http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

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:                       J U D G M E N T D.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 ?

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

    (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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

    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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

    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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

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.