P. VENKATARAMA REDDY versus CONTROLLER OF ESTATE DUTY

Citation: [1998] 3 S.C.R. 806 · Decided: 20-07-1998 · Supreme Court of India · Bench: SUJATA V. MANOHAR · Disposal: Dismissed

Judgment (excerpt)

A 
P. VENKATARAMA REDDY 
v. 
CONTROLLER OF EST A TE DUTY 
JULY 20, 1998 
B 
[SUJATA V. MANOHARAND D.P. WADHWA, JJ.] 
Estate Duty Act, J953 : Sections 2(15) and (16), J4(J), 34 and 38. 
Property-Passing on death-Insured assigned Life Insurance Policies 
C during his lifetime to his grandchildren-After such assignment, insured 
retained possession of Policies and kept them alive-Insured also repaid 
loans or parts thereof on the said policies-Held : In the circumstances of 
the case, the said life insurance policies constitute property of the deceased--
Contention that deceased had no interest in the policies after assignment, 
rejected 
D 
Section 34(3)-Property-Passing on death-One "in which the 
deceased never had an interest"-Estate duty-Rate of-Determination a/-
Test-Deceased assigned life insurance policies during his lifetime to his 
grandchildren-Held: Test laid down in Re Hodson's Settlement, Brookes'case 
followed- Prior to assignment deceased had an interest in the policies-
E Hence, amount under the policies liable to be included in the estate of the 
deceased, and not assessed separately, for determination of rate of estate 
duty. 
Words and Phrases: 
"Jn which the deceased never had an interest"-Meaning of-Jn the 
F context of S.34(3) of the Estate Duty Act, J953. 
The deceased-insured has assigned life insurance policies during his 
lifetime to his grandchildren. The deceased had retained possession of the 
policies and had kept them alive during his lifetime even after the assignment 
The deceased also repaid the loans or parts thereof on these insurance 
G policies. 
In the estate duty proceedings the Assistant Collector of Estate Duty 
treated the policies as a part of the main estate of the deceased and levied 
estate duty accordingly. The Appellate Tribunal upheld the view of the Assistant 
Collector of Estate Duty. The High Court dismissed the appeal filed by the 
H appellant Hence this appeal. 
806 
P.V. REDDY v. CONTROLLER OF ESTATE DUTY 
807 
On behalf of the appellant it was contended that in view of the A 
assignment of the policies to the grandchildren the deceased had no interest 
in the policies and, under Section 34 of the Estate Duty Act, 1953 the 
policies could not be treated as property passing on death of the deceased 
and, therefore, the policies would not constitute a part of the estate of the 
deceased; and that even if the policies formed a part of the estate of the B 
deceased, they should be separately assessed under Section 34(3) of the Act. 
Dismissing the appeal, this Court 
.,. 
HELD: 1.1. Section 14(1) of the Estate Duty Act, 1953 contains a clear 
deeming provision whereby even after the assignment of his policy by the 
assured, if the assured keeps up the policy for the benefit of his assignee, c 
the insurance policy will constitute a part of the estate of the deceased. 
(813-D) 
1.2. In the present case, the assignees have not contended that after the 
assignment of the policies in their favour, the assignees paid the premium 
or any part of the premium on the policies as assigned or the assignees kept D 
the policies alive. The policies were entirely under the control of the deceased. 
The deceased had taken loans and repaid loans or part thereof on these 
..... 
insurance policies. It was the deceased who had retained possession of the 
policies and had kept them up during his lifetime even after the assignment. 
The provisions of Section 14 of the Act are, therefore, directly attracted. The 
contention of the appellants that the deceased did not have any interest in the E 
insurance policies passing on his death must, therefore, be rejected. 
[813-E-G) 
CED. v. Bomansha Framji Cama, 170 ITR 600 (Bom), approved. 
D. Mohanavelu Mudaliar v. Indian Insurance & Banking Corporation F 
Ltd., AIR (1957) Mad 115, MCt. Muthiah v. CED, 161 ITR 768 and Bharat 
Kumar Manila/ Dalal v. CED, 164 ITR 231, held inapplicable. 
2.1. Only such property passing on the death of the deceased in which 
the deceased "never had an interest" will constitute a separate estate under 
Section 34 (3) of the Act for the purpose of determining the rate of estate 
duly. In Re Hodson 's Settlement Brookes v. Attorney General while examining G 
the application of a similar provision in an English Act to decide whether the 
>-
amount under the settlement could be aggregated with the other estate of the 
deceased-settler the Court formulated the following test to decide when it 
could be said that the pro

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