Assistant Controller Of Estate Duty vs Prayag Dass Agarwal

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1981 Supreme(SC) 281

SUPREME COURT OF INDIA
R.S. PATHAK AND E.S. VENKATARAMIAH, JJ.
The Assistant Controller of Estate Duty and others, Appellants
Versus
Prayag Dass Agarwal, Respondent.
Civil Appeal No. 1843 of 1974, D/- 23-4-1981.
Advocates appeared
Mr. S.C. Manchanda, Sr. Advocate (Mr. Champat Rai and Miss A. Subhashini, Advocates with him), for Appellants; Mr. Pramod Swarup, Advocate, for Respondent.

Advocates:
A.Subhashini, CHAMPAT RAI, Promod Swarup, S.C.Manchanda

Headnote:
Estate Duty Act, 1953 - Sections 52,52(1),5(1),35,85(1),51 - British Finance Act 1946 - Section 49 - Finance (1909-10) Act 1910 – Section 56,56(1) - Finance Act 1975 – Section 22 - Estate Duty Rules - Rule 18 - Whether under Section 52 of the Estate Duty Act, 1953 Central Government is bound to accept in satisfaction of whole or any part of duty payable under Act at such price as may be agreed upon between Central Government and person accountable for estate duty any property passing on death of deceased when an application is made for that purpose by such person - Respondent herein filed a statement of account under Act of estate passing on death of deceased - Estate duty payable in respect of estate in question was determined by Assistant Controller of Estate Duty Allahabad by his order - When appeal filed against said order was still pending respondent made an application under Section 52 (1) of Act on February 16, 1971 to Central Board of Direct Taxes offering one of items of property passing on death of deceased namely premises Road Allahabad whose principal value had been determined by Assistant Controller in part payment of balance of estate duty which was still payable by him under order of assessment - Whether it was open to Central Government to refuse offer of property on a ground other than price as the impugned order had not disclosed any reason at all for rejecting the offer - Whether they will accept property under this provision but Chancellor of Exchequer in his Budget statement for 1946 said that he expected the power (which hitherto had not in practice been used) to operate on a substantial scale in the future - Whether a property passing on death of deceased should be transferred so that its price can be adjusted towards Payment of estate duty - Whether Central Government is bound to do so - Whether Central Government is bound to accept a property offered by accountable person under Section 52 and initiate proceedings to settle its price by negotiation - whether one should enter into negotiations with the other at all and in that regard the law takes no account of the reason of any party for not choosing to entertain proposal for sale made by other however arbitrary illogical or irrelevant reason may be - Held, High Court was however right in holding that it had not been shown that competent authority had properly exercised its discretion - In counter affidavit filed by Assistant Controller of Estate Duty some reasons were given in support of decision of Board - That counter affidavit is of no use for deponent could not speak on behalf of Central Government or the Board - Counter affidavit of Secretary, Central Board of Direct Taxes and Deputy Secretary to Government of India two principal grounds were mentioned for rejecting the offer - One that Central Government was not bound to accept the offer and two that it had been shown that cash in hand cash at bank book debts business profits rent and share of deceased in the firm of amounted which amount was more than sufficient to pay entire estate duty demand - On other hand respondent contended in his reply affidavit that he had no liquid cash to pay the estate duty as it had been invested in business - But there appears to have been no further probe into the question - Language of the statute prima facie does not compel Central Government to do so - Section is in nature of an enabling provision which authorises Central Government to accept a property in lieu of estate duty payable subject to conditions mentioned in it - It is true that even enabling words in a statute which confer a discretionary power may have to be interpreted as compulsory where they amount to words clearly intended to effectuate a legal right - But ordinarily such words are permissive only - In instant case the very fact that there is a need for an agreement upon price of property between Central Government and accountable person makes power of Central Government under Section 52 (1) of Act discretionary and permissive - Any other meaning may lead to impractical and incongruous result - Central Government cannot be compelled to accept property in discharge of estate duty when no agreement is possible on its price and when law does not provide for a machinery to determine price when there is no agreement - History of corresponding legislation in United Kingdom and language of S. 52 read with notes on clauses attached to relevant Bill extracted above suggest that Central Government has the option either to accept or rejected - Sub-clause (b) seeks to substitute provisions of Section 52 of Estate Duty Act by a new provision enabling Central Government to accept at an agreed price assets comprised in an estate passing on death of the deceased towards payment of the estate duty if accountable person so offers - Provision is also made that any balance of price left after satisfying amounts due under Estate Duty Act will be adjusted against amounts due under other direct taxes Acts from deceased his estate and accountable person beneficially entitled to asset in question in that order - Ordered accordingly

Judgment

VENKATARAMIAH, J.:- The question which arises for consideration in this appeal by special leave is whether under Section 52 of the Estate Duty Act, 1953 (hereinafter referred to as the Act) the Central Government is bound to accept in satisfaction of the whole or any part of the duty payable under the Act at such price as may be agreed upon between the Central Government and the person accountable for estate duty any property passing on the death of the deceased when an application is made for that purpose by such person.

2. On the death of Lala Beni Madho Agarwal which took place on September 29, 1964 his son Prayag Dass Agarwal, the respondent herein filed a statement of account under the Act of the estate passing on the death of the deceased. The estate duty payable in respect of the estate in question was determined at Rs. 3,37,543.40 by the Assistant Controller of Estate Duty, Allahabad by his order dated November 30, 1970. When the appeal filed against the said order was still pending, the respondent made an application under Section 52 (1) of the Act on February 16, 1971 to the Central Board of Direct Taxes offering one of the items of property passing on the death of the deceased, namely premises No. 1, Phaphamau Road, Allahabad, whose principal value had been determined by the Assistant Controller at Rs. 2.53,625/- in part payment of the balance of estate duty which was still payable by him under the order of assessment. The said application elicited a cryptic reply dated Sept. 16, 1971 from the Under Secretary of the Central Board of Direct Taxes, the relevant part of which read as follows :-

"I am directed to refer to your petition dated 16-2-1971 on the subject mentioned above and to say that your offer is not acceptable."

3. The Assistant Controller, however, wrote to the respondent on October 21, 1971 stating that the respondent could pay the arrears of estate duty payable by him in monthly instalments of Rupees 10,000/- each beginning from October 29, 1971 subject to payment of interest @ 9% per annum on the arrears outstanding. Thereupon the respondent filed a writ petition before the High Court of Allahabad under Article 226 of the Constitution against the Assistant Controller, the Central Board of Direct Taxes and the Union of India requesting the High Court to issue a writ in the nature of mandamus to the Union of India to consider the application made by him under Section 52 (1) on its merits, to negotiate and settle the price of the property offered by him in settlement of part of duty payable by him and to give credit to the extent of the price so determined under the Act. The respondent contended inter alia that Section 52 of the Act conferred a right on an accountable person, if he chose to do so, to offer an item of property passing on the death of the deceased in respect of whose estate, duty was payable under the Act in discharge of the whole or part of such duty and that it imposed a reciprocal obligation on the Central Government to accept such property and adjust its price as may be agreed upon between the Central Government and the accountable person towards the duty payable. He further contended that the Central Government had no right to refuse to accept the offer so made by the accountable person and that he having made the offer to pay the duty by transfer of the property in question he could not be compelled to pay the duty to the extent of its price. He, therefore, prayed for the issue of appropriate directions to the Central Government to comply with Section 52 of the Act accordingly.

4. On behalf of the Union Government it was inter alia urged that it was not bound to accept an offer made under Section 52 (1) of any property and it was within the discretion of the Union Government to reject the offer.

5. The High Court held that if the accountable person exercised the option to pay the estate duty by transferring property, the Central Government could not refuse to accept the offer and

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