TAX CASES No.5 OF 1999 ***** In the matter of an application under the provisions of sub-clause 3 of Section 64 of the Estate Duty Act, 1953. ***** Late Tara Nand Jha, through Shri Narendra Kumar Jha, son of Late Tara Nand Jha, resident of Ashok Raj Path, Patna in his capacity as accountable person under the Estate Duty Act. .... Applicant. Versus The Asstt. Controller of Estate Duty, Patna. .... Respondent. ***** For the Applicant: Mr. Ajay Kumar Jha, Advocate. For the respondent: Mr. Harshwardhan Prasad, Sr. S.C. with Mr. Rishi Raj Sinha, Jr. S.C. ***** P R E S E N T THE HON'BLE MR. JUSTICE SUDHIR KUMAR KATRIAR THE HON'BLE MR. JUSTICE KISHORE KUMAR MANDAL ***** S K Katriar, J. The assessee, an Accountable Person, (hereinafter referred to as the „AP‟) under the provisions of the Estate Duty Act 1953 (hereinafter referred to as the „Act‟), has preferred this appeal under Section 64(3) of the Act, and challenges the order dated 31.3.1998, passed by the Income-tax Appellate Tribunal, Patna Bench, Patna, in EDA No.2/Pat/1993 arising out of the assessment order passed against the AP under section 58(3) of the Act, whereby the second appeal preferred by the AP has been rejected. It is further directed against the 2 order dated 23.9.1998, passed by the Tribunal, in RA No.110/Pat/1998, whereby it has refused to refer the case to this Court for consideration. 2. A brief statement of facts essential for the disposal of the case may be indicated. The AP is a lineal descendant and in fact son of one Tara Nand Jha who owned two properties in Patna. The present proceeding relate to both the properties. The first property is known as „Tara Bhawan‟ (Novelty House), at Ashok Raj Path, opposite Patna College, Patna. The AP‟s father died on 20.10.1982, whereafter proceedings were initiated under the Act. The learned Assessing Officer valued the total property at Rs.16,89,847/-, rounded up to 16,89,800/-,vide assessment order dated 6.3.1986, passed by the learned Assessing Officer. This was the valuation of the whole of the multi-storied building but we are concerned with the 5th and the 6th floors of the house which, according to the AP, has been used for his residential purposes. Aggrieved by the order, the AP preferred appeal which was partly allowed by the learned appellate authority by his order dated 16.6.1993, passed by the learned Controller of Estate Duty (Appeals), Patna, in Appeal No.885/P/92-93. The learned first appellate authority gave partial relief to 3 the AP by reducing the valuation of the property of the residential portion to Rs.3,23,800/-. Aggrieved by this order, the AP preferred second appeal before the Tribunal, which has been rejected by the impugned order. 3. The deceased also left behind a residential house at Arya Kumar Road, Patna. The Tribunal has allowed this part of the appeal and has remitted the matter back to the learned Assessing Officer for a fresh consideration in accordance with law and the observations made therein. Learned counsel for the AP has not challenged this part of the order. We, therefore, proceed to dispose of the case in so far as the impugned order with respect to 5th and 6th floors of Tara Bhawan is concerned. 4. While assailing the validity of the impugned order, learned counsel for the AP submits that the Tribunal has failed to take into account sub-section (3) of Section 36 of the Act which was inserted with effect from 1.3.1981. He further submits that, in the facts and circumstances of the present case, the Tribunal has also failed to follow the procedure prescribed by rule 1BB of the Wealth Tax Rules, 1957 (hereinafter referred to as the „Rules‟), which makes a departure from the procedure 4 engrafted in sub-section (3) of Section 36 of the Act for evaluation of the property. He relies on the following reported judgments: (i) (2001) 250 ITR 316 (Controller of Estate Duty v. P.N. Luthra); and (ii) (2004) 270 ITR 195 (Controller of Estate Vs. Lalit Kumar Savjibhai. 5. The learned junior Standing Counsel has supported the impugned order. He submits that the procedure engrafted in rule 1BB of the Rules will apply in a situation where the deceased or the AP had filed returns under the Act immediately preceding the date of death of the deceased. In the present case, in his submission, the valuation date would be 31.3.1982, as the deceased had died on 20.10.1982. Neither the deceased nor AP had filed any return under the Act and, therefore, the procedure prescribed under rule 1BB will not apply, and instead the procedure prescribed under Chapter IV of the Act shall apply. He relies on the judgment of a Division Bench of this Court in Controller of Estate Duty, Bihar, Patna Vs. P.K. Agarwalla [1987 (10) Bihar Law Judgments 886]. 6. We have perused the materials on record and considered the submissions of learned counsel for the parties. It appears to us that sub- 5 section (3) was inserted in Section 36 of the Act with effect from 1.3.1981. The relevant portion of which is set out hereinbelow: “36. Principal value how to be estimated.- xxx xxx xxx xxx xxx xxx a(3) Notwithstanding anything contained in sub-section (1) of sub- section (2), the principal value of one residential house or part thereof belonging to the deceased (which the accountable person may at his option specify in writing in this behalf) shall be- (a) Where the value of such house or part is included in computing the net wealth of the deceased for the purpose of making an assessment under the Wealth-tax Act, 1957 (hereinafter in this sub-section referred to as the Wealth-tax Act) in respect of his net wealth on the valuation date immediately preceding the date of his death, the value as taken by the Wealth-tax Officer for the purposes of such assessment;” 7. The valuation has been done by the department as per the procedure prescribed by the Act and the Tribunal has held that valuation of the residential portions of the property in question is Rs.3,23,800/-. The procedure prescribed by rule 1BB of the Rules would have been applicable if the deceased or the AP had filed returns on the valuation date, i.e. immediately preceding the date of death of the 6 deceased. In the present case, this date is 31.3.1982. The procedure prescribed under this rule would have been applicable if the deceased or the AP had submitted returns under the Act on or before 31.3.1982. Not having done so, the procedure prescribed by sub-section (3) of section 36 of the Act shall be applied. Rule 1BB of the Rules is not attracted in the present case. Therefore, the learned Assessing Officer rightly assessed the valuation of the property by following the procedure prescribed by section 34 read with section 36 of the Act. Learned counsel for the respondent has appropriately relied on a Division Bench judgment of this Court in Controller of Estate Duty Vs. P.K. Agarwalla (supra), paragraphs 7 and 8 of which are reproduced hereinbelow for the facility of quick reference. 7. In case it is held that the principal value of the entire joint family residential house is taken into consideration for granting exemption under Section 33(1)(n) of the Act and the exemption will be granted thereon and thereafter only the estate duty will be payable on the share of the deceased. It would mean that higher amount of estate duty shall be payable on the estate of the deceased which passes on his death. This would go contrary to the spirit of the legislation. This may be demonstrated by giving an example. A person dies leaving behind a son having interest in a joint family 7 residential house in a portion of which he was residing and the valuation of the entire house is Rs.2,50,000. If a sum of Rs.1,00,000 which is the exemption limit of such house under section 33(1)(n) is deducted out of Rs.2,50,000 which is value of the entire house, estate duty is leviable on Rs.75,000, i.e. upon half of the balance sum of Rs.1,50,000. On the other hand, if exemption of Rs.1,00,000 is deducted out of the value of half share of the deceased in the house which is Rs.1,25,000, estate duty will be payable on Rs.25,000 only. In this view of the matter, it is not possible to accept the contention of the learned counsel for the accountable person and I am clearly of the view that exemption under Section 33(1)(n) can be allowed only out of the value of share of the deceased in the joint family residential house. Consequently the value of the share of lineal descendants in the residential house would be liable to be aggregated under Section 34(1)(c) for purposes of ascertaining the rate of estate duty. 8. The view which I have taken is supported by the decision of Karnataka High Court in Controller of Estate Duty, Mysore v. K. Nataraja (1979) 119 ITR 769. In that case Rs.80,000 was the value of entire residential house in which the deceased had only 1/4th share. Besides this value of the other joint family properties was Rs.56,400. Thus the total value of joint family properties was Rs.36,400. It was contended that under Section 33(1)(n), Rs.80,000 being the value of the entire joint family house will be excluded and share of lineal descendants would not be liable to be aggregated for rate purposes under Section 34 (1)(c) of the Act. Their Lordships repelled the contention and held that 8 exemption under Section 33(1)(n) would be given out of the principal value of share of the deceased in the joint family residential house and not out of the value of the entire house. Speaking for the court, Mr. Justice Venkataramiah (as he then was) (now elevated to the Supreme Court Bench) observed:- “Where the residential house belongs to a HUF governed by Mitakshara, only the share of the deceased in such house is exempt from estate duty under Section 33(1)(n). For purposes of rate of estate duty, the value of the share of the deceased in such house has to be excluded from the value of the property passing on his death under Section 34(1)(a), but the value of the shares of all the lineal descendants to the deceased in the coparcenary property including the residential house has to be aggregated under Section 34 (1)(c) without any reference to any exemption under Section 33(1)(n) of the Act”. We, therefore, do not find fault with the impugned order. 8. In the result, the case is dismissed. In the circumstances of the case, there shall be no order as to costs. (S K Katriar, J.) Kishore K. Mandal, J. I agree. (Kishore K. Mandal, J.) Patna High Court, Patna. Dated the 8th day of December, 2009. S.K.Pathak/ (NAFR).