JUDGMENT
1. The Tribunal, Delhi, has referred the following question of law under Section 64(1) of the Estate Duty Act, 1953, hereinafter referred to as the Act, for opinion to this Court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the amount of Rs, 55,350 should be deducted from the value of the estate ignoring the fact that the value of the house taken by the deceased from Avas Avam Vikas Parishad under the hire-purchase tenancy agreement was required to be estimated on the basis of instalment actually paid by the deceased ?"
2. Briefly stated, the facts giving rise to the present reference are as follows : Shri Ram Lal Agarwal died intestate on 19th June, 1998. His son Shri Ravinder Kumar Agarwal is accountable person in this case. The deceased had taken a house from UP Avas Avam Vikas Parishad under the hire-purchase tenancy agreement for a sum of Rs. 58,000 on instalment basis. The deceased could pay only one instalment of Rs. 2,650 for this house and the balance of Rs. 55,350 was outstanding against him at the time of his death to be payable to Avas Avam Vikas Parishad. The accountable person claimed exemption in respect of this house which was a residential house under Section 33(l)(n) of the Act and also claimed the deduction of unpaid instalments of Rs. 55,350 against the total value of the estate. The Asstt. CED rejected the contention of the accountable person by holding that the value of the house could be estimated at Rs. 2,650 only on the basis of instalment actually paid by the deceased. This amount was accordingly taken as the value of the house in the hands of the deceased and treated as exempt under Section 33(l)(n) of the Act. There was no question of allowing any separate deduction of Rs. 55,350.
On appeal, the CED(A) upheld the order of the Asstt. CED denying the deduction of the liability of Rs. 55,350 as all the instalments of the house purchased from Avas Avam Vikas Parishad had not been paid.
On further appeal, the learned Tribunal has accepted the contention of the accountable person. The Tribunal has held that this amount of Rs. 55,350 represented a liability by the deceased and the amount was liable to be deducted from the value of the estate. The Tribunal also held that this deduction could not be disallowed merely on the ground that it related to an exempted asset as there was no such provision in the ED Act.
3. We have heard Sri A.N. Mahajan, learned standing counsel who appears for the Revenue. Sri R.K. Jain has put in appearance on behalf of the respondent- assessee, accountable person. 4. Learned counsel for the Revenue submitted that under Section 33(l)(n) of the Act exemption has been provided in respect of one house or part thereof exclusively used by the deceased for his residence to the extent the principal value thereof does not exceed Rs. 1,00,000 where it is situated in a place with a population exceeding ten thousand and the full principal value thereof, in any other case. He submitted that the deceased was not owner of the house in question as there was only hire-purchase agreement in which it has been specifically provided that the position of the deceased was that of a tenant and after all instalments are paid the ownership shall be transferred. According to him, the unpaid instalments could not have been treated as debt of the deceased and, therefore, no deduction could have been allowed while computing the value of the assets left by the deceased.
5. Having heard the learned counsel for the parties, we find that the deceased had entered into an agreement of hire-purchase with the UP Avas Avam Vikas Parishad for the house in question. A copy of the agreement dt. 28th Jan., 1976, entered into between UP Avas Avam Vikas Parishad and the deceased is on record. From perusal of the said agreement it appears that the deceased was in possession of the property in question as a tenant. Clause 2 of the hire- purchase agreement is reproduced below :
"2. The hire-purchaser shall hold the said property as a tenant for the hire- purchase period which is a fixed term of twenty years commencing from the 1st day of the month of July of the year one thousand nine hundred and seventy- five and ending on the eight day of the month of June of the year 1995 subject to the following conditions :"
Clause 3 of the agreement stipulated that the owner (UP Avas Avam Vikas Parishad) shall transfer the property to the hire-purchaser by executing a conveyance deed with him in the prescribed form after the expiry of the hire- purchase period. Clause 3 of the hire-purchase agreement is reproduced below :
"3. The owner hereby agrees to transfer the said property to the hire-purchaser by executing conveyance deed with him in the prescribed form after the expiry of the hire-purchase period provided that he has paid all the dues of the owner and of public bodies if any prior to such execution. The hire-purchaser thereafter ceases to be a tenant and become the owner of property subject to the provisions of the conveyance deed to be executed as provided in para 5."
Thus, from the reading of the aforesaid clause of the hire-purchase agreement, it is clear that the deceased was not the owner of the house in question and his possession was only that of a tenant till he had paid all the instalments and a conveyance deed had been executed in his favour by the UP Avas Avam Vikas Parishad.
6. Section 33 of the Act, provides exemption in respect of the property belonging to the deceased. Clause (n) of sub-s. (1) of Section 33 grants exemption in respect of one house or part thereof exclusively used by the deceased for his residence. Clause (n) of the Act is reproduced below :
"(n) one house or part thereof exclusively used by the deceased for his residence, to the extent, the principal value thereof does not exceed rupees one lakh if such is situate in a place with a population exceeding ten thousand, and the full principal value thereof, in any other case;"
7. The house did not belong to the deceased as his status was that of a tenant till such time the property is transferred in his name. So far as the unpaid instalments are concerned, it may be mentioned here that Section 44 of the Act deals with provisions for debts and encumbrances to be allowed for in determining chargeable value of estate. Section 44 of the Act reads as follows :
"44. Reasonable funeral expenses and, with some exceptions, debts and encumbrances to be allowed for in determining chargeable value of estate.
In determining the value of an estate for the purpose of estate duty, allowance shall be made for funeral expenses (not exceeding rupees one thousand) and for debts and encumbrances; but an allowance shall not be made-
(a) for debts incurred by the deceased or encumbrances created by a disposition made by the deceased, unless, subject to the provisions of Section 27, such debts or encumbrances were incurred or created bona fide for full consideration in money or money's worth wholly for the deceased's own use and benefit and taken effect out of his interest, or
(b) for any debt in respect whereof there is right to reimbursement from any other estate or person, unless such reimbursement cannot be obtained, or
(c) more than once for the same debt or encumbrance charged upon different portions of the estate, or
(d) for debts incurred by or on behalf of the deceased by way of dower, to the extent to which such debts are in excess of rupees five thousand, and any debt or encumbrance for which an allowance is made shall be deducted from the value of the property liable thereto.
Explanation : For the purposes of this section, 'funeral expenses' include all expenses which may have to be incurred in connection with the Sraddha or Barsi ceremonies of the deceased for a period of one year from his death."
8. From the reading of the Section 44 of the Act, it is clear that any debt or encumbrance for which an allowance is made shall be deducted from the value of the property liable thereto. If the authorities have taken the value of the house in question at Rs. 58,000 then liability towards unpaid instalments of Rs. 55,350 if it is taken as debt ought to be deducted from the value of that house. In this view of the matter, the Tribunal was not justified in allowing the liability of Rs. 55,350 while determining the value of the estate left by the deceased. In view of the foregoing discussion, we answer the question referred to us in the negative, i.e., in favour of the Revenue and against the respondent-assessee. However, parties shall bear their own costs.