THE ESTATE DUTY ACT, 1953 WILL BE BACK?

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THE ESTATE DUTY ACT, 1953 WILL BE BACK?

There are the chances that the Estate Duty Act or Inheritance Tax may be reintroduced. Let us have a look at the original Estate Duty Act -1953 which was later discontinued from 16th March 1985 . Whether it will be so or not, only time will tell. Probably it will be clear on 5th July when new Finannce Minister Smt. Nirmala Sitharaman will be presenting her first ever union Budget.

 

Let us have a look at the Estate Duty Act  – 1953

THE ESTATE DUTY ACT, 1953

 No.34 OF 1953

[6th October, 1953]

An Act to provide for the levy and collection of an estate duty.

THE ESTATE DUTY ACT, 1953

 

  1. Short title, extent and commencement.

(1) This Act may be called the Estate Duty Act, 1953 .

(2) It extends to the whole of India 2 .

(3) It shall come into force on such date 3 as the Central Government may, by notification in the Official Gazette, appoint.

  1. Definitions. In this Act, unless the context otherwise requires,–

(1) ” affidavit of valuation” means the affidavit of valuation made under section 19-I of the Court- fees Act, 1870 , (7 of 1870 ) in connection with an application for the grant of representation;

(1A) 4 ” Appellate Controller” means a person appointed to be an Appellate Controller of Estate Duty under section 4;

(1B) ” Appellate Tribunal” means the Appellate Tribunal appointed under section 5A of the Indian Income- tax Act, 1922 ; (11 of 1922 ;)]

(2) ” Board” means the 5 Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 ]; (54 of 1963 )

(3) ” company” includes any body corporate wheresoever incorporated;

(4) ” controlled company” means a company as defined in section 17;

(5) ” Controller” means a person appointed to be a Controller of Estate Duty under section 4 and includes a person appointed to be a Deputy Controller of Estate Duty or an Assistant Controller of Estate Duty;

  1. This Act has been extended to the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry, with modifications, by Reg. 3 of 1963, s. 3 and Sch. (w. e. f. 1- 4- 1963 ). 2 The words” except the State of Jammu and Kashmir” omitted by Act 41 of 1954, s. 2 (2) and Sch. 3 15th October, 1953, vide Notification No. S. R. O. 1882, dated the 8th October, 1953, see Gazette of India, 1953, Pt. II, Sec. 3, p. 1595. 4 Ins. by Act 33 of 1958, s. 2 (w. e. f. 1- 7- 1960 ). 5 Subs. by Act 54 of 1963, s. 5, for certain words (w. e. f. 1- 1- 1964 ).

(6) ” deceased person” and” the deceased” mean a person dying after the commencement of this Act;

(7) ” estate duty” means estate duty under this Act;

(8) ” executor” means the executor or administrator of a deceased person;

(9) ” general power” includes every power or authority enabling the donee or other holder thereof to appoint or dispose of property as he thinks fit, whether exercisable by instrument inter vivos or by will or both, but exclusive of any power exercisable in a fiduciary capacity under a disposition not made by himself or exercisable as mortgagee;

(10) ” incumbrances” includes mortgages and terminable charges;

(11) ” interest in expectancy” includes an estate in remainder or reversion and every other future interest whether vested or contingent, but does not include reversions expectant upon the determination of leases;

(12) ” legal representative” means 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 of, or intermeddles with, the estate of a deceased person or any part thereof, and

(iii) where the deceased was a coparcener of a Hindu family, the manager for the time being of the family;

(12A) 1 ” person accountable” or” accountable person” means the person accountable for estate duty within the meaning of this Act, and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of the principal value of the estate of the deceased;]

(13) ” power to appoint property” means power to determine the disposition of property of which the person invested with the power is not the owner;

(14) ” prescribed” means prescribed by rules made under this Act;

  1. Ins. by Act 33 of 1958, s. 2 (w. e. f. 1- 7- 1960 ).

(14A) 1 ” principal officer”, in relation to a company or a corporation established by a Central, State or Provincial Act, means the manager, managing director, managing agent or secretary, and includes any person connected with the management of the company or corporation upon whom the Controller has served a notice of his intention of treating him as the principal officer for the purposes of this Act;]

(15) ” property” includes any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale and also includes any property converted from one species into another by any method; Explanation 1.– The creation by a person or with his consent of a debt or other right enforceable against him personally or against property which he was or might become competent to dispose of, or to charge or burden for his own benefit, shall be deemed to have been a disposition made by that person, and in relation to such a disposition the expression” property” shall include the debt or right created. Explanation 2.– The extinguishment at the expense of the deceased of a debt or other right shall be deemed to have been a disposition made by the deceased in favour of the person for whose benefit the debt or right was extinguished, and in relation to such a disposition the expression” property” shall include the benefit conferred by the extinguishment of the debt or right;

(16) ” property passing on the death” includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and” on the death” includes” at a period ascertainable only by reference to the death”;

(17) ” public charitable purpose” includes relief of the poor, education, medical relief and the advancement of any other object of general public utility within the territory of India;

  1. Ins. by Act 33 of 1958, s. 2 (w. e. f. 1- 7- 1960 ).

(18) ” representation” means probate of a will or letters of administration;

(19) ” settled property” means property which stands limited to, or in trust for, any persons, natural or juridical, by way of succession, whether the settlement took effect before or after the commencement of this Act; and” settlement” means any disposition, including a dedication or endowment, whereby property is settled;

(20) ” Valuer” means a Valuer appointed under section 4.

  1. Interpretation.

(1) For the purposes of this Act,–

(a) a person shall be deemed competent to dispose of property if he has such an estate or interest therein or such general power as would, if he were sui juris, enable him to dispose of the property;

(b) a disposition taking effect out of the interest of the deceased shall be deemed to have been made by him, whether the concurrence of any other person was or was not required;

(c) money which a person has a general power to charge on the property of another person shall be deemed to be an interest in that property of which the former has power to dispose;

(d) the domicile of a person shall be determined as if the provisions of the Indian Succession Act, 1925 , (39 of 1925 ) on the subject applied to him.

(2) In Parts II and III of this Act, any reference to any interest disposed of, policy of insurance effected, annuity or other interest purchased or provided or to any gift, settlement, disposition or transfer of property made, shall be construed as including any such interest, policy, annuity, gift, settlement, disposition or transfer, as the case may be, whether it was disposed of, effected, purchased or provided, or made before or after the commencement of this Act.

(3) 1 For the avoidance of doubt, it is hereby declared that references in this Act to property passing on the death of a person shall be construed as including references to property deemed to pass on the death of such person.]

  1. Ins. by Act 17 of 1954, s. 4 (with retrospective effect).

(4) 1 Any reference in sections 9, 11 and 33 to public charitable purpose or purposes in relation to a gift made or disposition or determination of an interest effected or suffered on or after the 1st day of April, 1964 shall be construed as not including a purpose the whole or substantially the whole of which is of a religious nature.]

  1. Estate duty authorities.

(1) There shall be the following authorities for the purposes of this Act, namely:–

(a) the Board,

(b) Controllers of Estate Duty,

(bb) 2 Appellate Controllers of Estate Duty,]

(c) Valuers.

(2) The Central Government may appoint as many Controllers of Estate Duty as it thinks fit and they shall, subject to the control of the Board, perform their functions in respect of such estates or classes of estates and such areas as are assigned to them by the Board: Provided that, subject to such rules as may be made by the Board in this behalf, every Controller, within the local limits of whose jurisdiction any part of the estate of the deceased is situated, may exercise in relation to the whole estate or any part thereof any of the powers conferred on the Controller by this Act: Provided further that the Board may, by general or special order, direct that any Controller specified by it in this behalf may exercise all or any of the powers conferred on the Controller by this Act to the exclusion of any other Controller.

(2A) 2 The Central Government may appoint as many Appellate Controllers of Estate Duty as it thinks fit and they shall, subject to the control of the Board, perform their functions in respect of such estates or classes of estates or such areas as the Board may direct, and where such directions have assigned to two or more Appellate Controllers the same estate or classes of estates or the same area, they shall perform their functions in accordance with any orders which the Board may make for the distribution and allocation of the work to be performed.]

(3) The Central Government shall, within twelve months after the Commencement of this Act and may thereafter, from time to time,

  1. Ins. by Act 15 of 1965, s. 19 (w. e. f. 1- 4- 1964 ). 2 Ins. by Act 33 of 1958, s. 3 (w. e. f. 1- 7- 1960 ).

appoint a sufficient number of qualified persons to act as Valuers for the purposes of this Act and shall fix a scale of charges for the remuneration of such persons.

(4) Subject to the rules and orders of the Central Government regulating the conditions of service of persons in public services and posts, a Controller may appoint such executive or ministerial staff as may be necessary to assist him in the execution of his functions.

(5) All officers and persons employed in the execution of this Act, other than Valuers, shall observe and follow the orders, instructions and directions of the Board: 1 Provided that no such orders, instructions or directions shall be given by the Board so as to interfere with the discretion of the Appellate Controller of Estate Duty in the exercise of his appellate functions.] PART IMPOSITION OF ESTATE DUTY PART II IMPOSITION OF ESTATE DUTY Extent of charge

  1. Levy of estate duty.

(1) 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 property, settled or not settled, including agricultural land situate in 2 the territories which, immediately before the 1st November, 1956 , were comprised in the States] specified in the First Schedule to this Act, which passes on the death of such person, a duty called” estate duty” at the rates fixed in accordance with section 35.

(2) The Central Government may, by notification in the Official Gazette, add the names of any other States to the First Schedule in respect whereof resolutions have been passed by the Legislatures of those States adopting this Act under clause (1) of article 252 of the Constitution in respect of estate duty on agricultural lands situate in those States, and on the issue of any such notification the States so added shall be deemed to be States specified in the First Schedule within the meaning of sub- section (1).

5A. 3 Application in respect of estate duty on agricultural lands of Act amending this Act.

(1) The amendments made to this Act by–

(i) the Finance Act, 1954 , (17 of 1954 .)

  1. Ins. by Act 33 of 1958, s. 3 (w. e. f. 1- 7- 1960 ). 2 Subs. by the Adaptation of Laws (No. 3) Order, 1956 for” the States”. 3 Ins. by Act 16 of 1960, s. 2 (w. e. f. 1- 7- 1960 ).

(ii) the Taxation Laws (Extension to Jammu and Kashmir) Act, 1954 , (41 of 1954 .) and

(iii) the Repealing and Amending Act, 1957 , (36 of 1957 ) shall apply, and shall be deemed to have applied, to estate duty in respect of agricultural lands situate in the territories comprised in the States, except those in the States of West Bengal and Jammu and Kashmir, but including those in the transferred territories, on and from the dates on which the amendments made by each of the amending Acts aforesaid respectively took effect: Provided that where in respect of any part of the territories comprised in any of the said States the resolution of the Legislature concerned under clause (1) of article 252 of the Constitution was

passed subsequently to the date on which the said amendments would otherwise have taken effect by virtue of the foregoing provision, the said amendments shall, in respect of estate duty on agricultural lands in that part of the said territories, be deemed to have taken effect only on the date on which this Act became applicable to estate duty in respect of agricultural lands.

(2) The amendments made to this Act by the Estate Duty (Amendment) Act, 1958 (33 of 1958 ), shall also apply to the levy of estate duty in respect of agricultural lands situate in the territories comprised in the States except those in the States of 1 West Bengal and Jammu and Kashmir

(2A) 2 The amendments made to, or in relation to, this Act, by–

(i) the Central Boards of Revenue Act, 1963 (54 of 1963 ),

(ii) the Finance Act, 1964 (5 of 1964 ),

(iii) The Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (11 of 1964 ),

(iv) the Direct Taxes (Amendment) Act, 1964 (31 of 1964 ),

(v) the Finance Act, 1965 (10 of 1965 ),

(vi) the Finance (No. 2) Act, 1965 (15 of 1965 ),

(vii) the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1965 (41 of 1965 ), and

(viii) the Finance Act, 1966 (13 of 1966 ), shall apply, and shall be deemed to have applied, on and from the dates on which the amendments made by each of the Acts aforesaid respectively took effect, to estate duty in respect of agricultural lands situate in the territories comprised in–

(a) the States of Gujarat, 3 Tamil Nadu], Maharashtra and Rajasthan; and

(b) any other States which the Central Government may, by notification in the Official Gazette, specify in this behalf after resolutions have been passed by the Legislatures of those States adopting the said amendments under clause (1) of article 252 of the Constitution.]

(2B) 5 The amendments made to this Act by sections 3 to 6 of the Estate Duty (Amendment) Act, 1982 (31 of 1982 ), shall apply, and shall be deemed to have applied, on and from the 1st day of March, 1981 , to estate duty in respect of agricultural lands situate in the territories comprised in–

(a) the States of Bihar, Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Maharashtra, Orissa and Tamil Nadu; and

(b) any other States which the Central Government may, by notification in the Official Gazette, specify in this behalf after resolutions have been passed by the Legislatures of those States adopting the proposals with respect to such amendments or the said amendments, as the case may be, under clause (1) of article 252 of the Constitution.]

(2C) 6 The amendments made to this Act by sections 3 to 5 of the Estate Duty (Amendment) Act, 1984 (53 of 1984 ), shall apply to estate duty in respect of agricultural lands situate in the territories comprised in- –

(a) the States of Assam, Bihar, Gujarat, Haryana, Himachal Pradesh, Kerala, Madhya Pradesh, Maharashtra, Meghalaya, Orissa and Tamil Nadu and all the Union territories, on the expiration of two months from the date on which the said Act received the assent of the President;[ 7

(aa) 8 the States of Punjab and Tripura, on the 16th day of March, 1985 ; and]

(b) any other States in respect whereof resolutions have been passed by the Legislatures of those States adopting the proposals with respect to such amendments or the said amendments, as the case may be, under clause (1) of article 252 of the Constituion, on the expiration of four months from the date of such adoption.]

(3) This Act shall cease to apply to the levy of estate duty in respect of agricultural lands situate 4 in the transferred

  1. The word” Orissa,” omitted by Act 5 of 1964, s. 49 (w. e. f. 23- 9- 1963 ). 2 Ins. by Act 22 of 1968, s. 2. 3 Subs. by the Madras State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1970, for” Madras” (w. e. f. 14- 1- 1969 ). 4 The words” in the State of Orissa and” omitted by Act 5 of 1964, s. 49 (w. e. f. 23- 9- 1963 ). 5 Ins. by Act 31 of 1982, s. 2. 6 Ins. by Act 53 of 1984, s. 2. 7 Omitted by Act 49 of 1986, s. 2 (w. e. f. 16- 3- 1985 ). 8 Ins. by s. 2, ibid. (w. e. f. 16- 3- 1985 ).

territories and, notwithstanding anything contained in sub- section (1), shall be deemed to have so ceased on and from the 1st day of April, 1959 . Explanation.–” Transferred territories” means the territories which as from the 1st day of November, 1956 , were added to the State of West Bengal by virtue of sub- section (1) of section 3 of the Bihar and West Bengal (Transfer of Territories) Act, 1956 . (40 of 1956 )]

5B. 1 Act to cease to apply to estate duty in respect of agricultural land. Notwithstanding anything contained in section 5, this Act shall cease to apply to the levy of estate duty in respect of agricultural land.]

5C. 2 Discontinuance of levy of estate duty. Notwithstanding anything contained in section 5, this Act shall cease to apply to the levy of estate duty in respect of any property (other than agricultural land) which passes on the death of any person on or after the 16th day of March, 1985 .] Property which is deemed to pass

  1. Property within disposing capacity. Property which the deceased was at the time of his death competent to dispose of shall be deemed to pass on his death.
  2. Interests ceasing on death.

(1) Subject to the provisions of this section, property in which the deceased or any other person had an interest ceasing on the death of the deceased shall be deemed to pass on the deceased’ s death to the extent to which a benefit accrues or arises by the cesser of such interest, including, in particular, a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law.

(2) If a member of a Hindu coparcenary governed by the Mitakshara school of law dies, then the provisions of sub- section (1) shall apply with respect to the interest of the deceased in the coparcenary property only–

(a) if the deceased had completed his eighteenth year at the time of his death, or

(b) where he had not completed his eighteenth year at the time of his death, if his father or other male ascendant in the male line was not a coparcener of the same family at the time of his death. Explanation.– Where the deceased was also a member of a sub- coparcenary (within the coparcenary) possessing separate property of its own, the provisions of this sub- section shall have effect separately in respect of the coparcenary and the sub- coparcenary.

(3) If a member of any tarwad or tavazhi governed by the Marumakkattayam rule of inheritance or a member of a kutumba or kavaru governed by the Aliyasantana rule of inheritance dies, then the provisions of sub- section (1) shall not apply with respect to the interest of the deceased in the property of the tarwad, tavazhi, kutumba or kavaru, as the case may be, unless the deceased had completed his eighteenth year.

  1. Ins. by Act 53 of 1984, s. 3. 2 Ins. by Act 52 of 1985, s. 2 (w. e. f. 16- 3- 1985 ).

(4) The provisions of sub- section (1) shall not apply to the property in which the deceased or any other person had an interest only as holder of an office or recipient of the benefits of a charity, or as a corporation sole. Explanation.– For the removal of doubts, it is hereby declared that the holder of a Sthanam is neither the holder of an office nor a corporation sole within the meaning of this sub- section.

  1. Gifts mortis causa. Property taken as a gift made in contemplation of death shall be deemed to pass on the donor’ s death. Explanation.– In this section, the expression” gift made in contemplation of death” has the same meaning as in section 191 of the Indian Succession Act, 1925 (39 of 1925 ).
  2. Gifts within a certain period before death.

(1) Property taken under a disposition made by the deceased purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust, settlement upon persons in succession, or otherwise, which shall not have been bona fide made 1 two years] or more before the death of the deceased shall be deemed to pass on the death: Provided that in the case of gifts made for public charitable purposes the period shall be six months.

(2) 2 The provisions of sub- section (1) shall not apply to–

(a) gifts made in consideration of marriage, subject to a maximum of rupees ten thousand in value;

(b) gifts which are proved to the satisfaction of the Controller to have been part of the normal expenditure of the deceased, subject to a maximum of rupees ten thousand in value.]

  1. Gifts whenever made where donor not entirely excluded. Property taken under any gift, whenever made, shall be deemed to pass on the donor’ s death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise: Provided that the property shall not be deemed to pass by reason only that it was, not, as from the date of the gift, exclusively retained as aforesaid, if, by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the
  2. Subs. by Act 13 of 1966, s. 38, for” one year” (w. e. f. 1- 4- 1966 ). 2 Subs. by Act 33 of 1958, s. 4, for sub- section (2) (w. e. f. 1- 7- 1960 ).

donor or of any benefit to him for at least 1 two years] before the death: 2 Provided further that a house or part thereof taken under any gift made to the spouse, son, daughter, brother or sister, shall not be deemed to pass on the donor’ s death by reason only of the residence therein of the donor except where a right of residence therein is reserved or secured directly or indirectly to the donor under the relevant disposition or under any collateral disposition.]

  1. Limited interests disposed of within a certain period before death.

(1) Subject to the provisions of this section, where an interest limited to cease on a death has been disposed of or has determined, whether by surrender, assurance, divesting, forfeiture or in any other manner (except by the expiration of a fixed period at the expiration of which the interest was limited to cease), whether wholly or partly, and whether for value or not, after becoming an interest in possession, and the disposition or determination (or any of them if there are more than one) is not excepted by sub- section (2), then–

(a) if, had there been no disposition or determination, as aforesaid of that interest and no disposition of any interest expectant upon or subject to that interest, the property in which the interest subsisted would have passed on the death under section 5, that property shall be deemed by virtue of this section to be included as to the whole thereof in the property passing on the death; or

(b) if, had there been no disposition or determination as aforesaid of that interest and no disposition of any interest expectant upon or subject to that interest, the property in which the interest subsisted would have been deemed by virtue of section 7 to be included to a particular extent in the property passing on the death, the property in which the interest subsisted shall be deemed by virtue of this section to be included to that extent in the property passing on the death.

(2) Where a disposition or determination of an interest limited to cease on the death was bona fide effected or suffered not less than 1 two years] before the death (or, if it was effected or suffered for public charitable purposes, not less than six months before the death),

  1. Subs. by Act 13 of 1966, s. 38, for” one year” (w. e. f. 1- 4- 1966 ). 2 Ins. by Act 10 of 1965, s. 69 (w. e. f. 1- 4- 1965 ).

the disposition or determination shall be excepted by this sub- section–

(a) if bona fide possession and enjoyment of the property in which the interest subsisted was assumed immediately thereafter by the person becoming entitled by virtue of or upon the disposition or determination and thence- forward retained to the entire exclusion of the person who immediately before the disposition or determination had the interest and of any benefit to him by contract or otherwise; or

(b) in the case of a partial determination, if the conditions specified in the preceding paragraph were not satisfied by reason only of the retention or enjoyment by the deceased of possession of some part of the property, or of some benefit, by virtue of the provisions of the instrument under which he had the interest: Provided that where bona fide possession and enjoyment of the property referred to in clause (a) was not assumed immediately after the disposition or determination of the interest limited to cease on death, the disposition or determination shall be excepted by this sub- section, if, by means of the surrender of the reserved benefit or otherwise, the property is subsequently enjoyed for at least 1 two years] before the death, to the entire exclusion of the person who immediately before the disposition or determination had the interest and of any benefit to him by contract or otherwise: 2 Provided further that where the disposition or determination of an interest limited to cease on the death in a house or part thereof was effected or suffered in favour of the spouse, son, daughter, brother or sister, then, the disposition or determination shall, notwithstanding the residence therein of the person who immediately before the disposition or determination had the interest, be deemed to be excepted by this sub- section save where a right of residence therein is reserved or secured directly or indirectly to such person under the relevant disposition or under any collateral disposition:] Provided further that nothing in this sub- section shall be construed as affecting any charge of estate duty arising otherwise than by virtue of the provisions of the preceding sub- section.

(3) In the application of sub- section (1) to a case in which an incumbrance on the property in which the interest in question subsist-

  1. Subs. by Act 13 of 1966, s. 38, for” one year” (w. e. f. 1- 4- 1966 ). 2 Ins. by Act 10 of 1965, s. 69 (w. e. f. 1- 4- 1965 ).

ed has been created by associated operations (as hereinafter defined in section 27) which included a disposition of that interest, references to that property shall be construed as references to that property free from the incumbrance, except in a case in which the incumbrance was created for consideration in money or money’ s worth which was applied for purposes calculated to maintain or increase the value of that property, and, in that case, shall be construed as references to that property subject to the incumbrance to the extent to which the consideration was so applied.

(4) Where an interest limited to cease on a death has been disposed of or has determined, bona fide possession and enjoyment of the property shall not be deemed for the purposes of sub- section (2) to be assumed immediately thereafter and thenceforward retained to the entire exclusion of a person who had the interest and of any benefit to him by contract or otherwise, if at any time thereafter he has a benefit by virtue of any operations associated with the disposition or determination, nor while he has such a benefit shall the property be deemed to be enjoyed to the entire exclusion as aforesaid for the purposes of the first proviso to sub- section (2).

(5) In the preceding sub- section–

(a) the reference to any operations associated with the disposition shall be taken as referring to any associated operations as defined in section 27, of which the disposition is one; and

(b) the reference to any operations associated with the determination shall be taken as referring to any associated operations as so defined of which any disposition resulting in, or effected in contemplation of or with reference to, the determination is one.

  1. Settlements with reservation.

(1) Property passing under any settlement made by the deceased by deed or any other instrument not taking effect as a will whereby an interest in such property for life or any other period determinable by reference to death is reserved either expressly or by implication to the settlor or whereby the settlor may have reserved to himself the right by the exercise of any power, to restore to himself or to reclaim the absolute interest in such property shall be deemed to pass on the settlor’ s death: Provided that the property shall not be deemed to pass on the settlor’ s death by reason only that any such interest or right was so

reserved if by means of the surrender of such interest or right the property is subsequently enjoyed to the entire exclusion of the settlor and of any benefit to him by contract or otherwise, for at least 1two years] before his death: 2 Provided further that a house or part thereof comprised in such settlement made in favour of the spouse, son, daughter, brother or sister, shall not be deemed to pass on the settlor’ s death by reason only of the residence therein of the settlor except where a right of residence is reserved or secured directly or indirectly to the settlor under the settlement or under any collateral disposition.] Explanation.– A settlor reserving an interest in the settled property for the maintenance of himself and any of his relatives (as defined in section 27) shall be deemed to reserve an interest for himself within the meaning of this section.

(2) Notwithstanding anything contained in sub- section (1), where property is settled by a person on one or more other persons for their respective lives and after their death, on the settlor for life and thereafter on other persons and the settlor dies before his interest in the property becomes an interest in possession, the property shall not be deemed to pass on the settlor’ s death within the meaning of this section.

  1. Joint investments. Where a person, having been absolutely entitled to any property or to the funds with which any property was purchased, has caused it to be transferred to or vested in himself and any other person jointly, whether by disposition or otherwise, either by himself alone, or in concert, or by arrangement, with any other person so that the beneficial interest in some part of that property passes or accrues by survivorship on his death to the other person, the whole of that property shall be deemed to pass on the death.
  2. Policies kept up for a donee.

(1) Money received under a policy of insurance effected by any person on his life, where the policy is wholly kept up by him for the benefit of a donee, whether nominee or assignee, or a part of such money in proportion to the premiums paid by him, where the policy is partially kept up by him for such benefit, shall be deemed to pass on the death of the assured.

  1. Subs. by Act 13 of 1966, s. 38, for” one year” (w. e. f. 1- 4- 1966 ). 2 Ins. by Act 10 of 1965, s. 69 (w. e. f. 1- 4- 1965 ).

Explanation.– A policy of insurance on the life of a deceased person effected by virtue or in consequence of a settlement made by the deceased shall be treated as having been effected by the deceased.

(2) For the purposes of sub- section (1), so much of the premiums paid on any policy of insurance as was, by virtue or in consequence of a settlement made by the deceased, paid out of property, whether or not provided by the deceased, comprised in the settlement or out of income, whether or not provided by the deceased, arising under the settlement, shall be treated as having been paid by the deceased: Provided that any payments which were not made either out of property provided directly or indirectly by the deceased for the purposes of the settlement, or out of property representing that property, or out of income provided directly or indirectly by the deceased whether arising from such property or otherwise, shall not be treated as having been made by the deceased if the Controller is satisfied that those payments were not made as part of any reciprocal arrangements between the deceased and any other person.

(3) For the purposes of this section,–

(a) the expression” settlement” includes any disposition, trust, covenant, agreement or arrangement; and

(b) a person shall be deemed to have made a settlement if he has made or entered into the settlement directly or indirectly, and in particular (but without prejudice to the generality of the foregoing words of this clause) if he has

provided or undertaken to provide funds directly or indirectly for the purposes of the settlement, or has made with any other person a reciprocal arrangement for that other person to make or enter into the settlement.

  1. Annuity or other interest purchased or provided by the deceased. Any annuity or other interest, purchased or provided by the deceased, either by himself alone or in concert or by arrangement with any other person shall be deemed to pass on his death to the extent of the beneficial interest accruing or arising, by survivorship or otherwise, on his death. Explanation.– The extent of the beneficial interest must be ascertained without regard to any interest in expectancy which the beneficiary may have had therein before the death.
  2. Annuity or other interest purchased or provided out of property derived from the deceased.

(1) Section 15 shall have effect in relation to any annuity or other interest that was purchased or provided wholly or in part by any person who was at any time entitled to, or amongst whose resources there was at any time included, any property derived from the deceased, as if that annuity or other interest had been provided by the deceased, or, if it is proved to the satisfaction of the Controller that the application of all the property derived from the deceased would have been insufficient to provide the whole of that annuity or other interest, as if a similar annuity or interest of an amount reduced to an extent proportionate to the insufficiency proved had been provided by the deceased: Provided that for the purpose of determining whether there would have been any such insufficiency as aforesaid, and the extent thereof, there shall be excluded from the property derived from the deceased any part thereof as to which it is proved to the satisfaction of the Controller that the disposition of which it, or the property which it represented, was the subject- matter, was not made with reference to, or with a view to enabling or facilitating, the purchase or provision of the annuity or other interest, or the recoupment in any manner of the cost thereof.

(2) In this section the following expressions have the meanings hereby assigned to them respectively, namely:–

(a) ” property derived from the deceased” means any property which was the subject- matter of a disposition made by the deceased, either by himself alone or in concert or by arrangement with any other person, 1 notwithstanding

  1. Subs. by Act 33 of 1958, s. 5, for” otherwise than for full consideration” (w. e. f. 1- 7- 1960 ).

that the disposition was made for full consideration] in money or money’ s worth paid to him for his own use or benefit, or which represented any of the subject- matter of such a disposition, whether directly or indirectly, and whether by virtue of one or more intermediate dispositions and whether any such intermediate disposition was or was not for full or partial consideration: Provided that where the first- mentioned disposition was for full consideration in money or money’ s worth paid to the deceased for his own use or benefit and it is proved to the satisfaction of the Controller that the disposition was not part of associated operations which included–

(a) a disposition by the deceased, either by himself alone or in concert or by arrangement with any other person, otherwise than for full consideration in money or money’ s worth paid to the deceased for his own use or benefit, or

(b) a disposition by any other person operating to reduce the value of the property of the deceased; then, in considering whether estate duty should be charged the said first mentioned disposition shall be left out of account as if this provision did not apply in relation to it;

(b) ” disposition” includes any trust, covenant, agreement or arrangement; and

(c) ” subject- matter” includes, in relation to any disposition, any annual or periodical payment made or payable under or by virtue of the disposition.

(3) For the purposes of section 34 the deceased shall be deemed to have had an interest in any property included by virtue of this section in the property passing on the death of the deceased.

16A. 1 Interest of the deceased in building allotted or leased to him by a co- operative society. Where at the time of his death, the deceased was a member of a co- operative society, being a co- operative housing society, and a building or part thereof allotted or leased to him under a house building scheme of the society, continued to remain allotted or leased to him at the time of his death, he shall, notwithstanding anything contained in this Act or any other law for the time being in force, be deemed to be the owner of such building or part at the time of his death and such building or part shall be deemed to pass on his death and, in determining the value of such building or part, the value of any outstanding instalments of the amount payable under such scheme by the deceased at the time of his death to the society towards the cost of such building or part and the land appurtenant thereto shall, whether the amount so payable is described as such or in any other manner in such scheme, be allowed as a debt owed by him in relation to such building or part. Explanation.– For the purposes of this section and section 33.” co- operative society” means a co- operative society registered under the Co- operative Societies Act, 1912 (2 of 1912 ) or under any other law for the time being in force in any State for the registration of co- operative societies.] Special provisions relating to transfers to companies

  1. Property transferred to a controlled company.

(1) Where the deceased has made to a controlled company a transfer of any property (other than an interest limited to cease on his death or property which he transferred in a fiduciary capacity), and any benefits accruing to the deceased from the company accrued to him in the three years ending with his death, the assets of the company shall be deemed for the purposes of estate duty to be included in the property passing on his death to an extent determined in accordance with sub- section (2).

  1. Ins. by Act 31 of 1982, s. 3 (w. e. f. 1- 3- 1981 ).

(2) The extent to which the assets of the company are to be deemed to be included as aforesaid shall be the proportion ascertained by comparing the aggregate amount of the benefits accruing to the deceased from the company in the last three accounting years with the aggregate amount of the net income of the company for the said years: Provided that–

(a) where, in any of the said accounting years, the company sustained a loss, the amount of that loss shall be deducted in ascertaining the said aggregate net income of the company;

(b) where the company came into existence in the last year but one, or in the last, of the said accounting years, the references in this sub- section to the said accounting years shall be construed as references to the last two, or, as the case may be, the last, of those years.

(3) The assets of the company which are deemed to be included in the property passing on the death of the deceased by virtue of this section shall include any assets thereof which have been disposed of or distributed by the company at any time between the beginning of the first of the accounting years aforesaid and the death of the deceased either–

(a) in or towards satisfaction of rights attaching to shares in or debentures of the company, or

(b) otherwise howsoever except as follows, that is to say, by way of sale for full consideration in money or money’ s worth received by the company for its own use and benefit, or in or towards discharge of taxes or rates or other liability imposed by or under an enactment, or in or towards discharge of a fine or penalty or a liability for tort incurred without collusion with the injured party, including assets which have been so disposed of or distributed in a winding up, whether continuing at or completed before the death: Provided that this sub- section shall not apply to assets disposed of or distributed by way of payments from which income- tax was deductible or which were assessable to income- tax, of amounts not exceeding in the aggregate, as respects payments made in any accounting year or in the period between the end of the last accounting year and the death of the deceased, the amount of the income of the company for that year or period.

(4) (i) A controlled company is any company which at any relevant time, was or would, if these provisions had always been in force, have been deemed to be, under the control of not more than five persons and which is not a subsidiary company or a company in which the public are substantially interested. Explanation.– For the purposes of this sub- section,–

(a) a company shall be deemed to be a subsidiary company if, by reason of the beneficial ownership of shares therein, the control of the company is in the hands of a company not being a company to which the provisions of this sub- section apply, or of two or more companies none of which is a company to which the aforesaid provisions apply;

(b) a company shall be deemed to be a company in which the public are substantially interested if shares of the company (not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) carrying not less than twenty- five per cent. of the voting power have been allotted unconditionally to, or acquired unconditionally by, and are at the end of the year or other period for which the accounts of the company have been made up beneficially held by the public (not including a company to which the provisions of this sub- section apply) and any such shares have, in the course of such year or other period, been the subject of dealings on a recognised stock exchange or are in fact freely transferable by the holders to other members of the public.

(ii) A company shall be deemed to be under the control of not more than five persons–

(a) if any five or fewer persons together exercise, or are able to exercise or are entitled to acquire, control, whether direct or indirect, over the company’ s affairs, and in particular, but without prejudice to the generality of the foregoing words, if any five or fewer persons together possess, or are entitled to acquire, the greater part of the share capital or voti

 

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