further indicated that even on the basis of the High Court decision the mistake can be rectified Under Section 254(2) of the Act. Such situation has not arisen in the present misc. Application and, therefore, no finding is given on this argument. The counsel of the accountable person has also indicated the amendment by retrospective legislation and subsequent rectification of the mistake. This is not applicable on the facts of the present case, and therefore, it is not discussed elaborately.
11. The Tribunal had decided the issue following the judicial pronouncement of the Madras High Court (supra). The view taken by the Madras High Court was reversed by the decision of the Supreme Court in M.Ct. Muthiah's case (supra). Therefore, it is clear that law which was applied by the Tribunal on the basis of the Madras High Court decision was not a good law and law of the land on that issue was declared by the Supreme Court in the judgment in M.Ct. Muthiah's case (supra). Therefore, there was a legal mistake in the order of the Tribunal when the Tribunal decided the issue following the decision of the Madras High Court, because the decision of the Madras High Court had been considered not to be a good law. Therefore, the legal mistake was apparent from the record in view of the decision of the Supreme Court (supra). Under the said circumstances, legal mistake committed by the Tribunal is a rectifiable mistake Under Section 254 of the Act. The observation made by the Supreme Court in the penultimate paragraph at page 791 was in a different context. The Supreme Court was hearing the appeal of the accountable person as well as of the department together. The first question which was answered against the assessee was answered by the Supreme Court in favour of the accountable person and indicated that the insurance money received by the accountable person is not includible in the estate of the deceased. The departmental appeal was also to be disposed of by the Supreme Court and, therefore, they clearly indicated that question No. 2 need not be answered. However, they indicated casually that had it been necessary to answer, they would have indicated that it would be treated as a separate estate and that would not be aggregated to the estate of the deceased. As the conclusion had been given on the first question which was answered by the Supreme Court in appeal of the accountable person, there was no further necessity to answer the other questions referred to by the department and, therefore, the observation made by the Supreme Court in the penultimate paragraph at page 791 was neither obiter dicta nor the ratio of the decision. It was a casual remark which did not form the conclusion of the Court. Under the circumstances, the questions for the consideration of the Special Bench are answered as follows:-
(1) The second sentence in the penultimate paragraph at page 791 of the decision rendered by the Hon'ble Supreme Court in 161 ITR 768 does not constitute the ratio or an obiter of the Hon'ble Supreme Court but, it is only a casual observation of the Court (2) The order of the Tribunal dated 30-11-1988 suffered from a legal mistake apparent from the record in view of the Supreme Court decision Under Section 61 of the E.D. Act.
12. Therefore, the insurance money received by the accountable person is not to be included in the estate of the deceased. At the same time, it is not liable to estate duty.
13. In the result, the Miscellaneous Application is allowed.