JUDGMENT

1. On an application of the assessee under Section 64(1) of the Estate Duty Act, 1953, the Tribunal has referred the following question :

"Whether, the Tribunal was justified in law in holding that the estate duty payable in respect of the estate of the deceased is not deductible from the principal value of the estate ?"

2. None appeared for the accountable person though the matter has been listed twice.

3. Heard learned counsel for the Revenue.

4. One Smt. Jamuna Devi Bazaz died on October 5, 1979. The accountable person, Sri Mohanlal Bazaz, filed an estate duty return on September 13, 1980. The Assistant Controller of Estate Duty computed the principal value of the estate of the deceased at Rs. 9,05,451. During the course of valuing the estate for the purpose of estate duty, the assessee claimed that there shall be a deduction of estate duty liability from the principal value of the estate. This claim was negatived by the Assistant Controller of Estate Duty in his order dated March 31, 1987. In appeal the Controller of Estate Duty (Appeals) has also negatived the claim of the accountable person. In second appeal before the Tribunal it has considered the decision of the Gujarat High Court in Smt. Shantaben Narottamdas v.,CED and the decision of the Gauhati High Court in Bhawani Shankar Baya-ria v. Asst. CED [1982] 137 ITR 801, and dismissed the appeal of the accountable person on the same grounds.

5. In Smt. Shantaben Narottamdas v. CED , the Gujarat High Court has considered a similar issue and concluded that the accountable person is not entitled for deduction of estate duty liability from the principal value of the estate of the deceased. It discussed the issue at pages 371 to 374 which reads as under :

"In our opinion, the argument urged on behalf of the assessee is built on foundation of quicksand. In the first place, Section 74(1), on a plain reading, negatives the contention of learned counsel for the assessee. It is in terms, inter alia, provided thereby that the estate duty payable in respect of the property passing on the death of the deceased shall be a first charge on the immovable property so passing on his death regardless in whom the property may vest only after the debts and incumbrances allowable under Part VI (which includes Section 44} of the Act. Two aspects require to be emphasised : (i) that the charge arises only in respect of the immovable property (and not of movable property), and (ii) the charge will operate only after the debts and incumbrances allowable under Section 44 and other provisions contained in Part VI. The importance of the first circumstance, namely, that the charge in respect of the estate duty will operate only in respect of the immovable property cannot be overemphasised. If the arguments of learned counsel for the assessee were right, the entire estate including the movable property passing on the death would at the very moment of death and at the identical moment of passing be burdened by incumbrance arising in the context of the exig'i-bility to pay the estate duty. Under Section 74(1), however, the charge will operate in respect of only the immovable property and not the movable property. This would introduce a fatal contradiction in the argument for if the estate of the deceased were to contain only movable property, Section 74(1) will not be attracted and estate duty payable thereon cannot be deducted from the value of the estate passing on the death of the deceased. The second point of significance is that Section 74(1) itself draws a distinction between the liability to pay the estate duty on the one hand and debts and incumbrances to be excluded from the estate on the other. It postulates that the liability to pay the estate duty is not otherwise deductible from the valuation of the estate passing on the death of the deceased. If that was not so there was no point in providing that the charge will operate only after the debts and incumbrances allowable under Section 44 and other provisions of Part VI of the Act are accounted for. Section 74(1) gives a clue to the legislative mind and indicates that the Legislature has proceeded on the assumption that the estate duty payable on the estate passing on the death of the deceased would not fall within the permissible deductions within the meaning of Section 44 of the Act. As observed earlier, this is the view which has prevailed with the Karnataka High Court in Smt. V. Pmmila's case [1975] 99 ITR 221. Faced with this difficulty, counsel for the assessee argued that Section 44 must be interpreted independently of the provisions contained in Section 74 of the Act and that, as provided therein, in determining the value of the estate for the purpose of estate duty, allowance shall be made for debts and incumbrances. It is contended that the expression 'incumbrance' would be attracted in respect of the statutory liability for payment of the estate duty and that, on that account, the amount payable as estate duty deserves to be excluded from the value of the estate. Now, in the first place, Section 44, inter alia, provides for exclusion of debts and incumbrances in determining the value of the estate passing on the death of the deceased. The question necessarily arises what exactly is meant by 'debts' and 'incumbrances'. Learned counsel for the assessee is unable to show that the expression 'debts' is referable to debts other than debts of the deceased. What must be deducted from the estate passing on the death are the debts of the deceased for the very good reason that it is the surplus of the assets over the liabilities which passes on the death of the deceased regardless of in whose hands it passes. That being the position, the expression 'debts' cannot but refer to debts of the deceased whose estate has passed upon his death. If the expression 'debts' is referable to the estate of the deceased, the expression 'incumbrances' must also of logical necessity refer to incumbrances created by the deceased during his lifetime. The expression 'incumbrance' has been defined by Mozley and Whitely in Law Dictionary, sixth edition, at page 173, as meaning--'a charge or mortgage upon real or personal estate'. The Act itself defines the expression 'incumbrance' as 'including mortgages and terminable charges', as per Section 2(10). In Wharton's Law Lexicon, 'incumbrance' has been defined as meaning 'a claim, lien or liability, attached to property'. Now, the liability simpliciter to pay the duty not giving rise to any charge even if created by a statute cannot be said to be an incumbrance, nor can it be said to have been created by the deceased. A reading of Clauses (a) and (b) of Section 44 reveals that the Legislature had in mind the incumbrance created by the deceased. If this was not so, Clause (a) would not have referred to an incumbrance created by disposition by the deceased whilst making a provision for exclusion of certain types of incumbrances from the purview of the first paragraph of Section 44. It is, however, argued that the expression 'incumbrance' must be read and construed in the sense of a burden on the estate passing on the death of the deceased person which burden arises instantaneously with the death of the deceased by virtue of its exigibility to pay tax under Section 5 of the Act. It is no doubt a statutory liability but the mere fact that the liability is created by the statute will not make it a liability coupled with a charge on all the properties, movable and immovable, comprised in the estate of the deceased. A charge will not fasten itself on the properties unless a charge is created by the parties or by operation of law. Even under Section 74 a charge would be created only in respect of immovable properties and not in respect of movable properties. What is more, it would not fall within the ambit of the expression 'debts' and 'incum-brances' employed in Section 44 of the Act particularly having regard to the fact that we are of the view that the expression 'debts' is referable to the debts of the deceased and also that the expression 'incumbrances' is referable to the incumbrances created by the deceased. Besides, there is yet another fundamental fallacy in the argument urged on behalf of the assessee. It is assumed by him that the death of a deceased, passing of the estate and exigibility to tax, all the three take place simultaneously at an identical notional point of time. There is no warrant for this proposition. The taxing event is the passing of the property on the death of a person. And the property which passes on the death of a person is the property in respect of which title is transmitted to the heirs and successors of the deceased on account of the death. (We are, for the present, not concerned with the inclusive definition contained in Section 2(16) of the Act). When does transmission of title then take place ? So long as the deceased was alive, no transmission of title by operation of law by testamentary succession or intestate succession could have taken place and no property could have passed from his hands to the hands of his heirs and successors. Passing of property can, therefore, take place only upon the death at the instantaneous moment (however small in the time dimension) next after the moment of death. It would happen at that infinitesimal point of time which intervenes between the last breath exhaled by the deceased and the next breath that he might have inhaled if he were not dead. The concept of time itself is a concept of human mind and, therefore, we have to visualize a minimal point of the time when the deceased breathed his last and visualise the very next moment, which is the point of time when passing of the estate takes place. Passing of property must follow the death of necessity and, therefore, death and passing cannot be simultaneous."

6. The Gauhati High Court also has considered the similar issue in Bha-want Shankar Bagaria v. Asst CED [1982] 137 ITR 801. At page 808, they also have taken the same view as has been taken by the Gujarat High Court holding that an obligation like charge created under Section 74 of the Act which came to be attached to the property of the deceased, not so long as he was alive, but as a consequence of death. The relevant observation reads as under :

"We are clearly of opinion that while evaluating the principal value of the property which passes on the death of a deceased under the Estate Duty Act only such obligation or burden that came to be attached to the property while the deceased was alive can be taken into account. The obligation like the charge created under Section 74 of the Act which gets attached to the property of the deceased, not so long as he was alive, but as a consequence of death, is not to be taken into account in determining its principal value."

7. Considering the reasons given by the Gauhati High Court and the Gujarat High Court we found no merit in the question raised by the accountable person. In the result, we answer the question in the affirmative, i.e, in favour of the Revenue and against the accountable person. The reference application is accordingly disposed of.

8. All parties are to act on a xerox signed copy of this dictated order on the usual undertakings.