Supreme Court of India
H.H. VIJAYABA RAJAMATH AND ANR.versusCONTROLLER OF ESTATE DUTY KARNATAKA, BANGALORE
- Citation
- 1997 INSC 536
- Decided
- 8 July 1997
- Disposal
- Dismissed
- Bench
- S C AGRAWAL
Holding
Estate duty paid in a reciprocating country cannot be deducted as an expense under Section 48; only the credit under Section 30 applies.
Summary
The deceased left extensive assets in England and India. Under a India‑United Kingdom agreement, estate duty paid in the UK was credited against the Indian estate duty under Section 30 of the Estate Duty Act, 1953. The daughters, as accountable persons, claimed that the UK estate duty, interest on its delayed payment, bank charges, loss on devaluation and a solicitor’s fee should be allowed as additional expenses under Section 48 of the Act. The Tribunal disallowed all except the solicitor’s fee; the Karnataka High Court affirmed this view; the Supreme Court was asked to consider whether the Tribunal was justified in that disallowance. The Court held that estate duty payable in a reciprocating country cannot be treated as a deductible expense under Section 48; the credit under Section 30 suffices, and Section 49 applies only to non‑reciprocating countries. Consequently, the Tribunal’s disallowance of the UK duty, interest and bank charges was upheld, and the appeals were dismissed.
Issues considered
- Whether estate duty paid in the United Kingdom, a reciprocating country, can be allowed as an additional expense under Section 48 of the Estate Duty Act, 1953.
- Whether interest on delayed payment of UK estate duty and bank service charges are deductible under Section 48.
- Whether Section 30 relief under the India‑UK double taxation agreement precludes any deduction under Section 48.
Subjects
estate dutydouble taxationreciprocating countrySection 48Section 30foreign propertydeduction
Judgment
A H.H. VIJAYABA RAJAMATH AND ANR.
v.
·-
CONTROLLER OF ESTATE DUTY
KARNATAKA, BANGALORE
JULY 8, 1997
B
[S.C. AGRAWAL AND D.P. WADHWA, JJ.]
Estate Duty Act, 1953-Sections 30,48,49-Assessment of estate
duty-Properties situated both in England and in lndia--Death duty paid in
c U.K-Disallowance claimed u/s 48 of the Act-Whether maintainable-Held,
No-:R.elief already granted u/s 30 of the Act-Death duty paid in U.K could
not be treated as an expense.
Appellant's father died leaving behind extensive properties both in
D England and in India. 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 tCI estate duty u/s 30 of the Estate Duty Act,
1953. Appellants', claim that this amount of estate duty paid in U.K. be
E treated as cost of realising or administering foreign property, an addition-
al expense, and thus allowable u/s 48 of the Act was disallowed by the
Tribunal. As regards the interest paid on delayed payment of the death
duty in England and interest on service charges paid to the Bank, the
Tribunal held that no material was produced to show that these amounts
would not have been incurred if the property was in India and not in U.K.
F and that the property in U.K. consisting of certain deposits and war bonds
which could be easily realised. As regards amount paid towards Solicitor's
fee in London, the Appellate Controller of Estate duty allowed the deduc-
~
tion, holding that it was an additional expense in administering or in
realising the property by reason of the property being situate outside
G India. The question referred to the High Court was as to whether, on the
facts and in the circumstances of the case, the Tribunal was justified in
confirming the disallowance claimed by the accountable persons u/s 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
H devaluation. The reference was answered in the affirmative in favour of the
520
H.H. VIJAYABARAJAMATH v. CONTROLLEROFESTATEDUIT,KARNATAKA 521
Revenue and against the accountable persons. The present appeals were A
filed by the accountable persons against the judgment of the High Court
in the reference cases.
Dismissing the appeals, this Court
HELD : Estate duty falling upon the estate passing on the death of B
the deceased is not deductible in computing the net principal value of the
estate for the purposes of the Act. Allowance of the estate duty paid in U.K.
was given in the estate duty payable in this country. The death duty paid in
U.K. could not be treated as an expense for which the appellants were
entitled to claim as an additional expense in administering or in realising C
the property falling u/s 48 of the Estate Duty Act, 1953. Section 49 of the
Act applied where any property passing on the death of the deceased is
situated in a non-reciprocating 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 proper-
ty. Reading Ss. 48 and 49 together it is difficult to hold that where there was D
an agreement u/s 30 of the Act the estate duty payable in the reciprocating
country was never the less to·be deducted or given an allowance from the
value of the property left by the .deceased. It was not the case of the appel-
lant that u/s 30 of the Act in terms of the agreement between the two
Governments, i.e. the Government of India and the Government of United E
kingdom, relief had not been granted to the appellants under Article VI of
the Agreement. The appellants were 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. [526-B-F]
P. Leelavathamma v. Controller of Estate Duty, (1991) 188 ITR 303, F
relied on.
CIVIL APPEALLATE JURISDICTION Civil Appeal Nos.
2389-90 of 1981.
From the Judgment and Order dated 27.2 1980 of the Karnataka G
High Court in TRC No. 122175 and TRC 81 of 1977.
G.C. Sharma, P.H. Parekh and Indu Verma for the Appellants.
Ranbir Chandra, Anil Srivastava, BK Prasad and C. Radha Krishna
for the Respondent.. H
522 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.
A The Judgment of the Court was delivered by
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 Ban-
B galore Bench referred the following five questions to the High Court for
its opinion and in the second reference one question was so referred. These
are as under :
"T.R.C. NO. 122/75.
c (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
D 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 circumstances of the case,
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
E 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 person under Section 48 of the Act in respect
of the death duty paid in U .K. interest paid on death duty in U .K.,
F
interest payment to Lloyds Banks in U.K., and loss on devaluation?
(5) Whether, on the facts and in the circumstances of the case,
the amount of Rs.51,000 which became payable to the advocate
and the chartered accountant of the deceased subsequent to the
G 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,
H the principal value of the estate of the deceased had to be deter-
•
H.H. VUAYABARAJAMATii v. CON1ROLLEROFESTATEDUTY,KARNATAKA[D.P. WADHWA,l.J 523
mined under section 36 of the Act having regard to the death duty A
paid in United Kingdom and the estate duty payable under the
Act"?
Mr. G.C. Sharma, learned senior advocate for the appellant&, has
however confined his submissions to the question of law as stated in
question No. (4) in T.R.C. No.122ns and did not press other questions all B
of which however have been answered against the appellant.
For convenience sake we against 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 C
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 D
the following deductions under Section 48 of the Act:
Pound Sterling ·
"Death duty paid in U.K. ,. 95, 320.12
Interest paid on delayed E
payment of that duty... 8, 034.10
Interest and service charges
paid to Lloyds Banks .. 1, 078.25
Solicitor's fee paid in
F
London. 4, 855.55"
This case relates to the assessment of the estate duty of the estate of
late H.H. Rajkuverba Dowgar Maharani Saheb of Gonda! who died on
October 14, 1968" leaving behind extensive properties both in England and G
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 H
•
524 SUPREME COURT REPORTS (1997] SUPP. 1 S.C.R.
A 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 allowances for duty paid in a non-reciprocating country.
Sections 30, 48 and. 49 may be reproduced as under:
B "30. The Central Government may enter into an agreement with
the Government of any reciprocating 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
!eciprocating country and may, by notification in the Official
c Gazette, make such provision as may be necessary for implement-
ing the agreement.
Explanation - The expression "reciprocating country" for the pur-
poses of this Act means any country which the Ci.;nl! .ii Government
may, by notification in the Official Gazette, declare to be a
D reciprocating country.
· 48. Where 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
allowance from the value of the property on account of such
E expense not exceeding in any case five percent 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
F country in respect of that property, he may, subject to such rules
as may be made by the Board in this behalf, make an 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
G
country" means any ·country other than India whic~ has not been
declared to be a reciprocating country for the purposes of this
Act".
At this stage itself we may also note Article VI of the Agreement for avoidance
H of double .taxation under section 30 of the Act entered mto between the
H.H. VUAYABARAlAMATH v. CON'JROLLEROFESfATEDlITY,KARNATAKA[D.P. WADHWA,l.J 525
Government of India and the Government of United kingdom of Great A
Britain and Northern Ireland. It is as under :
"Article VI. (1) Where one contracting Government imposes
duty on any property which is not situated in its territory but is
situated in the territory of the other contracting Government. the
former Government shall allow against so much of its duty (as B
otherwise 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 contracting
Government as is attributable to such property.
(2) Where each contracting Government imposes duty on any
c
property which is situated -
(a) in the territory of both Governments, or
(b) outside both territories,
D
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 its duty so
attributable or to the amount of the other Contracting
Government's duty attributable to the same property, whichever is E
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 F
of duty payable in the territory of the other Contracting Govern-
ment."
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. G
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 Sections 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 H
526 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.
A 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.
B Sharma is right in his submission. As a principle, in P. Leelavathamma v.
Controller of Estate Duty, (1991) 188 ITR 303 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
C passing on the death of the deceased is situate in a non-reciprocating
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
D 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 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 of the agreement between the two Governments, i.e., the
E 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
F are entitled to claim as an additional expense· in administering or in
realising the property falling under Section 48 ofthe 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· riot a relief under the
G provisions of the Act and that there is a distinction between the relief under
t~e 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
H in England and interest on service charges paid to the Lloyds Bank, the
H.H. VIJAYABARAJAMATH '· CON1ROLIBROFESTATEDlITY,KARNATAKA[D.P. WADHWA,J.j 527
Tribunal has held that no material was produced "either before the lower A
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 B
the amount of pound sterling 4,855.55 towards Solicitor's fee in London is
concerned the Appellate Controller of Estate Duty held that it was an
additional expense in admin,istering or in realising the property by reason
of the property being situate outside India and deduction was therefore
allowed.
c
Accordingly, we do not find any merit in these appeals and the same
are dismissed. No costs.
R.A. Appeals dismissed.
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