Madras H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the exemption provided in s. 33(1)(n) of the ED Act, 1953, should be allowed in respect of the dwelling house of the HUF from the value of the joint family properties before determining the share of the deceased and also that of the lineal descendants, the former for assessment and the latter for aggregation ?

A.N. Rangaswami and Mrs. Nalini Chidambaram, for the Controller : None appeared for the respondent

RAMANUJAM, J.:

This reference arises out of an order of the Tribunal, dt. 16th July, 1970, in relation to an assessment of the estate of late Rajarathnam Chettiar through the accountable person, Gopalakrishnan, under the E.D, Act, 1953 (hereinafter, called “the Act”). Rajarathinam Chettiar died on 7th April, 1967. He was a member of an HUF. The assets of the family included a house property in which the members of the family including the deceased were residing. In the estate duty proceedings arising on the death of Rajarathnam Chettiar the Asstt. Controller included for assessment the deceased’s share in the house property, after allowing an exemption, under s. 33(1)(n) of the Act, of a sum in proportion to the share of the deceased in the family property. Further, he included the interest of all the lineal descendants in the joint Hindu family under s. 34(1)(c) for rate purposes without giving exemption under s. 33(1)(n).

On appeal by the accountable person, the Appellate Controller took the view that s. 39(3) prescribed that the principal value of the joint family property should first be ascertained by applying the relevant provisions of the Act and that the deceased’s share therein should be considered for estate duty assessment only thereafter. In this view he allowed the appeal and directed the Asstt. Controller to ascertain the principal value of the joint family property after allowing exemption in respect of the dwelling house and determine the share of the deceased as also the share of the lineal descendants therein, the former for assessment and the latter for aggregation.

Aggrieved against this order, the Revenue went up in appeal before the Tribunal. The Tribunal, following its earlier decision rendered in appeal EDA. 83/68-69, dt. 30th June, 1970, by a majority, held that according to s. 39(3) it has to be presumed by a legal fiction that the joint family property belonged to the deceased individually, that after arriving at the gross value of the property, the assessment provisions of the Act, including s. 33, would have to be applied, and that, therefore, it was not correct to hold that s. 33(1)(n) had no application to the assessment of the share of the member of the joint family. Aggrieved against this order of the Tribunal, the Revenue sought a reference under s. 64(1) of the Act, and the following question has been referred to us for our opinion “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the exemption provided in s. 33(1)(n) of the ED Act, 1953, should be allowed in respect of the dwelling house of the HUF from the value of the joint family properties before determining the share of the deceased and also that of the lineal descendants, the former for assessment and the latter for aggregation ?”

An identical question was referred by the Tribunal under similar circumstances to this Court in T.C. No. 54/72, and a Division Bench of this Court in CED vs. Estate of late R. Krishnamachari (1978) 113 ITR 200 (Mad) (DB), after holding that the exemption granted under s. 33(1)(n) related to the house property belonging to the deceased, held that where the deceased had only an interest in the property it was only his interest that passed on his death, that as such the exemption of Rs. one lakh granted under s. 33(1)(n) in respect of the residential house would be available only to the extent of his interest, and that if the value of the interest of the deceased was more than Rs. One lakh the exemption of Rs. one lakh would be available, but, if, however, the value of the interest of the deceased was less than Rs. one lakh the exemption would have to be limited to the value of his interest, and remitted the matter to the Tribunal for a fresh hearing under s. 64(5) of the Act.

The facts in the present case are almost identical. Here also there is no clear finding regarding the total value of the property of the joint family and the rate applicable to the amount apportioned as the value of the property passing on death has not been determined. On a proper reading of the various provisions of the Act particularly ss. 33(1)(n), 34(1)(c) and 39(3), we are inclined to agree with the view taken by the Division Bench in Krishnamachari’s case (supra).

A similar view has also been taken in CED vs. Estate of late Durga Prasad Beharilal (1979) 116 ITR 692 (AP). In that case, it has been held that the exemption under s. 33(1)(n) in respect of residential house is available only to the extent of the share of the deceased.” The Karnataka High Court has also taken a similar view in CED vs. K. Nataraja (1979) 8 CTR (Kar) 32 (1979) 119 ITR 769 (Kar). In that case, dealing with the fiction created under s. 39(3) (which was taken as the basis for the decision of the Tribunal in this case), the Bench observed : “The fiction under s 39(3) should be limited for the purpose of valuation only and cannot be extended for determining exemptions. Where the residential house belongs to an HUF governed by Mitakshara, only the share of the deceased in such house is exempt from estate duty under s. 33 (1)(n). For purposes of rate of estate duty, the value of the share of the deceased in such house has to be excluded from the value of the property passing on his death under s. 34(1)(a), but the value of the shares of all the lineal descendants of the deceased in the coparcenary property including the residential house has to be aggregated under s. 34(1)(c) without any reference to any exemption under s. 33(1)(n).”

In view of the above decisions, we have to hold that the exemption provided in s. 33(1)(n) can only be in relation to the share of the deceased.

As regards the question as to the aggregation of the value of the interest of the lineal descendants for rate purposes, this Court in V. Devaki Ammal vs. Asstt. CED (1973) 91 ITR 24 (Mad), has struck down s. 34(1)(c) as violative of Art. 14 of the Constitution of India and that matter has been taken in appeal to the Supreme Court and that is pending. Therefore, without answering the question referred, we direct the Tribunal to re-hear the appeal in the light of the principles set out above and in the light of the principles to be laid down by the Supreme Court in the appeal arising out of the decision of this Court in Devaki Ammal’s case (supra).

No order as to costs.

[Citation : 142 ITR 260]