Full Judgment
(2) The learned CED (A) ought to have held that in the case of the appellant since the annuity does not exceed Rs. 15,000 per annum, the balance in the Superannuation Fund of the deceased amounting to Rs. 29,463 ought to be exempted totally from the estate of the deceased and is not aggregable with the properties of the deceased under Section 34.
2. The deceased in this case was the member of the Calico Employees Superannuation Fund which as per the orders of the two lower authorities is an approved one. In the estate duty return, the A.P. had claimed an exemption of Rs. 29,463 being the "amount received" from the aforesaid fund. The ACED was of the view that the entire amount was to be aggregated to the estate and thereafter a rebate was to be allowed, He accordingly proceeded to do so. This was challenged before the CED (A) by the accountable person and in doing so reliance was placed on the provisions of Section 29A of the Estate Duty Act. It was contended before the CED (A) that under the provisions of Section 29A(b) the amount was exempt from estate duty. The CED(A) proceeded to dispose off the matter on the following lines : 3.1 I agree with the contentions of the learned representative. In view of the specific exemption under Section 29A(b) of the E.D. Act, superannuation fund to the extent of Rs. 15,000 is exempt from the estate duty. The ACED is, therefore, directed to allow exemption of Rs. 15,000 out of the superannuation fund from the approved Calico Employees Superannuation received by the deceased.
3. Being dissatisfied with the order of the CED (A) the A.P. has now come up in appeal before us. It has been submitted during the course of the hearing and as stated in the grounds of appeal that the appellant is entitled to exemption of Rs. 29,463 and not Rs. 15,000 as has been done by the CED (A). The learned D.R., on the other hand, contended that the exemption of Rs. 15,000 had been rightly given by the CED (A) and as envisaged by Section 29A(b) of the Act.
4. We have examined the rival contentions. According to us the matter has to be adjudicated upon by going right back to 1965 when Section 29A was introduced as a piece of legislation by means of the Finance Act, 1965 (w.e.f. 1-4-1965). An extract from the speech of the Hon'ble Finance Minister in Parliament is relevant. This is as under : Again, when a pension is given to the family of a deceased employee by Government or by some other body or out of a superannuation fund created by an employer and approved under the Income-tax Act, or out of a similar fund maintained by any of the international agencies, the capitalised value of the pension attracts Estate Duty. It is considered necessary to rectify the hardship arising in such cases by exempting such pension from Estate Duty. The loss of revenue as a result of these measures will be nominal.
4.1 We would at this stage also reproduce the relevant portion of the Finance Bill, 1965 which reads as follows : Sub-clause (vi) seeks to insert a new Section 29A in the Estate Duty Act to secure that estate duty shall not be attracted in respect of any pension payable on the death of an employee to his widow or other dependants under the relevant pension rules of the Central Government, a State Government, a local authority or a public sector corporation or in respect of any annuity or pension payable to the widow or dependants of the employee from a superannuation fund approved under the Indian Income-tax Act, 1922 or the Income-tax Act, 1961, or from a superannuation or pension fund established by international organisation to be notified by the Central Government.
There will be a limit of Rs. 15,000 per annum on the annuity or pension payable out of an approved superannuation fund which qualifies for this exemption.
4.2 It seems that the idea behind the introduction of this piece of legislation was that on amounts being received on account of pension by the family of a deceased employee or amounts being received out of a superannuation fund created by an employer and approved by the income-tax authorities, no estate duty would be leviable inasmuch as the earlier provision to tax the capitalised value of such amounts caused great hardship.
5. We would now go to the provisions of Section 29A, Sub-section (b) which reads as follows : (i) a superannuation fund approved under the Indian Income-tax Act, 1922 (11 of 1922) or the Income-tax Act, 1961 (43 of 1961), to the extent to which the amount of such annuity or pension does not exceed the equivalent of fifteen thousand rupees per annum, or (ii) a superannuation or pension fund established by such international organisations as the Central Government may, by notification in the Gazette, specify in this behalf.
5.1 The superannuation funds are dealt with in Schedule IV, Part B of the Income-tax Act, 1961. The scheme of such funds as detailed in the aforesaid Schedule has to be read with Rules 82 to 97 of the Income-tax Rules, 1962. In order to ascertain the nature of the aforesaid funds, we reproduce certain relevant clauses of the Schedule.
3(b) : the fund shall have for its sole purpose the provision of annuities for employees in the trade or undertaking on their retirement at or after a specified age or on their becoming incapacitated prior to such retirement, or for the widows, children or dependants of persons who are or have been such employees on the death of those persons ; It is quite clear that the purpose of the fund is to provide annuities to the employees during their lifetime or to their dependants on their death.
3(c) : the employer in the trade or undertaking shall be a contributor to the fund ; Prom this it is apparent that it is the employer who contributes to the aforesaid superannuation fund.
5.2 We would refer to certain I.T. Rules which are important for the purpose of this appeal: 89. "For the purpose of providing the annuities for the beneficiaries, the trustees shall (i) enter into a scheme of insurance with the Life Insurance Corporation established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (ii) accumulate the contributions in respect of each beneficiary and purchase an annuity from the said Life Insurance Corporation of India at the time of the retirement or death of each employee or on his becoming incapacitated prior to retirement.
91. (1) No beneficiary shall have any interest in any insurance policy taken out by the trustee under the rules of a fund and he shall be entitled only to an annuity from the fund.
(2) No money belonging to the fund shall be receivable by the employer under any circumstances nor shall the employer have any lien or charge on the fund.
5.3 We would at this stage also refer to the provisions of the other Acts to examine whether amounts in respect of the superannuation funds are exigible to Income-tax or Wealth-tax.
"(13) Any payment from an approved superannuation fund made (i) on the death of a beneficiary ; or (ii) to an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement; or (iii) by way of refund of contributions on the death of a beneficiary ; or (iv) by way of refund of contributions to an employee on his leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement, to the extent to which such payment does not, exceed the contributions made prior to the commencement of this Act and any interest thereon.
A reading of the above provision clearly shows that the payments from approved superannuation funds on the death of a beneficiary or under certain other circumstances are not liable to tax except the situation envisaged in Section 10(13)(iv) of the IT Act.
5.4 An examination of the provisions of the Wealth-tax Act also shows that the amounts lying in the superannuation funds are not treated as wealth under the Wealth-tax Act. In fact Section 5(l)(vii) exempts from wealth-tax the right of an assessee to receive a pension or life annuity in respect of past services under an employer. According to Section 5(l)(xvii) the amount standing to the credit of an assessee in a provident fund maintained by an employer, which is a recognised provident fund under the Income-tax Act or a fund to which the Provident Funds Act, 1925 applies is not liable to wealth-tax. The other provision is contained in Section 5(l)(xvii-d) which reads as follows: any property held by the trustees on behalf of any superannuation fund which is an approved superannuation fund within the meaning of Clause (6) of Section 2 of the Income-tax Act.
A reading of this clause shows that even the property held by trustees on behalf of the superannuation fund is fully exempt under the Wealth-tax Act.
5.5 We have drawn reference to the relevant provisions of the other Acts to show that the amounts pertaining to the Approved Superannuation Funds are not liable to income-tax or wealth-tax with the exception of Section 10(13)(iv) of the Income-tax Act (and that also in respect of a part of the contribution). According to us the idea behind the legislation by means of which Section 29A was introduced was to exempt the amounts received from Approved Superannuation Fund and such an intention would not be capable of two opinions inasmuch as none of the other Acts bring the aforesaid amount to tax. The learned CED(A) in this case has exempted a sum of Rs. 15,000 which according to him, is what Section 29A(b) provided. According to us he has misinterpreted the same inasmuch as the words used are "fifteen thousand rupees per annum". A reading of the provisions of the Act as well as the Rules pertaining to Superannuation Funds clearly shows that during the lifetime of an employee, the employer is supposed to contribute to the Approved Superannuation Fund a certain amount. All such payments are allowed as a deduction in the tax assessment of the employer. According to the scheme the employee is entitled to the payment of an annuity from the Approved Superannuation Fund either on his retirement, incapacitation or after his death (to his legal heirs). According to us the provision of Sub-Section (b) of Section 29A is that the amounts due to the deceased from an Approved Superannuation Fund are exempt from the charge of estate duty provided the payment to the legal heirs (as in the present case) does not exceed fifteen thousand rupees per annum.
For instance, in the matter before us the amount received by the legal heirs is Rs. 29,463. According to the approved Calico Employees' Superannuation Fund in case the legal heirs received this amount in one lump sum, then only a sum of Rs. 15,000 would be exempt as has been done by the CED (A) and the capitalised value of the excess amount would become chargeable to estate duty. However, if the aforesaid amount of Rs. 29,463 is paid to the legal heirs over a period of time exceeding one year, then nothing would be liable to estate duty in case the payment in any year does not exceed Rs. 15,000. To give an example in case Rs. 29,463 is payable immediately in a lump sum, then Rs. 15,000 would be exempt as stated above and Rs. 14,463 would be liable for estate duty on its capitalised value. However, in case the sum of Rs. 29,463 is paid in 3 equal installments over a period of 3 years, then nothing would be liable to estate duty as the payment in any one year would not exceed Rs. 15,000. According to us these are the provisions of Section 29A, Sub-section (b) and this is how we interpret them.
5.6 However, none of the two lower authorities have brought on record as to what were the terms and conditions of the Calico Employees' Superannuation Fund in order to show as to how the aforesaid sum of Rs. 29,463 was to be paid to the legal heirs and over what period of time.
We would for this limited purpose restore the matter back to the file of the Assistant Controller to enable him to examine the scheme of the Superannuation Fund under consideration and thereafter decide the issue of exemption on the basis of the guidelines given in the preceding paras and according to the interpretation of Section 29A, Sub-section (b) given by us. We would however like to clarify that this decision of ours should not be interpreted in a way so as to deprive the A.P. of the relief which has already been obtained by her from the CED (A). The Assistant Controller is only to decide the exemption in respect of the balance amount over and above Rs. 15,000.