( 231 )
Present: De Sampayo and Schneider JJ.
MURUGAPPA CHE TTY v. THE COMMISSIONER OFSTAMPS.99—D. C. (Inty.) Chilaw, 1,326.
Estate duty—Deductions for assessing duty—Are foreign debts to bededucted? Opinion of Commissioner of Stamps final as deductionsof debts—“ Property ”—What forms the estate of the deceased?—Procedure under the Ordinance indicated.
The term “ debts and incumbrances ” in section 17 (1) (b> ofthe Estate Duty Ordinance, 1919, refers to such debts and incum-brances as have been incurred or created within the Island. Forthe purpose of payment of estate duty, debts incurred or payableout if the Island are not to be deducted from the estate.
The procedure under the Estate Duty Ordinance indicated.“ The opinion of the Commissioner appears to conclude the questionas to what arc the debts of incumbrances which must be deducted. **
Andanandan (with him Bamachandra), for appellant.
Fernando, C.C., for respondent.
December 21, 1922. Schneider J.—
One Maiyappa Chetty described in the proceedings in this actionas a Natukotte Chetty, meaning thereby a native of Southern India,had carried on business as a money lender in Madampe in this Island.He died leaving a last will, whereby he devised all his estate inCeylon to three persons. Administration with the will annexedwas granted to the attorney of one of the executors, Murugappa byname, who is also one of the devisees under the will. This adminis-trator filed an inventory showing the assets of the estate in Ceylonas of the value of Bs. 61,005.02. As liabilities he showed as dueby the deceased a sum of Rs. 737.18 to creditors in Ceylon andBs. 39,993.14 to creditors in India- Under the provisions of “ TheEstate Duty Ordinance, No. 8 of 1919,*' the District Court of Chilaw,which had jurisdiction in the matter, appears to have called for acertificate of the payment, or of having secured the payment of theestate duty (section 23). It would seem that the administratorin the statements required under the provisions of section 21 (1)to be delivered by him to the “ proper officer *’ of all the propertyin respect of which duty is payable on the death of the deceased,and of tiie deductions which are to be made therefrom, claimedthat the whole sum of Bs. 39,993.14 shown as debts due to creditors
( 232 )
Chetty v. TheCommis-sioner ofStamps
in India should be deducted from the assets in Ceylon. He appearsalso to have submitted that the deceased was the sole survivingpartner of the firm of M. K. P., and that the Ceylon assets shouldbe regarded as held by him “ under the vilasam of Muttu KunaPana,” that the debts payable to the creditors in India had beenincurred by the deceased for the purposes of his trade in Ceylon,and that the assets in India which amounted to Rs. 25,000 wereheld by him 44 privately and not under the vilasam ” above named.It is stated in the petition to the District Court that the Commis-sioner of Stamps who is “the proper authority ” in valuing theestate for the purpose of assessing the duty payable deducted thewhole of the .debts due to creditors in India from the value of theassets there. In this petition, which is .the appeal by one of theexecutors of the last will to the District Court under the provisionsof section 22 (3), the petitioner contends that what he called “ theforeign assets,” that is, the estate of the deceased in India, “ oughtnot to be brought into the accounting at aU,“ or in the alternativethat onlythe value of the movableassetsofthe estatein India
should bededucted from the debtspayableinIndia. The matter
of the petition was heard and determined Upon arguments addressedto the District Judge by the proctors for the executor-petitionerand the Commissioner of Stamps. The learned District Judgeupheld the Commissioner’s order as ,to th£ assessment of duty withcosts. He thought that the debts payable in India should primarilybe paid from the assets in India, and that, therefore, the Commis-sioner of Stamps had rightly exercised his discretion. From thisholding the executor-petitioner has appealed.
I am of opinion that the learned District Judge’s holding is quiteright, and that not one of the contentions submitted by the appellantis sound.His first contention thatno partofthe assetsin India
should betaken into considerationis basedupon theassertion
that the assets in Ceylon belonged to the deceased as the sole sur-viving partner of the firm of M. K. P., while his assets_Jn Indiawere “held by him privately,” and'that, therefore, the characterof the two estates is different. I am obliged to say that I cannotfollow this argument at all In the eye of the law, upon the deathof a person, all he was entitled to whether in Ceylon, India, or else-where forms his estate in each of those countries, although it be thefact that in Ceylon he traded under a particular vilasam, in Indiahe lived the life of a gentleman of private means, and elsewheretraded under a different vilasam to that he adopted for his businessin Ceylon. In so far, therefore, as the first contention is foundedupon the alleged unsound distinction in the character of his titleto the assets in the two countries, it may be dismissed. His secondcontention purports to be based upon the definition of “ property “in section 2. This contention is obviously unsound for severalreasons. The movable property of the deceased does not come
( 233 )
within that definition, as there is no evidence' that the deceased 1922.
4* was at the time of his death domiciled in Ceylon.” Moreover, Schnbu>erthe matter in controversy between the parties is not what assets J.form the property of the deceased, but what deductions are per- Mumgappamitted under section 17 (1) of the Ordinance. In short, the whole Chetty v. Thedispute turns upon the construction of section 17 (1) (b) of the eioner ofOrdinance.Stamp*
The argument on behalf of the appellant as presented before uson appeal was that ** the debts and incumbrances ” mentioned insection 17 (1) (b) include all debts and incumbrances, irrespectiveof the question where they were incurred or payable. This, un-doubtedly, is a better argument than those urged in the lower Court.
But I am unable to uphold it. The Ordinance is one dealing onlywith property situated in Ceylon. Whenever its provisions renderit necessary to provide for any matters beyond the limits of thisIsland, there is express mention of such matters, e.g., in the definitionof ” property ” in section 2, and in the deductions provided for insection 17 (2) and (3). That being so' the words ** debts andincumbrances ” must be interpreted to mean such debts and in-cumbrances as have been ” incurred or created ” within the Island,as there is no reference to debts incurred elsewhere. It is not asound argument against this view to say that there are no expresswords creating such a limitation. Such a. limitation can be inferredfrom the Ordinance considered as a whole, and from the fact thatthe Ordinance is primarily intended to deal with matters withinthe Island, and where matters beyond the limits of the Islandshould be taken into consideration, express provision is made forthat purpose. There is another reason. Our Ordinance is basedupon the English Finance Act, 1894 (57 and 58"Viet., c. 30). Section17 of our Ordinance is closely modelled upon section 7 of that EnglishAct. Section 7 (2) of the English Act is as follows: —
" An allowance shall not be made in the first instance for debts
due. from the deceased to persons resident out of the UnitedKingdom (unless contracted to be paid in the UnitedKingdom, or charged on property situate within theUnited Kingdom), except out of the value of any personalproperty of the deceased situate out of the United Kingdomin respect of which estate duty is paid; and there shall beno repayment of estate duty in respect of any such debts,except to the extent to which it is shown to the satisfactionof the Commissioners, that the personal property of thedeceased situate in the foreign country tic British Possessionin which the person to whom1 such debts are due resides,is insufficient for their payment.”
The omission of this provision from our Ordinance is significant,and points to the intention as having been not to recognize debts
( 234 )
MurugappaCheUy v. TheCommis-sioner ofStomps
due from the deceased to persons resident out of this Island ascoming within the sphere of section 17 (1) (6).
In section 28 of the Customs and Inland Revenue Act, 1881, c. 12,which preceded the Finance Act, 1894, the only debts permittedto be deducted from the value of the estate were “ the debts duefrom the deceased to persons resident in the United Kingdom.’'
It would therefore appear that the only debts permitted at firstto be deducted in England were those payable to persons residentin the United Kingdom, and that even when the Finance Act in1094 modified this provision, deduction was only allowed (1) whereit was expressly contracted that the debt should be paid in theUnited Kingdom; or (2) when estate duty is paid in respect ofproperty situated out of the United Kingdom,.
There is a third reason.
It would be recognized as a broad principle that the debts, theamount of which should ordinarily be deducted, are those for thepayment of which the property from the value of which they arededucted might eventually be rendered exigible. To deduct fromthe Ceylon assets the whole of the debts payable to persons inIndia might result in injustice. By his will the deceased left allhis Ceylon property to three devisees. None of that property ischarged with the payment of the Indian debts. Why should thedevisees under the will have their legacies diminished, while theheirs of the deceased in India succeeded to a free inheritance byreason of the fact that the whole burden of the debts are thrownupon the Ceylon assets. There is nothing to show that the heirsto the estate in India are the same as the devisees under the will.Moreover, it is by no means clear that the deceased was liable topay all the debts payable in India—for it is stated that these debtswere incurred for a partnership business, the representatives ofdeceased partners may or may not therefore be liable to pay ashare of those debts.
There is nothing definite on record in the proceedings before thematter reached the Appeal Court to show that the Commissioner ofStamps was of opinion that the debts had “ been incurred or createdby the deceased bona fide for full consideration in money or money’sworth for the deceased own use and benefit.” Unless he is of thatopinion no deduction on account of any debt is permitted to be made.The argument of Mr. Martin who appeared for the Commissionerof Stamps in the lower Court, on the contrary, was to the effectthat he contested that the debts had been incurred by the deceasedfor the purpose of trading in Ceylon. But so far as we are concernedin appeal, Mr. Crown Counsel Fernando frankly stated that hewould not contest that point as the Commissioner of Stamps had forthe purpose of his assessment accepted the statement as to theexistence of the debts in question, and that the statement in thepetition as to the deductions made by the Commissioner was correct.
( 236 )
I would, therefore, hold that the order of the learned DistrictJudge is correct, and dismiss the appeal, with costs.
In view of the absence in these proceedings of proof or of admissionof facts which should have been placed before the Court, and theabsence of which proof gave some trouble in appeal, and in viewof the statement of the appellant's counsel that an expression ofopinion from us in the appeal would be of assistance, as the procedureprescribed in the Ordinance was not well known to our Courts,I would make the following observations.
Under the Ordinance no District Court is permitted to issueprobate or letters of administration until a certificate is producedthat an executor has paid or secured to the satisfaction of theCommissioner of Stamps the payment of all estate duty (section 23).To enable the Commissioner of Stamps to make his assessment, astatement verified on oath setting out the value of the property andthe deductions to be made is to be furnished to the Commissioner(section 21).
Then comes section 22 (3), which gives a right of appeal to theDistrict Court to any person dissatisfied with any assessment orvaluation. It requires—
That the sum in dispute in respect of duty shall exceed
That notice of intention to appeal against the assessment or
valuation be given in writing to the Commissioner withintwenty-one days of the receipt of notice of the assessmentof valuation.
That a statement in writing of the grounds of the appeal be
furnished to the Commissioner within the period of twenty-one days next following the first period of twenty-onedays.
That the appeal be by petition.
It seems to me that the petition should set out in its caption thetitle of the testamentary action, the name of the petitioner, andthe provisions of the law under which it is presented. It shouldset out in numbered paragraphs the relevant particulars as regardsthe right of the petitioner to appeal, the amount in dispute, thedue giving of the notice of appeal, and the furnishing of the statementof the grounds of appeal, and it should also set out the groundsof the appeal. The prayer should contain the relief asked for.There should be attached to this petition as exhibits, or producedin evidence at the trial, copies of the statements furnished to theCommissioner for the purpose of assessment, and any other documentsrelating to facts which had taken place before the matter wasbrought into Court. It is necessary to put a Court in possessionof such facts. The language of section 22 (4) gives the DistrictCourt powers for a full investigation, so that, if necessary, issues
Murvgappa.Chatty v. TheCommis-sioner ofStamps
( 236 )
lfttt. might be framed and tried. The necessary facts must either beSchneider admitted or proved as in all other cases where a Court is calledJ* upon to adjudicate upon any matter. Incidentally, I would alsoJdurugappa mention that the language of section 17 (1) (6) is such that theChgtty v. The opinion of the Commissioner appears to conclude the question asnone of what are the “ debt ” or “ incumbrances ” which might be deducted.Stamps
De Sampayo J.—I agree. •
MURUGAPPA CHETTY v. THE COMMISSIONER OF STAMPS