SMT. SAKKUBAI SRINIVASAN v. ASSISTANT CONTROLLER OF ESTATE DUTY
[Citation -1984-LL-0323-3]

Citation 1984-LL-0323-3
Appellant Name SMT. SAKKUBAI SRINIVASAN
Respondent Name ASSISTANT CONTROLLER OF ESTATE DUTY
Court ITAT
Relevant Act Income-tax
Date of Order 23/03/1984
Judgment View Judgment
Keyword Tags property passing on death • system of accounting • assistant controller • method of accounting • accountable person • written agreement • principal value • estate duty • cash basis
Bot Summary: Though the fees might not have been specifically mentioned, the deceased had a right to fees which is usually charged in such cases. There is no case for holding that the unrealised fees outstanding on the date of death of the deceased did not constitute property liable to assessment for the purpose of estate duty. Neither the fact that there was no written agreement between the deceased and the clients in most of the cases nor the bills had not been raised by the deceased for the work done in relation to these clients as on the date of death stand in the way of treatment of these fees as property. The learned counsel for the assessee kly urged that there was no contract between the deceased and his clients for the payment of fees. The very fact that the deceased rendered services would imply that there was a contract for the payment of fees towards his services. The deceased rendered services to his clients in respect of which the fees was paid to the legal heirs after the death of the deceased. The very fact that after the death of the deceased bills were raised and the clients have made the payments would go to show that the payment has been made by the clients for the services rendered by the deceased.


deceased, Shri J. Srinivasan, leading chartered accountant at Bangalore, passed away on 11-5-1975. estate duty account was filed by accountable person. In said account, movable assets declared included sum of Rs. 1,29,150 on account of fees receivable from clients on date of death, viz., 11-5-1975. In addition to that, sum of Rs. 10,850 was recovered as fees for work done by deceased. accountable person claimed that said amounts are not includible in net principal value of estate as deceased was maintaining accounts on cash basis. No bills were raised during lifetime of deceased. There was no understanding or contract with clients to pay any amount by way of fees, etc. Assistant Controller did not accept these submissions. He held that mere fact that accounts were kept on cash basis will not decide question as chargeability to estate duty did not depend upon method of accounting which is relevant only for purpose of income-tax assessments. deceased was entitled to get his remuneration for services rendered and there is present obligation on part of clients to make payment. amount of fees may be sum usually charged in such cases. When chartered accountant renders services, he has got right to remuneration which gives rise to 'actionable claim'. Thus, he did not accept contention that right to fees is not property. fact that no bills were raised during lifetime of deceased, does not affect his right to collect fees. Though fees might not have been specifically mentioned, deceased had right to fees which is usually charged in such cases. He gave deduction of Rs. 7,000 as collection charges. Thus, he included Rs. 1,32,250 as fees receivable in principal value of estate. 2. accountable person appealed to Appellate Controller. He held that work done by deceased for regular clients were all done at their instance and right to fees had accrued in respect of all of them as on date of death. There is no case for holding that unrealised fees outstanding on date of death of deceased did not constitute property liable to assessment for purpose of estate duty. Neither fact that there was no written agreement between deceased and clients in most of cases nor bills had not been raised by deceased for work done in relation to these clients as on date of death stand in way of treatment of these fees as property. These fees were all realised within reasonable period after death. deduction of 5 per cent allowed by Assistant Controller meets fully requirements of case. Thus, he upheld inclusion of Rs. 1,32,250 in principal value of estate. Against said order, assessee has preferred this appeal. 3. learned counsel for assessee kly urged that there was no contract between deceased and his clients for payment of fees. No bills were raised during his lifetime. There was no understanding or contract with clients. At any rate, there is no ascertainment of any amount. deceased maintains cash system of accounting. Hence, amount of outstanding fees is not includible in principal value of estate. He urged that ratio laid down in case of A.T. Mirji v. CWT [1980] 126 ITR 93 (Kar.) applies to estate duty assessment also. Alternatively he urged that if outstanding fees is includible, discount should be allowed at higher percentage. learned departmental representative submitted that there is quasi-contract between deceased and his clients. very fact that deceased rendered services would imply that there was contract for payment of fees towards his services. In case of chartered accountants no bills are raised immediately at time of rendering services. Bills are raised subsequently on basis of fees charged in earlier years. It is on that basis that bills were raised subsequently after death of deceased and clients have paid amounts. All this would clearly show that amounts were due to deceased for services rendered. Instead of paying amount during lifetime of deceased, payment was postponed but deceased had right for amounts due from his clients for services rendered. Reliance was placed on decision in Mrs. Menaben V. Parikh v. CED [1979] 116 ITR 840 (Bom.). It was also submitted that section 17 of Indian Contract Act, 1872, would apply. 4. We have considered rival submissions. deceased rendered services to his clients in respect of which fees was paid to legal heirs after death of deceased. When services are rendered by deceased, there was implied agreement with his clients for payment of fees. payment of fees normally depends on work done and fees charged for similar work done in earlier year and if any additional work is done, extra for similar work done in earlier year and if any additional work is done, extra payment will have to be made by clients. Merely because there is no written agreement, it cannot be said that deceased did not expect any payment for services. deceased being professional man would not have rendered services freely to his clients. He would have naturally expected his clients to pay fees for services rendered by him. Thus, there was implied understanding for payment of fees for services rendered by deceased. Merely because bills have not been raised, it cannot be taken that no amount was outstanding towards fees receivable for services rendered. very fact that after death of deceased bills were raised and clients have made payments would go to show that payment has been made by clients for services rendered by deceased. question of maintaining accounts on cash basis may not be very much relevant for purpose of estate duty. Hence, decision of Karnataka High Court in A.T. Mirji's case dealing with system of accounting of income-tax practitioner for purpose of wealth-tax may not be applicable while considering estate duty assessment. system of accountancy is not very much relevant for estate duty assessment. What is required for estate duty assessment is whether property has passed on death of deceased. In this connection, it may be relevant to refer to section 2(16) of Estate Duty Act, 1953 ('the Act') which reads as under: "'Property passing on death' includes property passing either immediately on death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and 'on death' includes 'at period ascertainable only by reference to death';" It is clear from above provision that even property passing after any interval either certainly or contingently on death is deemed as property passing on death of deceased. In Mrs. Menaben V. Parikh's case Bombay High Court held that immediate quantification is not essential attribute of 'property' under Act. Property passing on death would include property passing either immediately on death or after interval either certainly or contingently in view of wide ambit of statutory provisions. On facts of that case, it was held that salary must be taken to accrue from month to month and deceased had legal right to receive share of profits and could have disposed of this right. ratio laid down therein squarely applies to instant case. Thus, in our view, fee receivable from clients for services rendered by deceased is includible in principal value of estate. Thus, it was rightly included. Coming to alternative contention, we think higher discount should be allowed instead of 5 per cent allowed by Assistant Controller. If clients have not paid fee, normally, accountable person had to file suits and there would have been litigation. Taking entire facts into account, we think it proper to allow discount of 25 per cent on fees receivable by deceased. We direct Assistant Controller to allow same. 5. In result, appeal is partly allowed. *** SMT. SAKKUBAI SRINIVASAN v. ASSISTANT CONTROLLER OF ESTATE DUTY
Report Error