Full Judgment Text
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PETITIONER:
ASSISTANT CONTROLLER OF ESTATE DUTY & ORS.
Vs.
RESPONDENT:
PRAYAG DASS AGARWAL
DATE OF JUDGMENT23/04/1981
BENCH:
VENKATARAMIAH, E.S. (J)
BENCH:
VENKATARAMIAH, E.S. (J)
PATHAK, R.S.
CITATION:
1981 AIR 1263 1981 SCR (3) 576
1981 SCALE (1)786
ACT:
Estate Duty Act, 1953-Section 52, scope of-Whether
under section 52 of the Estate Duty Act, 1953, the Central
Government is bound to accept in satisfaction of the whole
or any part of the duty payable under the Act at such price
as may be agreed upon between the Central Government and the
person accountable for estate duty any property passing on
the death of the deceased when an application is made for
that purpose by such person.
HEADNOTE:
On the death of his father which took place on
September 29, 1964 the respondent filed a statement of
account under the Estate Duty Act of the estate passing on
the death of the deceased. The estate duty payable in
respect of the estate in question was determined at Rs.
3,37,543.40 by the Assistant Controller of Estate Duty,
Allahabad, by his order dated November 30, 1970. When the
appeal filed against the said order was still pending, the
respondent made an application under section 52(1) of the
Act on February 16, 1971 to the Central Board of Direct
Taxes offering one of the items of property passing on the
death of the deceased, namely, premises No. 1, Phaphamau
Road, Allahabad, whose principal value had been determined
at Rs. 2,53,625 in part payment of the balance of estate
duty which was still payable by him under the order of
assessment. The said offer was not accepted by the Central
Board of Direct Taxes but the appellant herein wrote to the
respondent stating that the respondent could pay the arrears
of estate duty payable by him in monthly instalments of Rs.
10,000 each beginning from October 29, 1971 subject to
payment of interest @ 9% per annum on the arrears
outstanding. Thereupon the respondent filed a writ petition
before the High Court of Allahabad requesting the High Court
to issue a writ in the nature of mandamus to the Union of
India to consider the application made by him under section
52(1) on its merits, to negotiate and settle the price of
the property offered by him in settlement of part of duty
payable by him and to give credit to the extent of the price
so determined under the Act. The High Court held that if the
accountable person exercised the option to pay the estate
duty by transferring property, the Central Government could
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not refuse to accept the offer and insist upon payment by
another mode when there was agreement about the price
between it and the accountable person. The High Court,
however, held that it was not necessary to decide the
question whether it was open to the Central Government to
refuse the offer of property on a ground other than the
price as the impugned order had not disclosed any reason at
all for rejecting the offer. Accordingly, the High Court
directed the respondents before it to dispose of the
application afresh in accordance with law. Hence the appeal
after obtaining special leave of the Court.
Affirming the High Court directions, the Court
577
^
HELD :1:1. What section 52(1) of the Estate Duty Act
does is to set forth one more mode in which estate duty may
be recovered. It is a provision made specially for the
recovery of estate duty. It enables the Government to
recover the duty in accordance with that mode. The other
statutory modes prescribed under section 51 and specified in
the Rules are those where recourse by the accountable
obliges the Revenue to accept the payment made in any of
those modes and to treat it, by compulsion of statute, as
satisfaction of the dues. The peculiarity of the mode
provided under section 52(1) is that while recourse to it by
the accountable person does not automatically imply
satisfaction of the dues, there is the duty cast on the
Revenue to consider the application by the accountable
person offering an item of property as a mode for satisfying
the dues. The Government must consider the application on
its merits and in the exercise of sound administrative
judgment. [587 F-H, 588 A]
1:2. Ordinarily in every contract for the purchase of
property there are two stages. (i) In the first stage, there
is complete freedom to the parties to decide whether one
should enter into negotiations with the other at all and in
that regard the law takes no account of the reason of any
party for not choosing to entertain the proposal for sale
made by the other however arbitrary, illogical or irrelevant
the reason may be. (ii) The second stage follows the
entertaining of the proposal and the actual negotiations
between the parties which may or may not fructify in a
contract. Section 52(1) is concerned with the first stage,
and differs in this from the complete freedom to entertain
the proposal in that the proposal made under section 52(1)
by the accountable person must be considered by the Central
Government and any decision taken by it on that question
must proceed on considerations which are relevant and
bonafide. The price of the property is, however, left to be
determined by agreement in the event of the Government
deciding to accept the offer made by the accountable person.
This forms part of the second stage. [588 A-D]
1:3. The Estate Duty Act is a fiscal statute
principally intended to levy and collect estate duty which
when collected has to be disbursed in accordance with Part
XII of the Constitution. It is not a law providing for
acquisition of a property forming part of the estate of the
deceased. Section 52 is in the nature of an enabling
provision which authorises the Central Government to accept
a property in lieu of estate duty payable subject to the
conditions mentioned in it. It is true that even enabling
words in a statute which confer a discretionary power may
have to be interpreted as compulsory where they amount to
words clearly intended to effectuate a legal right. But
ordinarily such words are permissive only. [585 F, 586 C-D]
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In the instant case, the very fact that there is a need
for an agreement upon the price of the property between the
Central Government and the accountable person makes the
power of the Central Government under section 52(1) of the
Act discretionary and permissive. Any other meaning may lead
to impractical and incongruous result. [586 D-E]
1:4. On a plain construction of section 52 of the Act
the Central Government may at its discretion either accept
the property offered under section 52 or may not if the
circumstances so warrant. The accountable person cannot
claim
578
that the Central Government is bound to accept such
property. The power of the Central Government under section
52 is purely administrative and discretionary. Therefore,
the said power should be exercised subject to the same
limitations which govern all such administrative and
discretionary powers. The Central Government or the
authority which is competent to take a decision should
exercise its discretion bonafide and in good faith by
addressing itself to the matter before it and should not
allow itself to be influenced by extraneous and irrelevant
considerations. The question should not be disposed of in an
arbitrary or capricious way. In this case, the Court can
only ask the authority concerned to exercise the discretion
vested in it but it cannot be asked to exercise it in a
particular way. [587 A-B, D-F]
Chella Rama Bhupal Reddy v. Central Board of Direct
Taxes and Anr., [1977] 108 I.T.R. 695 Andhra Pradesh,
approved.
2. In the instant case, the High Court was right in
holding that it had not been shown that the competent
authority had properly exercised its discretion. The Board
proceeded on the assumption that its discretion was
unfettered even by considerations relevant to administrative
law and did not probe into the question of the availability
of liquid cash in the hands of the respondent to pay tee
estate duty and the averment of the respondent that the
entire liquid cash had been invested in business. [588 E, H,
589 A]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1843 of
1974.
Appeal by special leave from the judgment and order
dated the 6th September, 1972 of the Allahabad High Court in
Civil Misc. Writ No. 27 of 1972.
S.C. Manchanda, Champat Rai and Miss A. Subhashini for
the Appellants.
Pramod Swarup for the Respondent.
The Judgment of the Court was delivered by
VENKATARAMIAH, J. The question which arises for
consideration in this appeal by special leave is whether
under section 52 of the Estate Duty Act, 1953 (hereinafter
referred to as the Act) the Central Government is bound to
accept in satisfaction of the whole or any part of the duty
payable under the Act at such price as may be agreed upon
between the Central Government and the person accountable
for estate duty any property passing on the death of the
deceased when an application is made for that purpose by
such person.
On the death of Lala Beni Madho Agarwal which took
place on September 29, 1964 his son Prayag Dass Agarwal, the
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respondent
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herein filed a statement of account under the Act of the
estate passing on the death of the deceased. The estate duty
payable in respect of the estate in question was determined
at Rs. 3,37,543.40 by the Assistant Controller of Estate
Duty, Allahabad by his order dated November 30, 1970. When
the appeal filed against the said order was still pending,
the respondent made an application under section 52(1) of
the Act on February 15, 1971 to the Central Board of Direct
Taxes offering one of the items of property passing on the
death of the deceased, namely premises No. 1, Phaphamau
Road, Allahabad, whose principal value had been determined
by the Assistant Controller at Rs. 2,53,655 in part payment
of the balance of estate duty which was still payable by him
under the order of assessment. The said application elicited
a cryptic reply dated September 16, 1971 from the Under
Secretary of the Central Board of Direct Taxes, the relevant
part of which read as follows:-
"I am directed to refer to your petition dated
16.2.1971 on the subject mentioned above and to say
that your offer is not acceptable."
The Assistant Controller, however, wrote to the
respondent on October 21,1971 stating that the respondent
could pay the arrears of estate duty payable by him in
monthly instalments of Rs. 10,000 each beginning from
October 29, 1971 subject to payment of interest @ 9% per
annum on the arrears outstanding. Thereupon the respondent
filed a writ petition before the High Court of Allahabad
under Article 226 of the Constitution against the Assistant
Controller, the Central Board of Direct Taxes and the Union
of India requesting the High Court to issue a writ in the
nature of mandamus to the Union of India to consider the
application made by him under section 52(1) on its merits,
to negotiate and settle the price of the property offered by
him in settlement of part of duty payable by him and to give
credit to the extent of the price so determined under the
Act. The respondent contended inter alia that section 52 of
the Act conferred a right on an accountable person, if he
chose to do so, to offer an item of property passing on the
death of the deceased in respect of whose estate, duty was
payable under the Act in discharge of the whole or part of
such duty and that it imposed a reciprocal obligation on the
Central Government to accept such property and adjust its
price as may be agreed upon between the Central Government
and the accountable person towards the duty payable. He
further contended that the Central Government had no right
to refuse to accept the offer so made by the accountable
person and that he
580
having made the offer to pay the duty by transfer of the
property in question he could not be compelled to pay the
duty to the extent of its price. He, therefore prayed for
the issue of appropriate direction to the Central Government
to comply with section 52 of the Act accordingly.
On behalf of the Union Government it was inter alia
urged that it was not bound to accept an offer made under
section 52(1) of any property and it was within the
discretion of the Union Government to reject the offer.
The High Court held that if the accountable person
exercised the option to pay the estate duty by transferring
property, the Central Government could not refuse to accept
the offer and insist upon payment by another mode when there
was agreement about the price between it and the accountable
person. It, however, held that it was not necessary to
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decide the question whether it was open to the Central
Government to refuse the offer of property on a ground other
than the price as the impugned order had not disclosed any
reason at all for rejecting the offer. Accordingly the High
Court directed the Union Government and the Central Board of
Direct Taxes to dispose of the application of the petitioner
afresh in accordance with law. This appeal is filed against
the said decision of the High Court under Article 136 of the
Constitution.
Section 5(1) of the Act provides that in the case of
every person dying after the commencement of the Act there
shall, save as expressly provided in the Act, be levied and
paid upon the principal value ascertained as per the
relevant provisions of the Act of all property, settled or
not settled, including agricultural land situate in the
territories which immediately before November 1, 1956 were
comprised in the States in the First Schedule to the Act
which passes on the death of such person, a duty called
’estate duty’ at the rates fixed in accordance with section
35 of the Act. The rates of estate duty are set out in the
Second Schedule to the Act. The principal value of the
property liable for estate duty has to be ascertained in
accordance with the provisions in Part V of the Act. The
estate duty levied under the Act can be collected as per
provisions in Part VII of the Act. Section 51 of the Act
states that estate duty may be collected by such means and
in such manner as the Central Board of Direct Taxes may
prescribe. Rule 18 of the Estate Duty Rules (hereinafter
referred to as ’the Rules’) made by the Central Board of
Direct Taxes in exercise of the powers conferred by sub-
section (1) of
581
section 85 of the Act deals with payment of estate duty.
That Rule provides inter alia that payment of any duty may
be made by delivery of a cheque on a scheduled bank or by a
bank draft issued by a scheduled bank or by depositing the
amount of duty in the Government Treasury or by adjustment
of any refund of income-tax, excess profits tax, business
profits tax or excess profits tax deposit. Section 52 of the
Act as it was originally enacted provided that the Board
might prescribe that Government securities could be accepted
in payment of estate duty on such items as it thought fit.
When it was suggested that a provision corresponding to
section 56(1) of the Finance (1909-10) Act 1910 as it stood
at the time when the Act was enacted could be introduced
into the Act, it was not accepted by the Indian Finance
Minister. Section 49 of the British Finance Act 1946 (9 & 10
Geo 6 C. 64) provided that the Commissioners of Inland
Revenue could accept any property under section 56 of the
Finance (1909-10) Act 1910 in satisfaction or part
satisfaction of any estate duty and amended the latter Act
accordingly. Section 56(1) of British Finance (1909-10) Act,
1910 which was again amended by the British Finance Act of
1949 read thus:
"56(1) The Commissioners may, if they think fit,
on the application of any person liable to pay estate
duty or settlement estate duty accept in satisfaction
of the whole or any part of such duty any such real
(including leasehold) property as may be agreed upon
between the Commissioners and that person."
The legal position in the United Kingdom as it existed
in 1965 in so far as transfer of real and leasehold property
in payment of estate duty is concerned is summarized in
Dymond’s Death Duties (14th Edition) at pages 720-721 thus:
"D-Transfer of Property in Payment of Duty :-
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(1) Real and leasehold property:-
By s. 56(1) of the Finance (1909-10) Act, 1910, as
extended and amended by s. 49 of the Finance Act, 1946
(which applies to deaths at any time) and the Finance
Act, 1946 (which applies to deaths at any time) and the
Finance Act, 1949, Sched. XI, Pt. IV the Commissioner’s
may, if they think fit, on the application of any
person liable to pay any Death Duties, accept in
satisfaction of the
582
whole or part of such duty any such real (including
leasehold) property as may be agreed upon between the
Commissioners and the accountable person. The
Commissioners have the right to accept foreign real or
leasehold property, but they are scarcely likely to do
so. The property accepted need not itself be liable to
duty. It may be accepted in satisfaction of duty on any
property, real or personal. No Stamp Duty is to be
payable on the transfer of such property (Finance
(1909-10) Act, 1910, s. 56(2) . The disposition of any
property accepted by the Commissioners is provided for
by ss. 50 and 51 of the Finance Act, 1946, under which
the Treasury may direct that the land be transferred
direct to a body of persons (e.g. the National Trust)
or to trustees for such a body, etc,. instead of to the
Commissioners, and the duty receivable by the latter
may be paid out of the National Land Fund established
by s. 48 of the Act. It is within the discretion of the
Commissioners whether they will accept property under
this provision, but the Chancellor of the Exchequer in
his Budget statement for 1946 said that he expected the
power (which hitherto had not in practice been used) to
operate on a substantial scale in the future: it is
understood that seventy properties had been taken over
up to the 31st March, 1963. He referred also to the
National Trust and the Youth Hostels Association as
examples of the bodies not established for profit, and
having for their object "the provision, improvement or
preservation of amenities enjoyed, or to be enjoyed, by
the public or the acquisition of land to be used by the
public" to which the land may be transferred.
Particulars of properties accepted are given in the
Commissioner’s Annual Reports.
There is no provision for the transfer of land by
a person other than the accountable person, and the
acquisition price cannot exceed the amount of the duty.
The Commissioners’ powers extend to the
acquisition of foreign immovable property, but are
scarcely likely to be exercised in respect of it."
The position in the United Kingdom appears to be more
or less the same even after the former estate duty was
replaced by the new tax known as capital transfer tax by the
British Finance Act
583
1975 (vide section 22 of the Finance Act 1975). The relevant
part of paragraph 17 of Schedule 4 to that Act reads thus:
"17 (1) The Board may, if they think fit on the
application of any person liable to pay tax, accept in
satisfaction of the whole or any part of it any
property to which this paragraph applies.
(2) This paragraph applies to any such land as may
be agreed upon between the Board and the person liable
to pay tax.
(3) This paragraph also applies to any objects
which are or have been kept in any building-
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(a) If the Board have determined to accept or have
accepted that building in satisfaction or part
satisfaction of tax or estate duty, or ..... " (See
Halsbury’s Statutes of England (Third Edition) Vol. 45
at page 1870).
Section 52 of the Act was substituted by a new section
52 by the Direct Taxes (Amendment) Act, 1964. The new
section reads thus:
"52. Payment of duty by transfer of property-
(1) The Central Government may, on an application
of the person accountable for estate duty, accept in
satisfaction of the whole or any part of such duty any
property passing on the death of the deceased at such
price as may be agreed upon between the Central
Government and that person, and thereupon such person
shall deliver possession of the property to such
authority as may be specified by that Government in
this behalf.
(2) Notwithstanding anything contained in any
other law for the time being in force, on the date the
possession of the property is delivered to the
authority under sub-section (1)-
(i) the property shall vest in the Central Government;
and
(ii) the Central Government shall, where necessary,
intimate the registering authority concerned
accordingly;
and the authority shall administer the property in such
manner as the Central Government may direct.
584
(3) Where the price referred to in sub-section (1)
exceeds the aggregate of the amounts due under this Act
in respect of the estate of the deceased, the excess
shall be applied in the following order to the payment
of any tax, penalty, interest or other amount-
(i) which the legal representative of the deceased is
liable to pay in respect of the income,
expenditure or wealth of, or gift made by, the
deceased under any of the Acts referred to in
clause (c) of section 2 of the Central Boards of
Revenue Act, 1963;
(ii) which the executor is liable to pay under any of
the Acts aforesaid in respect of the estate of the
deceased for the period of the administration of
the estate;
(iii)which the person beneficially entitled to the
property in question is liable to pay under any of
those Acts;
and the balance, if any, shall be paid to the
accountable person."
In the Notes on clauses annexed to the Bill which
ultimately became the Direct Tax (Amendment) Act 1964, it
was stated:
"Sub-clause (b) seeks to substitute the provisions
of section 52 of the Estate Duty Act by a new
provision, enabling the Central Government to accept at
an agreed price, the assets comprised in an estate
passing on the death of the deceased towards payment of
the estate duty, if the accountable person so offers.
Provision is also made that any balance of the price
left after satisfying the amounts due under the Estate
Duty Act will be adjusted against amounts due under the
other Direct Taxes Act from the deceased, his estate
and the accountable person beneficially entitled to the
asset in question in that order."
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Let us now analyse section 52 of the Act. A proceeding
under section 52 does not commence until an application is
made by the person accountable for estate duty. It is
entirely at his option whether a property passing on the
death of the deceased should be transferred so that its
price can be adjusted towards payment of the estate duty.
The Central Government cannot compel him to do so. When the
accountable person voluntarily applies to the Central
585
Government, the section says that the Central Government
’may’ accept the property offered in satisfaction of the
estate duty at such price as may be agreed upon between it
and the accountable person. Section 52 of the Act does not
say that the Central Government shall do so but it may do
so. The question in this case is whether the Central
Government is bound to do so. We shall revert to this
question later on. Then the price of the property has to be
agreed upon between the Central Government and the
accountable person. The price so agreed upon should
naturally relate to the date on which agreement takes place
and it cannot certainly be the principal value of the
property determined in the estate duty proceedings. This
provision may perhaps indirectly act as a deterrent against
excessive valuation of the property in the estate duty
proceedings because when the question of determination of
its price under section 52 of the Act arises there ought not
to be a wide disparity between the principal value
determined in the estate duty proceedings and what is
offered by the Central Government as the price under section
52. When once the price is agreed upon, then the accountable
person is bound to deliver possession of the property to
such authority as may be specified by the Central
Government. On such delivery the property vests in the
Central Government without any further formality. Sub-
section (3) of section 52 of the Act provides that where the
price agreed upon exceeds the amount due as estate duty, the
excess amount shall be applied to the payment of any tax
penalty, interest or other amount payable in the order
mentioned in clauses (i) to (iii) thereof. If after
adjusting all such dues, any balance still remains, such
balance shall be paid to the accountable person.
The Act is a fiscal statute principally intended to
levy and collect estate duty which when collected has to be
disbursed in accordance with Part XII of the Constitution.
It is not a law providing for acquisition of a property
forming part of the estate of the deceased. Part VII of the
Act in which sections 51 and 52 occur only provides the
machinery for collection of the duty. Whereas section 51 of
the Act authorises the Board to prescribe the means and
manner in which the estate duty may be collected, section 52
gives the option to the accountable person to offer a
property passing on the death of the deceased so that its
price may be adjusted towards the payment of the estate
duty. Rule 18 of the Rules made by the Board pursuant to
section 51 enables the accountable person to discharge his
liability in one or more ways mentioned therein and there
the Central Government is left with no choice
586
about them. Payment of duty in any of the said ways
discharges the liability of the accountable person under the
Act. Section 52 of the Act however, appears to be an
alternative mode by which such liability can be discharged
but it has some distinguishing features. Indisputably the
price of the property offered thereunder has to be agreed
upon between the Central Government and the accountable
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person which introduces an element of consensus into the
proceeding. But the point on which the parties are at issue
in this case is whether the Central Government is bound to
accept a property offered by the accountable person under
section 52 and initiate proceedings to settle its price by
negotiation. The language of the statute prima facie does
not compel the Central Government to do so. The section is
in the nature of an enabling provision which authorises the
Central Government to accept a property in lieu of estate
duty payable subject to the conditions mentioned in it. It
is true that even enabling words in a statute which confer a
discretionary power may have to be interpreted as compulsory
where they amount to words clearly intended to effectuate a
legal right. But ordinarily such words are permissive only.
In the instant case the very fact there is a need for an
agreement upon the price of the property between the Central
Government and the accountable person makes the power of the
Central Government under section 52(1) of the Act
discretionary and permissive. Any other meaning may lead to
impractical and incongruous result. The Central Government
cannot be compelled to accept the properties in discharge of
the estate duty when no agreement is possible on its price,
and when law does not provide for a machinery to determine
the price when there is no agreement. The history of the
corresponding legislation in the United Kingdom and the
language of section 52 read with the ’Notes on clauses’
attached to the relevant Bill extracted above suggest that
the Central Government has the option either to accept or
reject the offer made by an accountable person under section
52. This has to be so having regard to the administrative
difficulties involved in the matter. As mentioned earlier,
the Act is a fiscal statute intended to collect duty and not
to acquire property. If section 52 of the Act is held to be
mandatory then the Central Government will be obliged to
acquire properties in several parts of India where it may
not find any use for them and spend money on their
management and upkeep and arrange for their disposal. The
cost of administration involved in the Act in that case
possibly may be much more than the duty realisable under the
Act. Further if such is the construction to be placed then
what happens if the price of the property offered is more
than the duty payable ? Then in every such case, the
Government would be compelled to acquire property by paying
587
to the accountable person the amount which is in excess of
the duty and other sums payable under section 52(2)(i) to
(iii) even when it does not need such property. Surely such
could not have been the intention of the Parliament. We are
of the view that on a plain construction of section 52 of
the Act, the Central Government may at its discretion either
accept the property offered under section 52 or may not if
the circumstances so warrant. The accountable person cannot
claim that the Central Government is bound to accept to such
property. The power of the Central Government under section
52 is purely administrative and discretionary. The High
Court was in error in holding that if an assessee wanted to
pay the estate duty by transferring property, the Government
could not refuse to accept the offer and insist upon payment
by another mode, provided there was agreement on the price
of the property between the Government and the assessee.
When once it is held that the power of the Government
under section 52 of the Act is administrative and
discretionary, it follows that the said power should be
exercised subject to the same limitation which govern all
such administrative and discretionary powers. The Central
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Government or the authority which is competent to take a
decision should exercise its discretion bona fide and in
good faith by addressing itself to the matter before it and
should not allow itself to be influenced by extraneous and
irrelevant considerations. The question should not be
disposed of in an arbitrary or capricious way. In this case,
the Court can only ask the authority concerned to exercise
the discretion vested in it but it cannot be asked to
exercise it in a particular way. On this question we approve
the decision of the Andhra Pradesh High Court in Chella Rama
Bhupal Reddy v. Central Board of Direct Taxes & Anr.
The true legal position may be summarised thus. What
section 52(1) does is to set forth one more mode in which
estate duty may be recovered. It is a provision made
specially for the recovery of estate duty. It enables the
Government to recover the duty in accordance with that mode.
The other statutory modes prescribed under section 51 and
specified in the Rules are those where recourse by the
accountable person obliges the Revenue to accept the payment
made in any of those modes and to treat it, by compulsion of
statute, as satisfaction of the dues. The peculiarity of the
mode provided under section 52(1) is that while recourse to
it by the accountable person does not automatically imply
satisfaction of the
588
dues, there is the duty cast on the Revenue to consider the
application by the accountable person offering an item of
property as a mode for satisfying the dues. The Government
must consider the application on its merits and in the
exercise of sound administrative judgment. Ordinarily in
every contract for the purchase of property there are two
stages. (1) In the first stage, there is complete freedom to
the parties to decide whether one should enter into
negotiations with the other at all and in that regard the
law takes no account of reason of any party for not choosing
to entertain the proposal for sale made by the other however
arbitrary, illogical or irrelevant the reason may be. (2)
The second stage follows the entertaining of the proposal
and the actual negotiations between the parties which may or
may not fructify in a contract. Section 52(1) now under
consideration concerned with the first stage, and differs in
this from the complete freedom to entertain the proposal in
that the proposal made under section 52(1) by the
accountable person must be considered by the Central
Government and any decision taken by it on that question
must proceed on considerations which are relevant and bona
fide. The price of the property is, however, left to be
determined by agreement in the event of the Government
deciding to accept the offer made by the accountable person.
This forms part of the second stage.
In the instant case, the High Court was, however, right
in holding that it had not been shown that the competent
authority had properly exercised its discretion. In the
counter affidavit filed by the Assistant Controller of
Estate Duty, some reasons were given in support of the
decision of the Board. That counter affidavit is of no use
for the deponent could not speak on behalf of the Central
Government or the Board. In the counter affidavit of Balbir
Singh, Secretary, Central Board of Direct Taxes and Deputy
Secretary to the Government of India, two principal grounds
were mentioned for rejecting the offer-one, that the Central
Government was not bound to accept the offer and two, that
it had been shown that "the cash in hand, cash in bank, book
debts, business profits, rent and share of the deceased in
the firm of Ramnarain Lal Beni Madho amounted to Rs.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11
4,57,462 which amount was more than sufficient to pay the
entire estate duty demand". On the other hand the respondent
contended in his reply affidavit that he had no liquid cash
to pay the estate duty as it had been invested in business.
But there appears to have been no further probe into the
question. It is also obvious that the Board proceeded on the
assumption that its discretion was unfettered even by
considerations relevant to administrative
589
law. In these circumstances, we feel that there was no
proper exercise of the discretion by the Board.
We, therefore, affirm the direction issued by the High
Court but subject to the observations made above and direct
the Board to dispose of the application afresh in accordance
with law.
The appeal is accordingly disposed of. No costs.
V.D.K.
590