Nawab
Mir Barkat Ali Khan Bahadur Vs. Controller of Estate Duty [1996] INSC 1268 (8 October 1996)
S.P.
Bharucha, S.B. Majmudar S.B. Majmudar,J.
ACT:
HEAD NOTE:
This
appeal by certificate of fitness to appeal granted by the High Court of
Judicature. Andhra Pradesh under Section 65 of the Estate Duty Act, 1953
(hereinafter referred to as 'the Act') is moved by the appellant accountable
person who has felt aggrieved by the answers given by the High Court against
him on five out of six questions referred by the income-Tax Appellate Tribunal,
Hyderabad for opinion of the High Court under Section 64(1) of the Act. The
following six questions were so referred:
"1.
Whether on the facts and in the circumstances of the case, the sum of
Rs.1.56.971 relating to the Estate of late Mazharunnisa Begum is includible in
the estate of the deceased as passing under Sec.5 of the Estate Duty Act.
2.
Whether on the facts and in the circumstances of the case, the sum of
Rs.8.23.697, representing the amount spent on the construction of quarters of
dependants and Khanazadas, is includible in the estate of the deceased under
Sec.9 of the Estate Duty Act.
3.
Whether on the facts and in the circumstances of the case the sums of Rs.12,61,649
and Rs.8,85,850 representing respectively sale proceeds of the property known
as 'persi polis' belonging to Prince Kuararam Jan and shares of Hindustan
Motors Ltd; belonging to the Dependants and Khanazadas Trust were held by the
deceased in a fiduciary capacity and whether they are not includible in the
estate of the deceased under Sec.22 of the Estate Duty Act.
4. If
the answer to the above question is in the negative, whether on the facts and
in the circumstances of the case, the claim for the allowance of the sums of
Rs.12,61,649 and Rs.8,85,850 as debts due was hit by limitation imposed by
Section 49 of the Estate Duty Act.
5.
Whether on the facts and in the circumstances of the case, for purposes of
determining under Sec.36 of the Estate Duty Act the Principal value of the
estate passing on the death of the deceased, the amount of estate duty payable
is liable to be taken into account and the principal value of the estate should
be reduced accordingly or whether the amount could be deducted as a 'debt'
under Sec.44 of the Estate Duty Act.
6.
Whether on the facts and in the circumstances of the case, the sum of
Rs.5,01,460 being the value of properties in the occupation of Sahabzadas and Sahebzadis
was includible in the hands of the deceased as property passing." So far
as Question No.3 is concerned it was answered in favour of the appellant.
Consequently in the present appeal we are concerned with Questions Nos.1.2.4.5.
and 6 as aforesaid. At the time of final hearing of this appeal learned counsel
for the appellant fairly stated that Question No.5 is covered against the
appellant by a decision of this Court in the case of P. Leelavathamme (Smt) v. Controller
of Estate Duty. Andhra Pradesh, Hyderabad (1991) 2 SCC 299. Therefore, it will have to be answered against the
appellant and in favour of the respondent. We shall now deal with the remaining
questions which were pressed for our consideration.
Question
No.1 It has to be noted that the appellant accountable person was called upon
by the authorities under the Act to furnish appropriate return disclosing net
value of the estate of the erstwhile Nizam of Hyderabad Mir Osman All Khan, who
died on 24th February
1967. The Assistant
Controller computed the value of the estate at Rs.3.69 Crores by making several
additions. Question No.1 refers to the addition of Rs.1.56.971/- pertaining to
the estate of one Mazharunnisa Begum who died on 18th June 1964. The Assistant Controller of Estate Duty was of the view
that said Begum was the wife of late Nizam. He drew this inference from the
fact that late Nizam impleaded himself as her legal representative after her
death in Original Suit No.14 of 1958 on the file of the High Court relating to
the administration of Kurshud Jahi Paiga. He also recorded in his order that
the representative of the accountable person had agreed for inclusion of this
amount. In appeal by the accountable person the submission of the appellant
that said Begum was not the wife of late Nizam, was rejected. The said decision
which resulted into reference of Question No.1 to the High Court, came to be
affirmed by the High Court. The High Court came to be affirmed by the High
Court. The High Court noted that it was not in dispute that late Nizam was
closely associated with the said Begum and they were living like husband and
wife. That after his death the Nizam took several legal proceedings holding out
that he was the husband of said Begum. Nizam himself in several proceedings
mentioned her as his wife. On this evidence, therefore, the High Court rightly
came to the conclusion that Mazharunnisa Begum was the wife of late Nizam and
consequently the amount relating to her estate passed on to Nizam after her
death and, therefore, was rightly includible in the estate of late Nizam. The
aforesaid finding of the High Court is well sustained on evidence on record and
calls for no interference. Question No.1 is, therefore, answered against the
appellant and in favour of the respondent. That takes us to the consideration
of Question No.2.
Question
No.2 This question pertains to the inclusion of a sum of Rs.8,23,697/-. It was
the amount spent on the construction of quarters for dependents and Khanazadas
of late Nizam in the open land surrounding the King Kothi Palace. This property was gifted on 21st March 1957 by an instrument in writing registered in favour of Nizam's
grandson Prince Mukarram Jah. Simultaneously with the gift the late Nizam took
on lease the entire King Kothi Palace subject to payment of rent and a
lease deed was duly registered. While the property was in his occupation, the Nizam
constructed on the open land in King Kothi Palace some quarters for occupation
of certain descendants of the Nizam's family known as dependants and khanazadas.
The Assistant Controller of Estate Duty on evidence found that a sum of Rs.8,23,697/-
spent by late Nizam over the construction of quarters amounted to a gift by the
deceased within two years immediately preceding his death and, therefore, this
amount was includible in the estate of late Nizam by virtue of the fiction
contained in Section 9 of the Act. This finding was upheld by the Tribunal and
it resulted into the aforesaid question which was referred for opinion of the
High Court.
The
High Court referred to the evidence on record and concluded that even though
the Khanazadas had right of occupation and the buildings were given to them for
that purpose no liability was attached to them towards the cost of
construction. And that liability was discharged by the late Nizam by meeting
the cost and, therefore, to that extent this would be taken as an
extinguishment at the expense of deceased Nizam of a debt or other right and,
therefore, it amounted to disposition or property by the late Nizam within two
years of his death and consequently under the fiction of Section 9 of the Act
the property is deemed to have passed on his death. The High Court also noted
the stand taken by the concerned accountable person in wealth tax proceedings
wherein it was submitted that the quarters after construction were handed over
to the Khanazadas and the Nizam had divested himself of the right over them and
as such they were in the nature of gifts made by him to the Khanazadas. Once
the said stand was taken by the accountable person in wealth tax proceedings
obviously the cost of these constructions had to be taken as gifts made by the Nizam
to the Khanazadas and as the said disposition of property was within two years
of his death, in the present estate duty proceedings there was no escape from
the conclusion that these gifted amounts by fiction of Section 9 of the Act
were deemed to be property passing on his death. Question No.2 in our view was
rightly answered against the appellant by the High Court. The said answer calls
for no interference in this appeal. That takes us to the consideration of
Question No.4 which has a direct linkage with the answer given by the High
Court to Question No.3 in favour of the appellant.
Question
No.4 While answering Question No.3 in favour of the appellant the High Court
has noted that the sale proceeds of the property known as 'persi polls' at
Bombay which belonged to Principle Mukarram Jah and shares of Hindustan Motors
Limited belonging to dependents and Khanazadas were held by the deceased in
fiduciary capacity and, therefore these amounts held in trust by the late Nizam
were not includible in his estate under Section 22 of the Act. Once that
finding was reached by the High Court in favour of the appellant. it is
difficult to appreciate how Question No. 4 could have been answered against the
appellant, Question No.4 centers round the applicability of Section 46 of the
Act. The said Section seeks to impose limitation for excluding from allowances
and deductions available under Section 44 of the Act the amounts of debts
incurred by the deceased as mentioned in clause (a) of Section 44 under the
circumstances mentioned in Section 46. Now before such exclusion can be
effected it should be shown that the concerned amount was a debt incurred by
the deceased. The amounts of Rs.12,61,649/- and Rs.8,85,850/- were held by the
deceased Nizam as trust money on behalf of the concerned beneficiaries. These
trust amounts lying deposited with the late Nizam could not form part and
parcel of his estate.
Consequently
there would remain no occasion to include these amounts in his estate. Only on
this ground, therefore, these amounts were required to be excluded. There was jural
relationship between Nizam on the one hand and these beneficiaries on the
other, who were the equitable owners of these amounts only as trustees and
beneficiaries. No debtor- creditor relationship existed between them.
Consequently Section 46 was out of picture. In our view the High Court,
therefore, was not justified in treating these amounts as debts due from the Nizam
to the concerned beneficiaries and in invoking Section 46(1) in that
connection. It could not be said that the claim for allowances of the aforesaid
sums was hit by the limitation imposed by Section 46 of the Act.
Question
No.4. therefore, will have to be answered in favour of the appellant and
against the respondent. That takes us to the consideration of the last
question.
Question
No.6 It refers to an amount of Rs.5,01,460/- being the value of the properties
in the occupation of Sahebzadas and Sahebzadees. The said amount was included
by the Assistant Controller as property passing on the death of the deceased Nizam.
The High Court has answered the said question against the appellant relying on
decision of the High Court in Commissioner of Income Tax v. Barkat Ali Khan
1974 (12) T.L.R. 90. The said decision was confirmed by this Court in the case
of Commissioner of Income-Tax v. Nawab Mir Barkat Ali Khan (1991) 188 I.T.R.
231. In our view as there is no clear evidence on record to show that the
aforesaid amount represented the value of properties which were occupied by way
of full ownership by the said Sahebzadas and Sahebzadees, the said amount was
rightly included in the estate of the deceased. On the scanty material on
record, it is not possible for us to take any view contrary to the one taken by
the High Court as well as by the authorities below.
Question
No.6. therefore, will also have to be answered against the appellant and in favour
of the respondent.
In the
result this appeal stands partly allowed only with reference to the answer to
Question No.4. However it will stand dismissed so far as the answers given by
the High Court against the appellant on the remaining questions are concerned. Orders
accordingly. There will be no order as to costs.
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