1. This appeal by certificate by the Controller of Estate Duty directed against the order dated August 17, 1978, of the High Court of Patna in C. W. J. C. No. 202 of 1976, raises a short and interesting question as to the scope and interpretation of Section 50B of the Estate Duty Act, 1953 ("the Act", for short).
2. The estate to which the proceedings for assessment of duty relate, was of the late Sir J.J. Gandhi, who died on April 17, 1972. Mrs. Roshan Jahangir Gandhi was the accountable person. A sum of Rs. 3,16,026 was determined as the provisional duty. The accountable person having had no immediate cash to meet the demand for provisional duty, borrowed on December 27, 1972, sums aggregating to Rs. 3,36,000 out of which the provisional duty of Rs. 3,16,026 was paid on March 23, 1973. On April 10, 1974, she sold certain shares forming part of the estate to discharge the said borrowings. Indeed, the sale was made to the lender from whom the major borrowing had been made. Upon the sale of the shares, she became liable to pay capital gains in the sum of Rs. 90,158 which she duly paid. Basing on the provisions of Section 50B of the Act, she claimed to be entitled to a rebate respecting this payment of capital gains. Section 50B of the Act reads :
Where any property on which estate duty is leviable under this Act is transferred within a period of two years following the death of the deceased and tax under the Income-tax Act, 1961 (43 of 1961), has been paid in respect of the capital gains arising from such transfer, the estate duty payable shall be reduced by a sum which bears to the total amount of tax so paid the same proportion as the amount paid towards estate duty out of the proceeds of the transfer bears to the gross proceeds of such transfer....
3. This claim for the refund based on this provision was refused by the Revenue. The Revenue, upon a strict and literal construction of Section 50B, took the view that the payment of duty was, quite obviously, not directly out of the proceeds of the transfer of the shares as, indeed, the payment of duty was anterior to the transfer and that, therefore, the requirements of Section 50B of the Act were not satisfied.
4. The contention of the respondent, however, was that Section 50B was a beneficial provision and required to be construed liberally and that there was a substantial compliance with its requirements. It was urged that Section 50B did not lend itself to the construction that it stipulated payment of duty directly out of the proceeds of the transfer, but, in so far as it contemplated the application of the proceeds of the transfer towards "payment of the duty", its requirements were satisfied in this case.
5. The refusal by the Revenue to grant the rebate was assailed in the writ petition before the High Court. The High Court, by its order dated August 17, 1978, accepted the contention of the respondent and held :
...The second construction does not do violence to the words used in Section 50B because the section requires payment 'towards the estate duty' and not payment 'as estate duty' and the section does not use the expression 'directly paid' ; but only 'paid' towards estate duty and thus does not rule out indirect payment of estate duty out of the proceeds of the transfer. According to the dictionary meaning, 'towards' means 'in relation to' or 'for the purpose of. A payment made for liquidating a debt incurred solely for payment of estate duty is certainly a payment 'in relation to' and 'for the purpose of estate duty.
...I am, therefore, of the opinion that, if the transfer of property comprised in the estate is effected in reality and substance for the payment of the estate duty and the whole or part of the proceeds are utilised for payment of a loan incurred exclusively for the purpose of payment of estate duty, the whole or part of the proceeds of the transfer are paid 'towards the estate duty' within the meaning of the expression as used in section SOB of the Act.
In that view of the matter, since on the materials on record, I am satisfied that the loan was taken by the accountable person (the petitioner) to pay the estate duty and property was transferred to liquidate the loan and tax had actually been paid in respect of the capital gains arising from such transfer, the petitioner is entitled to the reliefs as claimed.
6. The Revenue assails the correctness of this view of the High Court. It is not disputed that the borrowing made by the accountable person was exclusively for the purpose of paying the provisional duty. Indeed, it would appear that the accountable person tendered the shares themselves towards payment of the duty ; but the Revenue by its communication dated December 27, 1972, advised her :
Please refer to my letter No. J-47/G86 dated Ranchi the 29th November, 1972. I have received instruction from my Deputy Controller of Estate Duty, Eastern Zone, Calcutta. He has written me to convey to you that the payment of estate duty demand should be made by disposing of the shares in the market through brokers or banks by you. The share scrips at present cannot be accepted under Section 52 of the Estate Duty Act. Therefore, you are requested to dispose of the shares or whatever property you deem fit for payment of estate duty. The payment of provisional demand must be made before 15th March, 1973, under intimation to me.
7. In response to the communication, the accountable person wrote as under :
With reference to your Memo No. J-47/730 of December 27, 1972, I am to state that Section 52 of the Estate Duty Act clearly states that payment of duty can be made by transfer of property in favour of the Government, but as per your letter, the shares scrips, at present, cannot be accepted under Section 52. As per your letter you have asked me to dispose of the shares. I cannot dispose of the shares unless I get a succession certificate from the court where I have applied for the succession certificate. Before the issue of succession certificate, the court will require a certificate from you according to Section 56(2) of the Estate Duty Act. As such I request you to kindly issue a certificate under Section 57(2) that the estate duty will be paid in respect of the property mentioned in the certificate.
8. In the further communication dated January 18, 1973, from the Controller of Estate Duty to the accountable person, it was stated :
It is hereby certified that the estate duty payable on provisional assessment under Sub-section (1) of Section 57 of the Estate Duty Act, 1953, will be paid or that no estate duty is due in respect of the property hereinafter described as passing on the death of Sir J.J. Gandhi of Jamshedpur who died on the seventh day of April, 1972.
9. It is, therefore, clear that the borrowing was made exclusively for the payment of the provisional duty and the subsequent transfer of the shares was also exclusively for the purpose of discharging the loan so earlier obtained. Sri K.N. Shukla, learned senior counsel for the Revenue, contended that even if all these facts are admitted, no rebate under Section 50B of the Act was permissible. He urged that a taxing provision knows no equity and would be strictly construed according to the words used. Learned Counsel emphasised that the words "out of the proceeds of transfer" would clearly exclude from Section 50B, a case such as the one in hand where the duty was paid out of the borrowing and not out of the proceeds of transfer, though the borrowing was later repaid by the proceeds of transfer. But, Sri Joseph Vellapally, learned senior counsel for the respondent, understandably, emphasised the significance of the words "paid towards estate duty" which, according to him, will take in a non-direct payment also where substantially, if not strictly chronologically, the proceeds of the transfer have gone "towards the duty".
10. As to the requirement of a strict construction, a distinction would perhaps have to be made between a provision imposing a tax as from a provision dealing with or relating to a tax. "It is the essential nature of the provision that has to be considered, its primary or subordinate place in the scheme of the enactment." The interpretation of Section 50B contended for by the accountable person and accepted by the High Court, in our opinion, is an eminently arguable one, though another view may also be possible. The Estate Duty Act, 1953, was itself repealed in the year 1985. The question raised is, therefore, no longer of any general public importance. If two views are possible on the scope and construction of Section 50B and one of them has appealed to, and been accepted by, the High Court and the view cannot also be said not to advance the cause of justice, there is hardly any justification to interfere where the Act itself has since ceased to exist. The question of law raised in the appeal is really sterile as it cannot arise hereafter. In CST v. S.K. Manekia [1991] 83 STC 34 (SC), dealing with an analogous situation, this Court had occasion to say (at page 36) :
The 1953 Act has been repealed by the Bombay Sales Tax Act, 1959... The question of law raised in these appeals is, therefore, sterile and cannot arise under the 1959 Act. Indeed, it has no general importance and has become academic. This Court seldom determines such questions. We, therefore, express no opinion on the question of law raised in these cases.
11. Accordingly, we decline to interfere with the order made by the High Court. The appeal is dismissed but without an order as to costs. But, we indicate that while the actual amount of rebate and refund be worked out under Section 50B, the accountable person shall not be entitled to any interest thereon. Ordered accordingly.