Judgment:
N.K. Jain, J.
The Tribunal, Indore Bench, Indore, has at the instance of the revenue, made this reference under section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as , 'the Act'), to this court for resolution of the following question, said to be of law, arising out of the Tribunal's order dated 23-11-1994, passed in EDA. No. 6/Ind/1988 :
'Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the interest charged by the Assistant Controller under section 70 of the Estate Duty Act on the demand of estate duty determined provisionally under section 57, is not sustainable in law ?'
2. The accountable person, in the instant case is Maharani Marunalinidevi Puar, the widow of later Shri Anand Rao Puar, ex-ruler of erstwhile State Dhar. She initially filed statement of account disclosing the principal value of the Estate of the deceased at Rs. 81,50,000. On the basis of that statement a provisional assessment was made by the Controller of Estate Duty on 11-5-1981, raising a demand of Rs. 51,00,510. However, the accountable person on 1-2-1982, submitted a revised statement claiming that in the original statement, the property was wrongly shown as individual property of the deceased. In this revised statement the principal value of the estate was shown at Rs. 40,83,518. After filing the revised statement the accountable person had been pressing the revenue to complete the final assessment. She has also addressed several letters to the assessing officer, the Controller of Estate Duty as also to the Central Board of Direct Taxes that the amount of duty already paid by her, exceeds the duty payable on the revised statement and as such the revenue should stay further recovery proceedings initiated on the basis of provisional assessment. It appears that the Controllr of Estate Duty had stayed the recovery of the aforesaid demand on 17-9-1982, and had directed the assessing officer to complete the assessment latest by 15-3-1983. However, the assessment could not be completed by that date. The assessment was finally completed on 31-12-1986, wherein the assessing officer had charged interest amounting to Rs. 20,12,509 by taking recourse to section 70(1) of the Act.
3. The accountable person-assessee appealed before the Assistant Controller of Estate Duty who while allowing the appeal held that the provisions of section 70 of the Act do not apply to the payment of demand raised on provisional assessment. Feeling aggrieved by the decision of the Assistant Controller Estate Duty, the revenue preferred appeal before the Tribunal. The Tribunal vide order dated 23-11-1994, dismissed the appeal of the revenue holding that in the circumstances of the case, charging of interest under section 70(1) would not be justified. Unsatisfied with the view taken by the Tribunal, prayer was made by the revenue to refer the question, as extracted above, for decision of this court under section 64(1) of the Act. The prayer was accepted by the Tribunal, thus giving rise to this reference.
4. We have heard Shri R.L. Jain, learned counsel for the revenue, and Shri Milind Phadke, learned counsel for the respondent-assessee.
5. It was contended by the learned counsel for the revenue that the interest is chargeable even on a demand arising out of the provisional assessment. It was further submitted that the respondent-assessee herself had made many representations to the revenue authorities for stay of the recovery proceedings inasmuch as she had no funds to pay the demand and as such the revenue authorities were justified in charging interest under section 70(1) of the Act. Reliance was placed on a Division Bench decision of Karnataka High Court in Smt. Jayakumari v. Asstt. CED : [1991]191ITR273(KAR) , wherein it is held that the provisions contained in section 70(1) does not limit itself only to final assessment and where estate duty is allowed to be paid in instalments in a provisional assessment, the levy of interest under section 70(1) is justified.
As against it, learned counsel for the assessee vehemently opposed the demand for interest and submitted that there is absolutely no provision for payment of interest on the amount of estate duty assessed provisionally under section 57 of the Act. This provision does not provide for charging of interest. It was thus contended that the revenue authorities had no power to charge interest under section 70(1) in respect of demand raised on the basis of provisional assessment. Reliance was placed on an earlier Division Bench decision of Patna High Court in Bettiah Estate v. Union of India & Anr. : [1977]108ITR210(Patna) .
6. We have given our anxious consideration to the rival contentions and we feel persuaded by the arguments advanced by the learned counsel for the assessee.
7. Section 57 of the Act provides for making of provisional assessment in advance of regular assessment. Section 57(1) confers power on the Controller to make provisional assessment in advance of regular assessment after the receipt of the account delivered under section 53 or section 56 by the accountable person. Sub-section (2) of section 57 further provides that upon a provisional assessment being made under sub-section (1) the person assessed shall either pay to the Controller or furnish security to the satisfaction of the Controller for payment of, the estate duty, if any payable under that provisional assessment. Sub-section (3) speaks of the adjustment of the amount paid under sub-section (2) towards the regular assessment. Sub-section (4) makes such provisional assessment non-appealable. There is absolutely no provision for payment of recovery of interest on the amount payable under the provisional assessment. In fact, no provision except under section 70, is made in the entire Act for levy of interest in the event of default of the duty either under the provisional assessment or the final assessment. Section 70 does provide for payment of interest but under limited circumstances. In fact section 70 deals with the power of Controller to allow postponement of payment on the condition of payment of interest. It thus reads :
'70. Controller may allow postponement of payment on terms(1) Where the Controller is satisfied that the estate duty leviable in respect of any property cannot, without excessive sacrifice, be raised at once, he may allow payment to be postponed for such period, to such extent, and on payment of such interest not exceeding four per cent or any higher interest yielded by the property, and on such other terms as he may think fit.
(2) Notwithstanding anything contained in sub-section (1), estate duty in respect of immovable property may at the option of the person accountable be paid in (four) equal yearly instalments or (eight) equal half-yearly instalments with interest at the rate of four per cent per annum or any higher interest yielded by the property from the date on which the first instalment is payable and the interest on the unpaid portion of the duty shall be added to each instalment and paid accordingly, but the duty for the time being unpaid with such interest to the date of payment may be paid at any time and in case where the property is sold shall be paid on the completion of the sale and if not so paid shall be recovered in the manner specified in section 73.'
8. A reading of sections 57 and 70 in juxtaposition would make it clear that the question or postponement of payment of estate duty under section 70 would arise only after final assessment. The mode of payment of the duty assessed provisionally under section 57(1) is provided in sub-section (2) thereof itself. Under that provision the assessee is either required to make the payment of the duty, if any, payable on the provisional assessment, or to furnish security for the payment of that duty. In fact, the entire Act nowhere provides for levy of interest on default of payment of duty. Question of payment of interest under section 70 would arise only when the Controller makes any order under sub-section (1) thereof postponing the payment of duty or the assessee exercising his/her option in a case falling under sub-section (2). The power to charge interest can be exercised only under the express terms of section 70 where payment of estate duty is postponed for a definite period, as prescribed under sub-section (2) thereof.
9. Division Bench of Patria High Court in Bettiah Estate (supra) has held :
'The power in the Controller of Estate Duty to impose interest where the payment of the duty is postponed can be exercised only under the express terms of section 70 of the Estate Duty Act, 1953, when the payment of estate duty is postponed for a definite period. The stage for making an order under section 70 must, therefore, follow after the making of the final order of assessment. Therefore, when the regular assessment of the estate duty was duly made on 17-2-1968, it cannot be sought to be rectified under section 61 of the Act on the ground that the interest under section 70 on the deferred payment of the tax due according to the provisional assessment had not been included in the regular assessment. As section 70 could have been invoked only after the regular assessment had been made, it cannot be contended that there was any mistake in that assessment to be rectified under section 61'.
10. Karnataka High Court in Smt. Jayakumari (supra) has, however, taken a different view and held :
'The two sub-sections of section 70 of the Estate Duty Act, 1953, operate in different fields. This is evident from the use of the non obstante clause in sub-section (2) or section 70. A careful reading of sub-section (1) clearly discloses that it applies to any case where payment of estate duty is involved and that payment is postponed. It does not limit itself only to the final assessment. Where estate duty is allowed to be paid in instalments in a provisional assessment, the levy of interest under section 70(1) is justified'.
In this decision (Smt. Jayakumari) the decision of Patria High Court in Bettiah Estate (supra) was also referred and distinguished on the ground that it turned on the interpretation of section 61 of the Act providing for rectification of an error. With respect we do not agree with the view taken by the Karnataka High Court. Ratio decidendi of the decision in Bettiah was clear that power to impose interest under section 70 can be exercised only under the express terms of section 70 where payment of estate duty is postponed for a definite period, as prescribed under that provision itself. No action to levy interest can be initiated unless an order under section 70 is made. In the instant case, no order as such for postponement of payment of estate duty on final assessment was ever made by the revenue authorities. Under the circumstance, no interest could be levied on the demand of estate duty determined provisionally under section 57, we hold so and answer the question in affirmative and against the revenue.