ivil Appeal No 822 of 1978
From the Judgment and Order dated 2331977 of the Andhra Pradesh High Court in Case Referred Estate Duty Case No 6 of 1975
450 TA Ramachandran and Ms Janki Ramachandran for the Appellant
SC Manchanda Ms A Subhashini NP and KP Bhatnagar for the Respondent
The Judgment of the Court was delivered by THOMMEN J
This appeal by certificate arises from the judgment of the Andhra Pradesh High Court dated 2331977 in Estate Duty Case No 6 of 1975
Answering the questions referred to it against the appellant and in favour of the Revenue the High Court held that in computing the net principal value of the estate for the purpose of the the Act the appellant was not entitled to deduct either the estate duty payable on the estate or the amount attributable to the maintenance of the wife of the deceased
The appellant s counsel Mr TA Ramachandran submits that the duty payable on the estate of the deceased is an encumbrance on the estate being a first charge on the property passing on the death and is therefore deductible in terms of Section 44 of the Act
According to counsel all properties passing on the death of the deceased are encumbered to the extent of the duty payable by reason of the charge created by section 74 of the Act and that duty has to be deducted from the total value of the estate which is subjected to the levy of duty in terms of section 5
Counsel further submits that the amount attributable to the maintenance of the wife during the life of her husband must also be treated as a debt deductible under section 44
Mr SC Manchanda appearing for the Revenue submits that the claim of the appellant has no warrant in the law and is totally unsupported by any judicial decision
He submits that estate duty falls upon the property passing upon the death
The property at the time of the passing was not encumbered by the duty for duty became payable only upon its passing and was therefore not a liability to which the estate was subjected during the life of the deceased
It becomes so encumbered only subsequent to and consequent on the death
He futher submits that there is not the smallest foundation for the claim for deduction in respect of the maintenance of the wife during the life of the husband as contended by the appellant s counsel for the estate was never charged with the amount attributable to the maintenance of the wife
A wife s claim for maintenance either during the life her 451 husband or subsequent to the death of her husband is not a charge on the property and is not a deductible amount in terms of the Act
We shall first deal with the claim for deduction of estate duty
Section of the 5 of the Act insofar as it is material reads Levy of estate duty
In the case of every person dying after the commencement of this Act there shall save as hereinafter expressly provided be levied and paid upon the principal value ascertained as hereinafter provided of all peroperty settled or not settled includng agricultral land  which passes on the death of such person a duty called estate duty at the rats fixed in accordance wth section 35
2     Sub section 1 of section 5 imposes a duty upon the net principal value ascertained of all property which passes on the death of a person
All properties passing on a death other than those which are exempted from duty See section 21 to 33 are for the purpose of levy under the Act aggregated into one estate which is the property on which duty is levied at the rates applicable in respect of its principal value Section 34 and 35 but subject to the deductions permitted under of the Act
The properties are valued for the purpose of levy under the Act in accordance with the provisions of Section 36 says that the principal value of any property shall be estimated to be price which in the opinion of the Controller such property would fetch if sold in the open market at the time of the death of the deceased
of the Act contains section 44 to 50B dealing with deductions in determining the chargeable value of the estate
Section 44 says that in determining the value of an estate allowance has to be made for funeral expenses not exceeding rupees one thousand and for debts and incumbrances
The section however provides that no allowance shall be made in respect of matters enumerated under clauses a to d of the section
The debts and encumbrances mentioned in section 44 are as a 452 general rule debts and encumbrances incurred before the death of the deceased
Certain exceptions are specifically provided in section 44 and the other provisions of Reasonable funeral expenses cost of realising or administering foreign property allowance for duty paid in a non reciprocating country relief from estate duty where court fees have been paid in any State for obtaining probate letters of administration or a succession certificate and relief from estate duty where tax has been paid on capital gains are in the specified curcumstances allowable deductions in the determination of the value of the estate for the purpose of estate duty notwithstanding that such liabilities arose subsequent to the death
In no other case does the Act postulate deduction or allowance for any debt or encumbrance incurred subsequent to the passing of the property upon the death
Singinficantly estate duty payable on the estate of the deceased is not one of those exceptions to the general rule
Section 53 makes certain persons accountable for the whole of the estate duty on the property passing on the death
These are the legal representatives trustees guardians committees or other persons in whom any interest in the property or the management thereof at the any time vested
They are accountable for the whole of the estate duty on the property passing on the death of the deceased but their liability is limited to the assest of the deceased which they have actually received or which but for their own neglect or default they might have received
Any default or concealment on their part in the discharge of their duties will make them liable for the penalty provided under section 60
Section 74 says that duty payable in respect of property passing on the death of the deceased is a first charge on the property so passing
Any claim in respect of such duty is not liable to be defeated by any private transfer or delivery of such property
Any such private transfer or delivery is void against such a claim
Section 74 reads Estate duty a first charge on property liable thereto
741
Subject to the provisions of section 19 the estate duty payable in respect of property movable or immovable passing on the death of the deceased shall be a first charge on the immovable property so passing including agricultural land in whomsoever it may vest on his death after the debts and incumbrances allowable under of this Act and any private transfer or delivery of such property shall void against any claim in respect of such estate duty
2 A rateable part of the estate duty on an estate in proportion to the value of any beneficial interest in possession in movable property which passes to any person other than the legal representative of the deceased on the death of the deceased shall be a first charge on such interest Provided that the property shall not be so chargeable as against a bona fide purchasr thereof for valuable consideration without notice
3     The sechme of the Act as the above provisions indicate is to levy estate duty upon the net principal value of all propertyas aggregated and ascertained under the Act and which passes on the death of the person who was competent to dispose of such property at the time of his death section 6 or which is deemed to pass on his death section 7 to 17
The expression passes on the death denotes change in the title or possession of the whole property taking place at the death
It is immaterial to whom the property passes
The question is not to whom has the property passed the question is whether it has passed at all
Per Lord Blanesburgh Inland revenue Commissioners vs
Crossman  Estate duty falls upon the property passing upon a death  Per Lord Loreburn LC Winans  Another vs Attorney General 30
the levy is upon the principal value of such property ascertained as provided under the Act
Property changes hands at the time of the death by reason of the death and therefore subsequent of the death
The imposition of the charge under the Act does not arise until the death has actually occurred and the property has thereupon passed
The liability to pay estate duty is fastened on the persons accountable
But their liability is limited to and will not exceed the assets of the deceased actually received by them or which but for their neglect or default they might have received
Apart from the personal liability cast on the persons accountable and their liability to penalty in the event of default or cocealment the duty payable is charged on the property itself and any private transfer or delivery is void against any claim in respect of such duty
Essentially and basi 454 cally therefore the duty is a burden on the estate and that burden is fastened on the estate upon the death of the deceased
During his life no liability under the Act arose or could arise
Subject to the limitations and exceptions statutorily specified the allowable deductions in the determination of the changeable value of the estate are the debts and encumbrances incurred before the death of the deceased
Esate duty falling upon property passing upon the death had not become a debt or encumbrance utill the death of the deceased and is therefore not deductible
The view is consistent with the conclusion reached on the point by various High Courts  1978 111 ITR 365  Gujarat 1981 127 ITR 642 Allahabad 1981 132 ITR 871 Madras 1982 137 ITR 801 Gauhati 1990 186 ITR 29 Bombay
This conclusion was adopted by the Andhra Pradesh High Court in Controller of Estate Duty vs Estate of Late Omprakash Bajaj and it was that decision which was followed by the High Court on this point in the judgment under appeal
The High Court in our view rightly disallowed the claim for deduction of the estate duty in the computation of the net principal value of the estate
As regards the claim for deduction of the amount attributable to the maintenance of the wife of the deceased during his life there is no evidence or any finding to show that the estate had been burdened with any such debt or encumbrance by reason of the husband s failure to act upto his statutory obligation to maintain his wife see Section 181 of the 
The wife is of course a sharer of the assets left behind by her husband see Section 8 of the 
This claim was also in our view rightly disallowed by the High Court
In the curcumstance for the reasons we have stated the appeal is dismissed
Howerver we do not make any order as to costs
VRR Appeal dismissed


Summary:
The grandfather of the appellants and respondents had two wives
The first wife and her only son died during his life time
The pre deceased son left behind four sons and a daughter
In 1947 the grand father made three oral gifts of certain properties in favour of his second wife in lieu of maintenance
Later the grandmother gifted some of these properties to two step grandsons
The gift was challenged by the other two grandsons
The lower court held that she had the absolute estate in the properties after the possing of the 
In Second Appeal the High Court held that she derived only a limited estate inasmuch as the gift in her favour would fall directly under section 142 of the and as such her limited estate would not stand enlarged into an absolute estate
This appeal is against the said judgment of the High Court
Allowing the appeal this Court HELD 1
There is no doubt that the donee had the right of maintenance and the gift was explicitly in lieu of maintenance
It was a case of her acquiring any new property by virtue of the gift but it was a case of her right of maintenance being given to her by way of a gift
It was a property acquired by gift in lieu of maintenance
The acquisition made on 26th April 1947 having been prior to the  and she having acquired the property by way of gift in lieu of her antecedent right to maintenance it would fail under sub section 1 and not under sub section 2 of section 14 of the and she derived absolute estate in the properties
387E F Bai Vajia Dead by Lrs
vs Thakorbhai Chelabhai  Ors   Gulwant Kaur  Anr
vs Mohinder Singh  Ors   Maharaja Pillai Lakshmi Ammal vs Maharaja Pillai Thillanayakom Pillai  Anr
   Jaswant Kaur V Major 386 Harpal Singh  relied on
Karmi vs Amru  Ors  Kothi Satyanarayana vs Galla Sithayya  Ors
   distinguished