Compensation received by dependants of deceased in air crash is not property passing on death and is not liable to estate duty.

D.K.Mahajan, J.

1. The Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law for our opinion :

"Whether, on the facts and in the circumstances of the case, the sum of Rs. 42,000 received by the dependants was liable to estate duty ?"

2. Shri D. P. Malhotra was the Chief Engineer in the State of Jamrnu £ Kashmir. He died on 7th February, 1966, in a plane crash near Banihal. On his death, his widow and sons were given Rs. 42,000 by the Indian Airlines Corporation (the carriers). The amount was subjected to estate duty by the Assistant Controller, Estate Duty, Julhmdur, who observed :

"It is claimed in the account of the estate that the legal heirs of the deceased were given a sum, of Rs. 42,000 as ad hoc compensation by the Indian Airlines Corporation because the deceased died in the accident while travelling as passenger of the Indian Airlines Corporation. Shri Dhawan claimed that this amount is exempt as this asset was not in existence at the time of death of the deceased and Shri Dhawan, therefore, claimed that it is not a property which passed on the death of the deceased. I have considered the contention of Shri Dhawan and I cannot agree to it. According to the definition of property under Section 2(15) "property" includes any interest in property also and this definition clearly lays down that property includes ary property converted from one species to another by any method. In the above case, the deceased had certain rights as a fare paying passenger of the Indian Airlines Corporation. On account of this right, his legal heirs were given compensation of Rs. 42,000. Therefore, when the legal heirs were paid the compensation of Rs. 42,000 it was directly because the right of the deceased as a fare paying passenger which was converted into the right of the deceased to receive the above compensation. It, therefore, is obvious that the compensation received by the legal heirs was a property which existed in the lifetime of the deceased and ceased on the death of the deceased because of his death. The amount is, therefore, includible in the estate of the deceased."

3. The assessee then went up in appeal to the Zonal Appellate Controller.

4. The Appellate Controller allowed the appeal and observed as follows:

"The last contention of the appellant is that a sum of Rs. 42,000 received as compensation by the deceaseds heirs from the Indian Airlines Corporation should not have been included in the value of the deceaseds estate because the said compensation was not receivable by the deceased, but was receivable by his heirs in the event of his death by accident during the course of his journey by the Indian Airlines Aircraft and nothing would have been received had the deceased survived the air crash which resulted in his death. In this connection the learned representative for the appellant also referred to Nanavatis Treatise on Estate Duty, 1964 edition, page 190, wherein an opinion has been expressed on the basis of the decision in Feay v. Barnwell, [1938] 1 All ER 31, that such a compensation to the deceaseds heirs was not taxable. This interpretation seems to be correct because the compensation was not payable to the estate of the deceased and, therefore, could not form part of his estate to be assessed to estate duty. In my opinion, this amount should not have been included in the value of the deceaseds estate. The sum of Rs. 42,000 included in this behalf is, therefore, deleted."

5. The revenue then appealed to the Income-tax Appellate Tribunal, Chandigarh Bench. The Tribunal affirmed the decision of the Zonal Appellate Controller. The relevant observations of the Tribunal are as follows:

"Where a person dies, but before his death puts his property in such, a manner that it will go to his descendants or heirs in a particular predestined manner determined by him, then the accountable person would be chargeable to estate duty, And it can be so taxed, if and only if, the property pas