MST. RASHIDA BEGUM VS ASSISTANT CONTROLLER, ESTATE DUTY, KARACHIASSISTANT CONTROLLER, ESTATE DUTY, KARACHI, 1992 PTD-KARACHI-HIGH-COURT-SINDH 1001 (1992)

(a) Estate Duty Act (X of 1950)---

----Preamble & S-58-A ---Finance Ordinance (XXX of 1979), S.3---General Clauses Act (X of 1897), S.6---Repeal of Estate Duty Act, 1950 by Finance Ordinance, 1979, S.3---In the absence of saving clause in S.3, Finance Ordinance, 1979, provision of S.6, General Clauses Act, 1897 was not applicable to the proceedings initiated by the Assistant Collector of Estate Duty on 16-9-1980 after the Estate Duty Act, 1950 had been repealed in June, 1979.

(b) General Clauses Act (X of 1897)---

----S.6---Scope and application of S.6.

Under clause (c) of section 6 of the General Clauses Act, 1897 unless a different intention appears, repeal of an enactment shall not affect any right, privilege, obligation or liability acquired, accrued or incurred under the repealed enactment, and under clause (e) the repeal does not affect any investigation, legal proceeding or remedy in respect of any such right, Privilege, obligation, liability, penalty or forfeiture acquired, accrued or incurred under the repealed law.

(c) Estate Duty Act (X of 1950)

----Ss.38 & 53---Levy of estate duty---Procedure.

(d) Estate Duty Act (X of 1950)---

----Ss.53(3) & 58-A---Finance Ordinance (XXX of 1979), S.3---Finaace Ordinance (XII of 1982), Ss.8 & 9---General Clauses Act (X of 1897), S.6-- Deceased died on 10-1-1979 and before the expiry of six months period provided under S.53(3), the Estate Duty Act, 1950 stood repealed on 28-6-1979 by S.3, Finance Ordinance, 1979---No notice having been issued to the heirs of deceased (applicant) prior to the repeal of Estate Duty Act, 1950 and there being no saving clause in the repealing law no proceedings were pending when the Act was repealed and proceedings could not be instituted later on against the heirs (applicant) only on the basis of S.6 of the General Clauses Act, 1897---Provisions of Ss.8 & 9 of the Finance Ordinance, 1982 having filled the lacuna left by S.3, Finance Ordinance, 1979 which had repealed the Estate Duty Act, 1950, however, validated the proceedings initiated against the heirs (applicant) after the repeal of the Estate Duty Act, 1950.

Muhammad Ali v. The State PLD 1980 Lah. 195 ref.

(e) Estate Duty Act (X of 1950)---

----S.9---Condition to be satisfied for a gift to come within the mischief of S.9 of the Act.

Admittedly, in the present case, the gift was made within 5 years of the death of the deceased, gift tax had been paid on the gift and the gifted properties had been sold by the donees prior to the death of the deceased. According to section 9, Estate Duty Act, 1950 if the gift had not been made bona fide within 5 years or more before the death of the deceased and on which gift tax had not been paid, the gifted property was deemed to have passed on the death of the deceased and as such would be deemed to form part of the estate of the deceased for purposes of the Estate Duty Act. The first condition in section 9 was satisfied as admittedly the gifts in question had been made within 5 years of the death of the deceased. However, for a gift to come within the mischief of section 9, the other condition to be satisfied was that on such gift, gift tax had not been paid. In the present case, admittedly, gift tax had been paid and as such the second condition was not satisfied. According to interpretation of section 9 of the Estate Duty Act, for a gift to come within the mischief of that section, both conditions had to be satisfied, and as the second condition about gift tax having not been paid was not satisfied, the properties, subject-matter of the gift in question would not have been deemed to have passed on the death of the deceased and as such were wrongly included in the estate of the deceased.

Dr. Nasim Ahmed Khan for Petitioner, 7, Nasrullah Awan for Respondent.

Date of hearing: 30th March, 1992.

JUDGMENT

NASIR ASLAM ZAHID, J.---On the application under section 59A(1) of the Estate Duty Act, 1950 (since repealed), the accountable person, namely, applicant Mst: Rashida Begum, the Income-tax Appellate Tribunal has referred the following three questions to this Court for decision arising out of the assessment to estate duty of the estate of the applicant's husband, late Abdul Khaliq Abdul Razzak, who died on 10-1-1979:---

"(1) Whether the Tribunal was justified in applying the provisions of clause 6 of the General Clauses Act in absence of a saving clause in section 3 of the Finance Ordinance, 1979, repealing the Estate Duty Act of 1950?"

(2) Whether the Tribunal rightly placed reliance on section 9 of the Finance Ordinance, 1982, for validating the action taken in the present case in spite of the fact that in the intervening period section 3A of the repealed Act, 1950 was not in existence, so as to provide authority to any official to initiate action under the repealed Estate Duty Act, 1950?"

(3) Whether the Tribunal was justified m upholding the inclusion of the property gifted and sold away before the death of the deceased under section 9 of the repealed Estate Duty Act?"

We have heard Dr. Nasim Ahmad Khan, learned counsel for the applicant and Mr. Nasrullah Awan, learned counsel for the Department.

2. According to the statement of the case drawn up by the Tribunal, the applicant, widow of deceased Abdul Khaliq Abdul Razzak, filed an account of statement in the prescribed Form ED-I, dated 23-4-1980 declaring the net principal value of the estate at Rs.12,14,16,899. The Assistant Controller of Estate Duty, Karachi issued a notice under section 58A of the Estate Duty Act, 1950 on 16-9-1980 proposing 1the net principal value of the estate at Rs.16,98,459, which included the proposed value of Rs.12,00,000 in respect of 70% of the values of the three immovable properties, which were gifted by the deceased to his wife (the applicant) and his three sons. The applicant filed objections, inter alia, pleading that the three immovable properties had been sold on 19-9-1978, four months before the death of the deceased for a sum of Rs. 10,00,000 and 30% shares of the deceased in the said properties (70% having been gifted) amounting to Rs.3,00,000 was credited to his personal account and the balance amount of Rs.7,00,000 had passed on to the respective donees according to their gifted shares. The applicant also raised a legal plea before the Assessing Officer that the Estate Duty Act had been repealed on 30-6-1979 (the correct date is 28-6-1979), and after the repeal of the Act, proceedings initiated under the Estate Duty Act were ultra vires as there was no saving clause in the repealing law.

The Assistant Controller, included the gifted properties in the estate of the deceased for the purposes of estate duty proceedings and held that the proceedings initiated after 28-6-1979 were valid. The case was taken by the applicant in appeal to the Appellate Tribunal where, inter alia, the following grounds were raised on behalf of the applicant:---

(a) The Assistant Controller of Estate Duty was not justified in initiating proceedings under the Estate Duty Act, 1950, after it was repealed on 28-6-1979; and

(b) The action of the Assistant Controller iii including in the estate of the deceased the three gifted properties on which gift tax had also been paid, was unjustified and unlawful.

The Appellate Tribunal held the legal pleas, raised on behalf of the applicant, to be devoid of force observing that section 6(e) of the General Clauses Act, 1897, was applicable to the proceedings despite absence of a saving clause and also relied upon section 9 of the Finance Ordinance, 1982 which reads as follows:---

"9. Validation of actions taken by any authority specified m section 3A of the Estate Duty Act, 1950 (X of 19501.--Anything done, action taken or order passed, or purporting to have been done, taken or passed, on or after the twenty-eighth day _of June, 1979, and before the commencement of this Ordinance, by or under the authorisation of any authority specified in section 3A of the Estate Duty Act, 1950 (X of 1950), shall be deemed to have been validly done, taken or passed and shall have and shall be deemed always to have-had effect accordingly."

In the circumstances, the applicant filed an application under section 59A(1) of the Estate Duty Act, 1950, before the Tribunal, and, as observed, the aforesaid three questions have been referred by the Tribunal to this Court for

decision.--

3. The first question relates to the applicability of section 6 of the General Clauses Act in the absence of a saving clause in section 3 of the Finance Ordinance which repealed the Estate Duty Act, 1950. Section 3 of the Finance Ordinance, 1979 read as follows:---

"3. Repeal of Act X of 1950.--The Estate Duty Act, 1950 (X of 1950), ishereby repealed.

In the absence of a saving clause in the repealing provision, the Tribunal relied upon section 6 of the General Clauses Act which reads as follows:--

Effect of repeal.--Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment made or hereafter to be made, then, unless a different intention appears, the repeal shall not:---

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;

and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed."

The only clauses of section 0 which arc relevant are clauses (c) and (c) and, in our view, neither of these two clauses or any other clause of the section was applicable to the proceedings initiated by the Assistant Controller of A Estate Duty on 16-9-1980 after the Estate Duty Act had been repealed in June, 1979.

Under clause (c) of section 6, unless a different intention appears, repeal of an enactment shall not affect any right, privilege, obligation or liability acquired, accrued or incurred under the repealed enactment, and under clause 8 (e) the repeal does not affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty or forfeiture acquired, accrued or incurred under the repealed law. Under the Estate Duty Act, 1950, the charging section was section 4, which read as follows:---

"4. 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, which passes on the death of such a person, a duty called "estate duty" at the rate laid down in the Schedule."

For the levy of Estate Duty the principal value is to be ascertained and until. the principal value is ascertained as provided in the Estate Duty Act, there is no levy of Estate Duty. In this context, reference may also be made to section 38 and section 53(3) of the Act. Under section 38 the method of ascertaining the principal value is laid down. Section 38 read as follows:---

"38.--(l) The principal value of any property shall be estimated to be the price which in the opinion of Controller it would fetch if sold in the open market at the time of the deceased's death:

Provided that, where the rules made under this Act so provide, the principal value of any property shall be determined in the manner prescribed.

(2) In estimating the principal value under this section the Controller shall fix the price of the property according to the market price at the time of the deceased's death and shall not make any reduction in the estimate on account of the estimate being made on the assumption that the whole property is to be placed on the market at one and the same time:

Provided that where it is proved to the satisfaction of the Controller that the value of the property has been depreciated by reason of the death of the deceased, the depreciation shall be taken into account in fixing the price."

Under section 53(3), every person accountable for estate duty is required to file an account of all the property in respect of which estate duty is payable and this he is required to do within six months of the death of the deceased. In the present case, the deceased died on 10-1-1979 and, before the expiry of six months period provided under section 53(3), the Estate Duty Act stood repealed on 28-6-1979 by section 3 of the Finance Ordinance, 1979. Then no notice had been issued to the applicant prior to the repeal of the Estate Duty Act. Admittedly no proceedings were pending when the Act was repealed.

Learned counsel for the applicant, Dr. Nasim Ahmed Khan, had relied upon a decision of the Lahore High Court in the case of Muhammad Ali v. The State PLD 1980 Lah. 195. In paras. 14, 15 and 16 of the aforesaid judgment it was observed as follows:--

"14. The occurrence in the instant case admittedly took place on 27-11-1975. No action was taken against the appellant until lodging of the complaint on 26th June, 1976. The complaint was in regard to an offence allegedly committed during the enforcement of the old Act, but was lodged after its repeal in a Court constituted under section.31 of the Drugs Act, 1976.

15. The situation obtaining in this case, therefore, inevitably gives rise to two points for consideration: (1) whether the vested right as contemplated under section 6 of the General Clauses Act had accrued in favour of the State at the time of the repeal of the Drugs Act, 1940, and (2) whether the forum constituted under the Drugs Act, 1976, would have retrospective effect to try offences committed under the provisions of the Drugs Act, 1940.

16. So far as the first question is concerned, it is clear that the object of enacting section 6 of the General Clauses Act was to protect rights and liabilities already accrued or incurred under the repealed law. The words "right accrued" occurring in section 6 of the General Clauses Act was construed by the Privy Council in Abbot v. Minister for Law 1895 AC 425 and it was held that the mere right existing on the date of the repealing statute without any act done by an individual towards availing himself of that right cannot appropriately be deemed a "right accrued" within the meaning of the enactment. In the instant case, the complaint was not made regarding the alleged offence committed on 27-11-1975 before any Magistrate competent to try the offence under section 18 read with section 27 of the Drugs Act, 1940. Therefore, a vested right or incurred liability as envisaged under section 6 of the General Clauses Act could not be deemed to have accrued for enforcing the same under the repealing enactment."

We are of the view that as neither any notice had been issued nor any proceedings had been initiated against the applicant under the Estate Duty Act, 1950, and rules framed thereunder before the Act was repealed and as there was no saving clause in the repealing law, proceedings later on could not be instituted against the applicant only on the basis of section 6 of the General Clauses Act. The decision of the Lahore High Court also supports the case of the applicant in this regard. Our answer to the first question therefore is in the negative.

5. For deciding the second question, reference to sections 8 and 9 of the Finance Ordinance, 1982, is necessary. Apparently, realising that there was no saving clause in section 3 of the Finance Ordinance, 1979, which simply repealed the Estate Duty Act, 1950, sections 8 and 9 of the Finance Ordinance, 1982, were enacted. Section 8 substituted section 3 of the Finance Ordinance, 1979 as follows:---

"8.Amendment of Finance Ordinance 1979 (XXX of 1979)--In the Finance Ordinance, 1979 (XXX of 1979), for section 3 the following shall be substituted and shall be deemed to have been so substituted on the twenty-eighth day of June, 1979, namely:---

3. Repeal of Act X of 1950.--The Estate Duty Act, 1950 (X of 1950), is hereby repealed.

(2) Upon the repeal of the aforesaid Act,--

(a) all proceedings which, immediately before such repeal, may be pending before the authorities appointed thereunder shall stand transferred for final disposal to such officers as the Central Board of Revenue may, by notification in the official Gazette, designate; and

(b) all proceedings which could have been initiated under the aforesaid Act had it not been repealed in the case of any person who died before such repeal shall be initiated and finally disposed of by such officers as the. Central Board of Revenue may; by notification in the official Gazette, designate.

(3) Any proceedings transferred or remanded to an officer in pursuance of subsection (2) shall be disposed of by him in accordance with the provisions of the aforesaid Act."

It would be observed that by the substituted repealing provision, a saving clause was also added and the substituted repealing provision was made effective from 28-6-1979, the date on which the Estate Duty Act was repealed.

Then after section 8, section 9 of the Finance Ordinance, 1982, made provision for validation of action taken by any authority specified in section 3-A of the Estate Duty Act. Section 9 of the Finance Ordinance, 1982 reads as follows:---

"9.Validation of actions taken by any authority specified in section 3-A of the Estate Duty Act. 1950 (X of 1950).--Anything done, action taken or order passed, or purported to have been done, taken or passed, on after the twenty-eighth day of June, 1979, and before the commencement of this Ordinance, by, or under the authorisation of,any authority specified in section 3-A of the Estate Duty Act, 1950 (X of 1950) shall be deemed to have been validly done, taken or passed and shall have and shall be deemed always to have effect accordingly."

The saving clause (section 8) and the validation clause (section 9) of Finance Ordinance, 1982, filled the lacuna left by section 3 of the Finance Ordinance, 1979, which had repealed the Estate Duty Act, 1950. Our answer to the question No.2, therefore, is that section 9 of the Finance Ordinance, 1982 read with section 8 of the said Ordinance validated the proceedings initiated against the applicant after the repeal of the Estate Duty Act, 1950.

6. The last question referred to us is whether the Tribunal was justified in upholding the inclusion of the properties gifted and sold away before the death of the deceased under section 9 of the Estate Duty Act. Section 9 read as follows:--

"9. 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 five years or more before the death of the deceased and on which gift-tax has not been paid shall be deemed to pass on the death:

Provided that in the case of gifts made for public or for any charitable purpose within the meaning of section 2 of the Charitable Endowments Act, 1890, the period shall be three months and not five years."

Admittedly, in this case, the gift was made within 5 years of the death of the deceased, gift tax had been paid on the gift and the gifted properties had been sold by the donees prior to the death of the deceased. According to section 9, if the gift had not been made bona fide within 5 years or more before the death of the deceased and on which gift tax had not been paid, the gifted property was deemed to have passed on the death of the deceased and as such would be deemed to form part of the estate of the deceased for purposes of the Estate Duty Act. The first condition in section 9 was satisfied as admittedly the gifts in question had been made within 5 years of the death of the deceased. However, for a gift to come within the mischief of section 9, the other condition to be satisfied was that on such gift, gift tax had not been paid in this case, admittedly, gift tax had been paid and as such the second condition was not satisfied. According to our interpretation of section 9 of the Estate Duty Act, for a gift to come within the mischief of that section, both conditions had to be satisfied, and as the second condition about gift tax having not been paid was not satisfied, the properties subject matter of the gift in question, would not have been deemed to have passed on the death of the deceased and as such were wrongly included in the estate of the deceased. The third question was therefore, wrongly decided by the Tribunal and our answer to the third question is in the negative.

7. This Estate Duty Reference stands decided in the above terms. There will be no order as to costs.

A copy of this judgment may be sent to the Registrar of the Appellate Tribunal.

M.BA./R-209/KOrder accordingly.