Patna High Court
Rameshwar Lall Agarwal vs Union Of India (Uoi) And Ors. on 14 May, 1980
Equivalent citations: [1982]133ITR545(PATNA)
JUDGMENT Hari Lal Agrawal, J.
1. This is an application under Articles 226 and 227 of the Constitution of India. The petitioner prays for an appropriate writ for quashing the order passed by the Appellate Controller of Estate Duty, Ranchi Range, Ranchi (annex. 3), dated 18th December, 1974, and for a declaration that Section 34(1)(c) of the E.D. Act is unconstitutional.
2. The petitioner's father, Tejmal Agarwal, died on 7th December, 1969, leaving behind movable and immovable properties and was governed by the Mitakshara school of Hindu law. Evidently, the share of the deceased in the movable as well as the immovable properties in the estate, would be half. The petitioner being an accountable person within the meaning of the E.D. Act (hereinafter referred to as "the Act") filed a return declaring the principal value of the share of the deceased in the joint family properties at Rs. 60,208. Respondent No. 3, namely, the Asst. Controller of Estate Duty, Ranchi, by his order dated September 4, 1973 (annex. "1"), determined the value of the properties passing on the death of the deceased at Rs. 1,01,359. He also added an equal sum and further a sum of Rs. 31,336 being the share of the petitioner as the lineal descendant of the deceased, in accordance with the provisions of Section 34(1)(c) of the Act. Thus, the principal value of the estate was determined at Rs. 2,34,054 in accordance with the provisions of Section 34(1)(c) of the Act.
3. The petitioner preferred an appeal before respondent no. 2 and challenged the order of respondent No. 3 on various grounds. Respondent No. 3 gave partial relief to the petitioner and held that the total of the estate of the deceased, comprising of the HUF and the individual property, was Rs. 86,256 and the share of the lineal descendant was Rs. 68,177. Thus, he reduced the value of the immovable properties by Rs. 25,760. He, however, being a creature under the statute, namely, the E.D. Act, rightly declined to go into the question of the vires of the impugned provision of the Act. Accordingly, the petitioner has come to this court and the order is challenged on the only ground that the charging section, namely, Section 5 of the Act, having provided only for the imposition of estate duty on the principal value of the property passing on the death of the deceased, the provision for clubbing the interest of the lineal descendant with the interest of the deceased, as provided under Section 34(1)(c) of the Act, was ultra vires and unconstitutional having no nexus with the main object and purpose of the Act, besides being violative of Article 14 of the Constitution of India as being discriminating between a person dying without any male lineal descendant and the others having lineal descendants. Reliance in support of this proposition was placed on a Bench decision of the Madras High Court in the case of V. Devaki Ammal v. Asst. CED [1973] 91 ITR 24. It was held in that case that the provisions of Section 34(1 )(c) which was a machinery section had gone far beyond the permissible limit by making a discrimination between the coparceners who died leaving lineal descendants and others, thus imposing a higher tax burden and incidence of tax on the property passing on the death of. the former coparcener.
4. The Madras High Court itself had earlier taken a contrary view in the case of PL. S. RM. Ramanathan Chettiar v. Asst. CED [1970] 76 ITR 402. The later decision has no doubt referred to the earlier decision, but has not made any elaborate discussions of the said judgment. The constitutional validity of the provision has, however, been upheld by all the other High Courts before whom this question was canvassed so far, namely, Andhra Pradesh, Kerala, Allahabad and Punjab & Haryana. The cases of the Andhra Pradesh High Court are Komanduri Seshamma v. Appellate CED [1973] 88 ITR 82 and Somaraju v. Government of India [1974] 97 ITR 97, that of the Kerala High Court injayasankar v. Assistant CED [1972] 83 ITR 445, of the Allahabad High Court in the case of Badri Vishal Tandon v. Assistant CED [1976] 103 ITR 468 and that of the Punjab and Haryana High Court in the case of Hari Ram v. Assistant CED [1975] 101 ItR 539.
5. Part IV of the Act deals with aggregation of property and rates of duty and Section 34(1 )(c) read as follows :
"(1) For the purpose of determining the rate of the estate duty to be paid on any property passing on the death of the deceased,--......
(c) in the case of property so passing which consists of a coparcenary interest in the joint family property of a Hindu family, governed by the Mitakshara, Marumakkattayam or Aliyasantana law, also the interests in the joint family property of all the lineal descendants of the deceased member;
shall be aggregated so as to form one estate and estate duty shall be levied thereon at the rate or rates applicable in respect of the principal value thereof. "
6. The main attack of Mr. Gadodia, appearing in support of the. petitioner, is directed on the provision where it states that the interests in the joint family property of all the lineal descendants of the deceased member shall be aggregated so as to form one estate. Learned counsel argued that although under Section 5, namely, the charging section, levy of estate duty is to be paid "upon the principal value ascertained......of all properties, settled or not settled......which passes on the death of such person dying after the commencement of the Act, at the rates fixed in accordance with Section 35 ; Clause (c) of Section 34(1) provided for aggregating the interest of the lineal descendants, which was beyond the purview and the mischief of the charging section so as to form one estate, and estate duty is contemplated to be "levied thereon". He, therefore, contended that Section 34, which was a machinery section, has transgressed the limits contained under Section 5 of the Act and thus made the estate of the lineal descendants also chargeable -to estate duty.
7. Mr. Rajgarhia, appearing for the revenue, on the other hand, contended that although the above provision, on the face of it, does give such an impression, in a sense, the aggregation of the interests of the members of the joint family, in the family property is made only for rate purposes, inasmuch as the subsequent provisions of Section 34 itself excludes the interests of these members, the net result of the aggregation is that the property passing to the hands of the lineal descendants on the death of a Hindu attracted only the incidence of a higher rate of duty. The reason for the Madras High Court in holding that the provision contained in Section 34(1)(c) is illegal, is that the said provision virtually brings in property belonging to the lineal descendants to charge along with the interest of the deceased passing on death when there was no such provision in the Act which could enable the levy of charge on any property not passing on the death of the deceased. It was further observed that under the Mitakshara system of Hindu law, the deceased did not have any right or interest in the share of the lineal descendants in the joint family property which they acquired as a result of their right by birth and, therefore, that interest could not be brought under the charging section by the process of aggregation said to be for rate purposes.
8. The essence of the above observation of the learned judges of the Madras High Court is that they thought that the interest of the lineal descendants was also subjected to a duty. Having examined the decision critically, I find myself unable to agree with the above view. The Madras High Court's view has not been accepted in any of the cases noticed above.
9. The provision of Section 34(1)(c) of the Act, providing for an aggregation of the shares of the lineal descendants, was added by the Amendment Act, 1958, which came into force on July 1, 1960. The Amending Act, however, does not give any indication as to the objects of the amendment. Mr. Rajgarhia, appearing for the revenue, however, on the other hand, contended that it would not be correct to hold that the interest of the lineal descendants was aggregated with the estate of the deceased coparcener for the purposes of levying estate duty thereon. The addition was simply for the sake of working out a higher rate of duty and, once that purpose is achieved, the interest is at once separated and no duty is levied on the interest of the other coparceners, namely, the lineal descendant.
10. On the other hand, there is a strong nexus of relation to the objects sought to be achieved by the provision of the Act, namely, to reduce inequalities in the distribution of wealth, and to ensure proper distribution of the same inasmuch as in the case of a male coparcener dying without any lineal descendant, his share being unqualified and unimpaired, the whole of the estate was available for the purpose of computing the estate duty, but in the case of a coparcener dying leaving male lineal descendants governed by the Mitakshara school of Hindu law, his share would be reduced to the extent of the number of the descendants. In the absence of the provisions of the nature as contained in Section 34(1)(c), the incidence of estate duty would be low. Similar would be the disparity with respect to a Hindu governed by the Dayabhaga law. The object of Section 34(1)(c), therefore, seems to be, on the other hand, removing the disparity in the incidence of the estate duty instead of violating the principle of equality enshrined under Article 14 of the Constitution of India. But even assuming that the said provision made any invidious classifications as alleged by the counsel for the petitioner, persons governed by the Mitakshara school of Hindu law, leaving male lineal descendants can be grouped into one category and those who do not leave any lineal descendant, into another. This principle has been accepted in all the above cases, except in the Madras case. It is, therefore, not possible to hold that the impugned provision makes an inroad into the property of the lineal descendant of the deceased.
11. It was observed by the Supreme Court in the case of Ram Krishna Dalmia v. Justice Tendolkar, AIR 1958 SC 538 and in the case of V. Venugopala Ravi Varma Rajah v. Union of India [1969] 74 ITR 49 that in order to have a proper classification the State is required to fulfil two prerequisites : firstly, that the classification must be founded on reasonable differentia and, secondly, the differentia must be for a reasonable object sought to be achieved by the Act. In this connection I may also usefully refer to the decision of Balaji v. ITO [1961] 43 ITR 393, where the Supreme Court is considering the validity of Section 16(3)(a)(i) and (ii) of the Indian I.T. Act, 1922, containing provision? for the inclusion of the wife's or minor child's share of profits of firm in which the assessee was a partner. This provision was challenged as ultra vires. The Supreme Court rejected the argument and held that the said provisions were enacted for preventing tax evasion arid were well within the competence of the Federal Legislature under the Govt. of India Act, 1935, and did not violate the fundamental right of equality before the law as it made a reasonable classification having regard to the object of preventing evasion of tax nor did the provision impose restriction on the fundamental rights under Article 19(1)(f) and (g) of the Constitution.
12. I find myself in respectful agreement with the view taken in the above cases and would accordingly hold that Section 34(1)(c)of the Act is valid and does not violate Article 14 of the Constitution of India.
13. No other point was raised before us.
14. For the reasons stated above, the writ petition fails and is hereby dismissed. But I shall leave the parties to bear their own costs.
S. Roy, J.
15. I agree.