JUDGMENT
V.K. Singhal, J.
1. The Income-tax Appellate Tribunal has referred the two questions of law arising out of its order dated December 23, 1982, under Section 64(1) of the Estate Duty Act, 1953 :
“1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the share of the lineal descendants in the residential house property was not includible in the principal estate of the assessee for rate purposes under Section 34(1)(c) of the Estate Duty Act, 1953 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the proportionate share in the accretion in the value of assets of the firm are not includible in the principal value of the estate passing on the death of the deceased under Section 36(1) of the Estate Duty Act, 1953 ?”
2. The facts, as stated by the Tribunal, are that the deceased was a member of a smaller Hindu undivided family consisting of himself and his son. The bigger Hindu undivided family of three brothers had a house property in which the deceased had a one-third share. This was a self-occupied house by the deceased. The value of this property was determined by the Assistant Controller of Estate Duty at a figure of Rs. 90,000 and accordingly, the one-third share of the deceased worked out to Rs. 30,000. Out of this one-third share, the Assistant Controller of Estate Duty held that the property being a joint Hindu family property of the smaller Hindu undivided family consisting of the deceased and his son, the share of the deceased Would come to Rs. 15,000. The exemption was granted to this extent under Section 33(1)(n). For the purpose of rate of duty, the entire value of this one-third share was taken into consideration under Section 34(1)(c) as the remaining Rs. 15,000 was the share of the lineal descendants, i.e., the son of the deceased. The Appellate Controller allowed the appeal following the decision of the Allahabad High Court in Badri Vishal Tandon v. CED [1982] 136 ITR 427. The order of the Appellate Controller was upheld by the Appellate Tribunal. The Tribunal found that there are conflicting views on this issue. The argument of the standing counsel on this point were heard. The matter stands concluded by the decision of this court in the case of CED v. Smt. Nirmala Saxena [1995] 214 ITR 566 (D. B. Estate Duty Reference No. 112 of 1983) decided on January 4, 1995, in which it was held by this court that the value of the share of the lineal descendants of the deceased in the coparcenary property has to be aggregated with the principal value of the estate of the deceased for the purposes of rate of duty under Section 34(1)(c) of the Estate Duty Act, 1953. Under Section 33(1)(n), only the share of the deceased in the residential house belonging to the Hindu undivided family is exempt from estate duty, because a notional partition of the Hindu undivided family property immediately before death is assumed and the value of that share is determined. Exemption under Section 33 is permissible only to such share because that share alone passes on death.
3. In view of the above decision of this court, we are of the view that the Income-tax Appellate Tribunal was not justified in holding that the share of the lineal descendants in the residential house property was not includible in the principal estate of the assessee for rate purposes under Section 34(1)(c) of the Estate Duty Act, 1953.
4. So far as the facts of the second question are concerned they are that the deceased was a partner in the firm, Messrs. Khetawat Cine Traders. This firm had lands and buildings, etc. According to the Assistant Controller, the value of the building in the assessment year 197,6-77 was taken at a figure of Rs. 1,29,964 and that of the land at Rs. 93,990 apart from the value of the road at Rs. 5,000. The value of the building was the depreciated value and according to the Assistant Controller of Estate Duty, the value of the land and building and road on the date of death of the deceased was much more than the value appearing in the books of the firm in which the deceased had a 21 per cent. share. Taking into consideration the increase in the value of such assets, the Assistant Controller of Estate Duty considered an addition of Rs. 30,000 towards the 21 per cent. share of the deceased in the accretion in the value of the above assets of the firm and included the same in the principal value of the estate passing on his death. In the appeal preferred before the Appellate Controller of Estate Duty, it was found that the Assistant Controller of Estate Duty has taken the value of the share as per the balance-sheet, but it is obvious from that assessment order that the addition is made only for difference in value of land, building and road belonging to the firm, Messrs. Khetawat Cine Traders. The value of share as per the balance-sheet was considered to be the correct one and the addition was accordingly deleted. The order “of the Appellate Controller of Estate Duty was challenged before the Income-tax Appellate Tribunal where, on the basis of Clause (4) of the partnership deed dated December 22, 1970, wherein it was provided that on retirement, no partner shall be entitled to any goodwill of the firm and he shall be entitled only to his investment amount, if any, together with the share of profit or loss, the Tribunal accepted the contention of the assessee that the deceased was not entitled to any share in the accretion of the property of the firm except the credit balance in his capital account by way of initial investment and subsequent profit credited thereto.
5. The submission of learned standing counsel for the Revenue is that in accordance with the provisions of Section 36, the principal value of any property has to be estimated to be the value which in the opinion of the Controller, it would fetch if sold in the open market at the time of the deceased’s death. It is submitted that the Income-tax Appellate Tribunal was not justified in restricting the value of the share in the firm in accordance with the deed of partnership as under Section 36(1), the value of the property has to be estimated to be the value which in the opinion of the Controller, it would fetch if sold in the open market at the time of the deceased’s death.
6. For the purpose of valuing the share of the deceased in the partnership firm, the value has to be taken into consideration on the basis that it is a going concern and to draw up a balance-sheet as on the date of death. If it is not possible to draw up the balance-sheet and estimate the profits as on the date of death then it could be taken on the basis of the latest balance-sheet after making necessary adjustments. The revaluation of the assets is possible to bring them at par with the market value but the revaluation then has to be for the entire assets and the Revenue is not permitted to pick and choose a particular item and revalue the same. In the case of Smt. Gunvantibai v. CED [1981] 130 ITR 122, the Madhya Pradesh High Court has also taken the same view. The restrictions which are imposed on the right of a partner in accordance with the partnership deed have also be taken into consideration. While valuing the business as a whole, the Tribunal has taken into consideration Clause (4) of the partnership agreement under which a partner is entitled to the capital invested along with the share of profit and loss and he is neither entitled for any goodwill or any other appreciation. The position which is applicable at the time of retirement is also applicable on death and, therefore, in these circumstances, the Tribunal was justified in holding that the proportionate share in the accretion in the value of assets of the firm is not includible in the principal value of the estate passing on the death of the deceased under Section 36(1) of the Estate Duty Act, 1953, as the deceased was not entitled to any accretion or appreciation in the value of the property and in accordance with the partnership deed, the value in accordance with the balance-sheet alone was to be taken into consideration which includes the investment together with the profit or loss as the case may be. In these circumstances, the second question is answered in the affirmative and against the Revenue. No order as to costs.
