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No further payment of 5 502 SCI/77 494 rent was thereafter made by the appellant either to the Assistant Controller or to the lessors. FAC |
Since the appellant did not pay any rent to the Assistant Controller for the period subsequent to January 1962 in defiance of the notice dated 9th January, 1962, the Assistant Controller issued a notice dated 5th March, 1964 to the appellant requiring him to show cause why penalty in the sum of Rs. 10,000/ should not b... |
The appellant addressed a letter dated 13th March, 1964 pointing out that the accountable persons mentioned in the notice dated 9th January, 1962 were "Shri TuIsi Chandra and others", that is, respondents Nos. 3 and 4 and the appellant had no concern or connection with these account able persons nor was any amount due ... |
The appellant also called upon the Assistant Controller to refund the sum of Rs. 2,800/ paid by him in respect of rent for the months of December 1961 and January 1962 on the ground that this payment had been made by him under a bona fide mistake of law. FAC |
This explanation furnished by the appellant was found unacceptable and the Assistant Control ler passed an order dated 25th March, 1964 holding that rent for the months commencing from March 1962 and ending with March 1964 aggregating to Rs. 35,000/ had been paid by the appellant to the lessors in contravention of the ... |
The appellant thereupon filed a writ petition in the High Court challenging the validity of the proceedings adopted by the Assistant Controller under section 73(5) or the read with section 46(5A) of the Act ' of 1922 for recovery of the amount of estate duty from the appellant as also the legality of the Order dated 25... |
The High Court, by a judgment dated 1st December, 1969, rejected the writ petition and hence the present appeal by special leave obtained from this Court. FAC |
There are two questions which arise for determination in this appeal: first, whether the notice dated 9th January, 1962 issued by the Assistant Controller to the appellant was a valid notice under which the appellant was bound to pay the amount of rent in respect of the leased premises to the Assistant Controller, and ... |
The first question is not free from difficulty but the second is relatively simple and hence it would be convenient to begin first with a discussion of the second question. Ratio |
Now, at the date when the notice dated 9th January 1962 was issued by the Assistant Controller the Act of 1922 was in force and hence the notice was issued under section 73, sub section (5) of the read with section 495 46(5A) of the Act of 1922. Ratio |
Section 73, sub section (5) of the provides inter alia that the provisions of sub sections (1), (1A), (2), (3), (4), (5), (5A), (6) and (7) of section 46 of the Act of 1922 shall apply as if the said provisions were provisions of and referred to estate duty and sums im posed by way of penalty or interest under the inst... |
Section 46 of the Act of 1922 lays down the mode and time of recovery of incometax and two sub sections of this section are material, namely, subsections (1) and (5A) which read as follows: "(1) When an assessee is in default in making a payment of income tax, the Income tax Officer may in his discretion direct that, i... |
The Income tax Officer may at any time or from time to time amend or revoke any such notice or extend the time for making any payment in pursuance of the notice. STA |
Any person making any payment in compliance with a notice under this sub section shall be deemed to have made the payment under the authority of the assessee and the receipt of the Income tax Officer shall constitute a good and sufficient discharge of the liability of such person to the assessee to the extent of the am... |
Any person discharging any liability to the assessee after receipt of the notice referred to in this sub section shall be personally liable to the Income tax Officer to the extent of the liability discharged or to the extent of the ability of the assessee for tax and penalties, whichever is less. STA |
496 If the person to whom a notice under this sub section is sent fails to make payment in pursuance thereof to the Income tax Offi cer, further proceeding may be taken by and before the Collector on the footing that the Income tax Officer 's notice has the same effect as an attachment by the Collector in exercise of h... |
Where a person to whom a notice under this subsection is sent objects to it on the ground that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this section shall be deemed to require such person to pay any s... |
The penalty under sub section (1) of section 46 can obviously be imposed on an assessee only when the assessee is in default in making payment of income tax and under section 45, the assessee would be deemed to be in default when he fails to pay the amount of income tax specified as payable in a notice of demand served... |
Thus, two conditions must be fulfilled before penalty can be imposed under section 46, sub section (1): one is that the person on whom penalty is sought to be imposed must be an assessee and the other is that the assessee must be in default within the meaning of section 45. Ratio |
Where a garnishee is required by notice issued under sub section (5A) of section 46 to pay to the Income tax Officer so much of the money due or which may become due from the garnishee to the assessee or held or which may subsequently be held by the garnishee for or on account of the assessee, as is sufficient to pay t... |
That sub section defines an assessee to mean a person by whom income tax or any other sum of money is payable under the Act and the amount which the garnishee is required to pay to. Ratio |
the Income Tax Officer in virtue of a notice under sub section (5A) of section 46 is not "income tax or any other sum of money payable under this Act". Ratio |
The garni shee merely pays the amount which is due from him to the assessee and such payment is in discharge of the debt owned by him to the assessee. Ratio |
It is not a payment the liability for which is created under any provision of the Act. Ratio |
The garnishee is thus not an assessee within the meaning of the definition of that term in section 2, sub section (2) nor is there any provision in the Act which by a legal fiction makes him an assessee. Ratio |
The Act also does not contain any provision that the garnishee who fails to comply with the notice issued under sub section (5A) of section 46 shall be deemed to be an assessee in default. Ratio |
It is interesting to compare the provisions of the Act of 1922 with the corre sponding provisions of the Income tax Act, 1961 (hereinafter referred to as the Act of 1961). Ratio |
Clause (x) of sub section (3) of section 497 226 of the Act of 1961 provides in clear and explicit terms that if the garnishee, to whom a notice under sub section (3) is sent, fails to make payment in pursuance thereof to the Income Tax Officer, he shall be deemed to be an asses see in default in respect of the amount ... |
But no such provision is to be found in the Act of 1922. Ratio |
It is, therefore, obvious that no penalty can be imposed on a garnishee under sub section (1) of section 46, even if he fails to comply with the notice issued to him under subsection (5A) of section 46. Ratio |
Now the scheme of collection and recovery of estate duty under the is substantially the same as that under the in come tax law. Ratio |
Section 73, sub sections (1) and (2) of the correspond to section 45, sub section (1) of the Act of 1922. Ratio |
These two sub sections provide that where any estate duty, penalty or interest is due in conse quence of any order passed under the Act, the Controller shall serve upon the person accountable or other person liable to pay such estate duty, penalty on interest, a notice of demand in the prescribed form specifying the su... |
The also, therefore, contemplates issue of a notice of demand to the accountable person after an order of assess ment is made under the Act and it is only when the account able person fails to pay in accordance with the requisition contained in the notice of demand that he is to be deemed to be in default. Ratio |
Section 73, subsection (5) then incorporates the provisions of sub sections (1), (1A) (2), (3), (4), (5), (5A), (6) and (7) of section 46 and makes them applicable for the purpose of collection and recovery of estate duty. Ratio |
It must follow a fortiori that penalty can be imposed on a garnishee under section 73, sub section (5) of the read with section 46, sub section (1) of the Act of 1922 only if the garnishee can be said to be an accountable person in default. Ratio |
But, for like reason as those discussed while dealing with the provisions of the Act of 1922, the garnishee cannot be regarded as an accountable person, since section 2, sub section (12A) defines 'account able person to mean the person accountable for estate duty within the meaning of the Act and the garnishee does not... |
There is also no provision in the deeming a defaulting garnishee as an accountable person in default by a legal fiction. Ratio |
It is therefore, difficult to see how an order imposing penalty could be passed against the appellant even if the notice dated 9th January, 1962 was a valid notice under which the appellant was bound to pay the amount of rent in respect of the leased premises to the Assistant Controller and be failed to do so. Ratio |
The order dated 25th March 1964 imposing penalty of Rs. 3000/ on the appellant must therefore be held to be outside the Dower of the Assistant Controller under the and it must be quashed and set aside. Ratio |
498 That takes us to the consideration of the first question as to the validity of the notice dated 9th January, 1962. Ratio |
We have already referred to the relevant provisions of this notice, but it would be desirable to recapitulate them here. Ratio |
The notice starts with the recital of the fact that a sum of Rs. 1,40,090.20 is due from respondents Nos. 3 and 4 on account of estate duty "as accountable persons to the estate of late Bhupati Nath Deb Bahadur". Ratio |
This recital states very clearly that the amount of Rs. 1,40,090.20 is due on account of estate duty payable on the death of the deceased. Ratio |
Then it goes on to require the appellant to pay to the Assistant Controller the amount which is due or may become due from him to the estate of the deceased or which is held or may subsequently be held by him for or on account of the estate of the deceased upto the amount of Rs. 1,40,090.20. Ratio |
Here the amount which the appellant is called upon to pay to the Assistant Controller is the amount due or to become due to the estate of the deceased. Ratio |
The purpose for which such amount is required to be paid is to meet "the amount due by the accountable person in respect of the arrears of estate duty" and the appellant is intimated that any payment made by him in compliance with the notice would in law be "deemed to have been made under the authority of the accountab... |
" The argument of the appellant was that the words "accountable person" here in the context meant respondents Nos. 3 and 4 and since the amount of rent was payable by him to the lessors and not to respondents Nos. 3 and 4, the notice was inoperative and did not obligate him to pay the amount of rent to the Assistant Co... |
This argument may, at first blush, appear a little attractive, but a close look at the scheme and rele vant provisions of the would be suffi cient to repel it. Ratio |
The has been enacted in exercise of the legislative power conferred under Entry 87 of List 1 of Seventh Schedule to the Constitution and it provides for levy and collection of estate duty in respect of property. Ratio |
The charge of estate duty is imposed by section 5 which provides that in the case of every person dying after the commencement of the Act, there shall be levied and paid upon the principal value of property, settled or not set tled which passes on the death of such person, a duty called "estate duty" at the rate fixed ... |
What property shall be deemed to pass on the death of a person is laid down in sections 6 to 16 which occur under the heading "Property which is deemed to pass". STA |
Sections 17 to 20A enacts special provisions relating to transfers to controlled companies and there are certain exceptions to the charge of estate duty enumerated in sections 21 to 33. STA |
The aggregation of property and rates of estate duty are provid ed in sections 34 and 35. STA |
The node of determination of the principal value of the property passing on the death of a person is dealt with in sections 36 to 43 and certain deduc tions and allowances to be made in determining the principal value of the estate are to be found in sections 44 to 50 B. STA |
Then follow a catena of sections providing for collection of estate duty. Ratio |
Section 53 lays down as to who shall be accountable for estate duty and what 499 shall be the duties and liabilities of such person and it reads as follows: "53 (1) Where any property passes on the death of the deceased (a) every legal representative to whom such property so passes for any beneficial interest in posses... |
(4) Where the person accountable knows of any property which he has not included in his account because he does not know its amount or value, he may state that such property exists, but he does not know the amount or value thereof and that he under takes, as soon as the amount and value are ascertained to bring a suppl... |
(5) Where two or more persons are accountable, whether in the same capacity or in different capacities, for estate duty in respect of any, property passing on the death of the deceased they shall be liable jointly and severally for the whole of the estate duty on the property of passing. STA |
500 The words 'legal representative ' occurring in clause (a) of sub section (1) of section 53 are defined in section 2, sub,section (12) to mean: "a person who in law represents the estate of a deceased person, and includes (i) an executor, (ii) as regards any obligation under this Act, any person who takes possession... |
(2) Upon a provisional assessment being made under sub,section (1), the person so assessed shall pay to the Controller, or furnish security to the satisfaction of the Controller for the payment of, the estate duty, if any, payable on the provisional assessment, and the Controller shall thereupon grant him a certificate... |
(3) After regular assessment has been made under section 58 any amount paid towards the provisional assessment made under sub section (1) shall be deemed to have been paid towards the regular assessment. STA |
X X X X" Section 58 provides for the making of regular assessment and confers power on the Controller to assess the principal value of the estate of the deceased and to determine the amount payable as estate duty. STA |
Then there are provisions relating to reopening of assessment, penalty for default or concealment and rectification of mistakes in the assessment. Ratio |
Section 62 provides inter alia that any person ob jecting to any valuation made by the Controller, or to any order made by the Controller determining the estate duty payable under section 58 or section 59 or denying his li ability to the amount of estate duty payable in respect of any property, may within thirty days o... |
Then a further appeal is provided to the Appellate Tribunal under section 63 followed by a reference to the High Court under section 64 and an appeal to the Supreme Court under section 65. Ratio |
There are certain other provisions following on these sections which are not material for our purpose until we come to section 73 to which we have already referred. Ratio |
The last section which is material is section 74 which provides that, subject to the provision of section 19, the estate duty payable in respect of property, movable or immovable, pass ing on the death of the deceased shall be a first charge on the immovable property so passing, in whomsoever it may vest on his death, ... |
This is broadly the scheme of the and it is in the light of this scheme that we have to determine the question which arises ' for consideration in this appeal. Ratio |
It is clear from the resume of the provisions of the which we have given above that under sub section (3) of section 53 every person accountable for estate duty under sub section (1) of that section is liable to deliver to the Controller within six months of the death of the deceased an account of all properties in res... |
There may be and in many cases there would be more than one person accountable for estate duty under sub section (1) of section 53 and the obligation to deliver an account of all the properties in respect of which estate duty is payable would be on each of the persons so accountable. Ratio |
But one out of several accountable persons may deliver an account to the Controller under sub section (3) of section 53 and that would be sufficient to empower the Controller to proceed under section 57, sub section (1) to make a provisional assessment of the estate duty payable by such accountable person on the basis ... |
The amount of estate duty provisionally assessed would be payable only by the accountable person on whom the provisional assessment is made. Ratio |
The Controller would thereafter be entitled under section 58 to make an order of regular assessment assessing the principal value of the estate of the deceased and deter mining the amount payable as estate duty. Ratio |
When an order of assessment is made, not only the accountable person in respect of whom proceeding for assessment has been taken, but also every other accountable person would be liable to pay the amount of estate duty, limited of course to "the assets of the deceased which he actually received or which, but for his ow... |
That is the plain effect of section 53, subsection (1) read with section 73, sub section (1). Ratio |
It may be noticed that So far as the estate duty payable on provisional assessment is concerned, sub section (2) of section 57 provides that "the person so assessed" shall pay the amount of such estate duty to the Controller, but when we turn to sub section (1) of section 53 and section 73, sub section (1), we find tha... |
But here a question of some difficulty arises, namely, whether each of the accountable persons in subclauses (a), (b) and (c) in section 53, sub section (1) is accountable for estate duty on the entire property pass ing on the death of the deceased or only for the estate duty on the particular property falling within t... |
The difficulty is created on account of the words "the property passing on the death" appearing in the expression "the whole" of the estate duty on the property passing on the death" in sub section (1) of section 53 These words, according to their plain grammatical construction, would seem to indicate that every accoun... |
But it was argued on behalf of the appellant that having regard to the words "where any property passes" appearing in the opening part of the sub section coupled with the words "such property so passes" and "the property so passing" appearing in the respective sub clauses, the word 'the ' appearing before the words "pr... |
This argu ment, plausible though it may seem, is not well founded, for it ignores one very important circumstance. Ratio |
namely that each of the persons mentioned in sub clauses (a), (b) and (c) is rendered accountable for the whole of the estate duty not mereIy "on the property so passing" but on "the property passing on the death". Ratio |
Where the legisla ture wanted to refer to the specific property passing on the death of the deceased, described in the opening part of the sub section, the legislature used the words "such property so passed" and "the property so passing" in sub clauses (a), (b) and (c), but while imposing accountability for the estate... |
This departure in phraseology is highly significant and clearly indicates that the legisla tive intent was that each of the persons mentioned in sub clauses (a), (b) and (c) should be accountable for the estate duty on the entire property passing On the death. Ratio |
It was for this reason that the liability of each of these persons had to be limited to "the assets of the deceased which he actually received or which. Ratio |
but for his own neglect or default, he might have received". Ratio |
If the liability of each of these persons was only to the extent of the estate duty on the particular property falling within the respec tive sub clauses, there was no need for limiting it to the assets of the deceased which such per 503 son received or ought to have received. Ratio |
The appellant, however, contended that if this construction of sub section (1) of section 53 were accepted, it would lead to conse quences which could hardly have been intended by the legis lature. ARG |
He pointed out by way of an example that a trustee of an insurance policy taken out by the deceased under the Married Women 's Property Act, 1874, which policy is exempt from payment of estate duty by reason of the total amount payable thereunder being Rs. 50,000/ or less, would become accountable and consequently liab... |
It is not necessary for us to decide wheth er such an anomaly would arise or not, because the possibil ity that an anomaly may arise on a particular construction is only a factor to ' be taken into account by the court where two interpretations are possible, but where the mean ing of a statutory provision is plain, it ... |
Moreover, it appears to us prima facie that no such anomaly would arise on the interpretation which we are inclined to accept, because it seems that though the trustee of the insurance policy would fall within sub, clause (b) and hence become accountable for the estate duty on the entire property passing on the death, ... |
to pay the estate duty out of the policy monies, since the estate of the deceased would have no interest in the policy monies and the policy monies would not from part of the estate of the deceased and his liability as an ac countable person would be limited only to the assets of the deceased which he has actually rece... |
The appellant then relied on the language of subsection (53 of section 53 and pointed out that even that sub section refers to the point and several liability of an accountable person "in respect of any property passing on the death of the deceased", only to be extent of "whole of the estate duty on the property so pas... |
But we do not think this is a correct way of looking at sub section (5) because what this section does is merely to emphasise the principle of joint and several liability where two or more persons are accountable for estate duty in respect of any property passing on the death of the deceased, regardless whether they ar... |
It would be reading much more in sub,section (5) than what its lan guage warrants to say that this sub section is consistent only with an accountable person mentioned in sub clause (a), (b) or (c) of sub section (1) being accountable only in respect of estate duty on the particular property passing to him on the death ... |
The object of sub section (5) is to provided that every accountable person shall be liable not only jointly with other accountable persons, but also severally, for estate duty in respect of any and every property passing on the death of the deceased. Ratio |
Sub section (5) does not, therefore, in our opinion, mili tate against the construction which we are inclined 504 to place upon sub section (1). Ratio |
In fact section 76 clearly postulates that an accountable person may have to pay estate duty in respect of a property not passing to him and pro vides for his indemnification in such a contingency by saying that if a person accountable under section 53 pays any part of the estate duty in respect of any property not pas... |
If an accountable person mentioned in sub clauses (a), (b) or (c) of sub section (1) were liable for estate duty only in respect of the particular property passing to him, there would be no need for such a provision as section 76, because in such an even there would be no question of payment by an accountable person of... |
The provision for indemnification enacted in section 76 clearly suggests that an accountable person being liable for estate duty on the entire property passing on 'the death may have to pay estate duty even in respect of a property not passing to him, but in such a case he would be entitled to be reimbursed by the trus... |
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