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1969 Supreme(Del) 213
High Court Of Delhi
CONTROLLER OF ESTATE DUTY,DELHI - Appellant
Versus
LATE SHRI A.T.SAHANI THROUGH MRS L.A.SAHANI, NEW DELHI - Respondent
Decided On : 12/01/1969
Compensation payable to the legal heirs of a deceased employee, which is payable as a reward for the services the deceased was required to render and is a part of the remuneration payable under the relevant rules and agreements, and over which the deceased had the right to dispose of by will or otherwise, is property within the meaning of Section 6 of the Estate Duty Act, 1953, and is therefore liable to estate duty.
Headnote:
ESTATE DUTY ACT, 1953 - SECTION 6 - PROPERTY PASSING ON DEATH - COMPENSATION PAYABLE TO LEGAL HEIRS ON DEATH OF EMPLOYEE - WHETHER PROPERTY WITHIN THE MEANING OF SECTION 6.
Fact of the Case:
The deceased, an employee of the Indian Airlines Corporation, died in an air crash while on duty. Under the Corporation's Service Rules, a member of the flying crew was entitled to compensation in the event of death or injury caused by an accident during air travel. The deceased's widow received a sum of Rs. 68,300 as compensation. The Assistant Controller of Estate Duty included the compensation in the principal value of the deceased's estate. On appeal, the Zonal Appellate Controller of Estate Duty and the Appellate Tribunal held that the compensation was not property passing on the death of the deceased and excluded it from the principal value of the estate.
Finding of the Court:
The court held that the compensation was property within the meaning of Section 6 of the Estate Duty Act, 1953, and was therefore liable to estate duty. The court found that the deceased had an interest in the compensation as it was payable as a reward for the services he was required to render and was a part of the remuneration payable under the Service Rules and the Pilot agreement. The court also found that the deceased had the right to appoint the person to whom the compensation should be paid on his death, as evidenced by his nomination of his wife as the recipient of the compensation.
Issues: Whether the compensation payable to the legal heirs of the deceased employee was property within the meaning of Section 6 of the Estate Duty Act, 1953.
Ratio Decidendi: The court held that the compensation was property within the meaning of Section 6 of the Estate Duty Act, 1953, because the deceased had an interest in it and the right to dispose of it by will or otherwise. The court found that the compensation was payable as a reward for the services the deceased was required to render and was a part of the remuneration payable under the Service Rules and the Pilot agreement. The court also found that the deceased had the right to appoint the person to whom the compensation should be paid on his death, as evidenced by his nomination of his wife as the recipient of the compensation.
Final Decision: The court answered the question in the affirmative, holding that the compensation was property within the meaning of Section 6 of the Estate Duty Act, 1953, and was therefore liable to estate duty.
( 1 ) THIS case raises an interesting but difficult point under the Estate Duty Act, 1953 (hereinafter called the Act ). The facts are not many and are also not in dispute.
( 2 ) THE deceased A. T. Sahani who was an employee of the Indian Airlines Corporation died on 11th September, 1963 in an air crash while on duty. Under Rule 159 of the Indian Airlines Corporation (Flying Crew) Services Rules, a member of the flying crew was entitled to certain compensation at specified rates in the event of his death or an injury caused by an accident during or as a result of air journey performed as such in the Corporation s service. The rule as it stood at the material time reads as under :-
"the Corporation shall pay compensation in the undermentioned circumstances and at the rates indicated below. Such compensation is payable only when the death or an injury is caused by an accident during or as a result of air journey performed as a member of the flying crew in the Corporation s service.
THE compensation payable under the said rule was in addition to the compensation which the Corporation had agreed to pay under an agreement described as Pilot agreement entered into with the Corporation on 1st April 1960 according to Rule (iv) where by it was provided that the Corporation shall pay compensation for the death of a pilot, a maximum of 36 times his monthly basic pay if such death occurred in the circumstances mentioned in the above-mentioned Service Rules or while travelling on duty in surface transport provided by the Corporation or its nominated agents.
( 3 ) IN accordance with the terms of the aforesaid agreement between the deceased and his employer, a sum of Rs. 68,300. 00 was received by his widow as compensation.
( 4 ) THE Assistant Controller of Estate Duty included, infer alia, the said amount of compensation in the principal value of the estate of the deceased under the head "movables".
( 5 ) ON appeal by the "accountable person", the Zonal Appellate Controller of Estate Duty, Delhi held that this was a case where compensation was payable to the legal heirs only in the event of death of the deceased. There could therefore be no question of the deceased having any interest in the compensation. He further observed that the mere right of nomination which the deceased had exercised in this case, was of no consequence. He accordingly excluded the sum of Rs. 68,300. 00 from the principal value of the estate of the deceased.
( 6 ) THE Revenue appealed against the decision to the Appellate Tribunal which confirmed the exclusion. The Tribunal held that only the property in which the deceased had an interest in his life-time would be deemed to be the property over which he could be said to have a power of disposition. In the case of a compensation receivable on his death such compensation came into being only by reason of the death of the deceased. As such it could not be said that the deceased had any interest in it during his life-time. The Tribunal therefore held that the property in question was not one over which the deceased had any power of disposition.
( 7 ) AS the Tribunal s order gave rise to a question of law; at the instance of the controller, the following question was referred under section 64 of the Act, to this Court for the opinion.
WHETHER on the facts and in the circumstances of the case, the compensation amounting to Rs 68300. 00 was a property within the meaning of Section 6 of the Estate Duty Act, 1953?
THE Act does not define the term property except by way of an inclusive definition of the term in section 2 (15) which reads as under:
S. 2 (15) "property" includes any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale and also includes any property converted from one species into another by any method; Explanation 1. The creation by a person or with his consent of a debt or other right enforceable
