BALASUBRAHMANYAN J.


This is a reference under the E.D. Act, 1953 . The deceased's estate included, among other properties, 101 shares in a private limited company. In the same company, the deceased's brother, who figures as the accountable person in this case, held 16 shares. The share capital of the company comprised, in the aggregate, only 250 shares. The deceased was all in all in the company as a director. The Assistant Controller of Estate Duty accordingly considered this company as a "controlled company" within the meaning of s. 17 of the E.D. Act. There is no dispute now about this determination. The Asst. Controller found that for a number of years past, the deceased had been maintaining a current account with this company. This current account remained to the deceased's credit right from the beginning unto the last. During the period of three years before his death and even earlier, the deceased had been withdrawing various sums of money at one time or another from this current account for making investments outside. The Asst. Controller took up for consideration the nature of the deceased's current account with the company and also the character of the withdrawals therefrom. This inquiry was undertaken by the Asst. Controller while examining the prospects for applying s. 17 to this case and with a view to finding out whether estate duty liability can be foisted to any extent on the assets of this company as a controlled company, having regard to the relationship between the deceased's current account on the one hand and the company's resources on the other. The Asst. Controller gave thought to these matters, and ultimately came to the conclusion that the amount to the credit of the deceased in his current account must be treated as a "transfer" of property by the deceased to the company, and the withdrawals from the current account must be regarded as "benefits" accruing to the deceased from the company. On these findings, the Asst. Controller proceeded to fix the quantum of liability for estate duty on the company's assets in accordance with s. 17 of the Act and by following the procedure laid down in the relevant Rules made under the Act for the purposes of that section The accountable person objected to the levy of estate duty on the company's assets under s. 17 of the Act. His principal contention was that the maintenance of a current account by the deceased even with a controlled company cannot be treated as a "transfer" nor could the withdrawals therefrom be regarded as "benefits". At a later stage, however, when the matter was in appeal before the Tribunal, the accountable person reconciled himself to the position that the deceased's current account did amount to a transfer of property by the deceased to the company. This was done presumably out of respect for the very wide sense in which the term "transfer" and other cognate expressions were found defined in the statute and in the Rules made thereunder. However, on the other aspect of the Asst. Controller's determination, the accountable person held fast to his objection that the withdrawals of money from the deceased's current account cannot be regarded as "benefits" within the statutory meaning of that expressionFor holding that the deceased's withdrawals from his current account were benefits which accrued to him from the company, the Asst. Controller relied on r. 5(1)(a) of the Estate Duty (Controlled Companies) Rules, 1953. This rule defines a benefit as "any periodical payment" out of the resources of the company which the deceased receives for his own benefit. There was no dispute in this case that the money in the current account, although it undoubtedly remained to the credit of the deceased, was nevertheless part of the company's resources. There was also no dispute about the position that the withdrawals from the current account were utilised by the deceased for his own investments elsewhere, and, therefore, very much to his benefit. The only controversy was whether every time the deceased withdrew money from his current account, that involved a periodical payment by the company within the meaning of r. 5(1)(a) of the Controlled Companies Rules. On this aspect of interpretation, the Asst. Controller's view was that each and every one of the withdrawals must be considered as a periodical payment. He relied for this view on r. 5(2) of the Controlled Companies Rules, which carried an elaborate meaning of the expression "periodical payment" in the following fashion


"(2) For the purposes of these rules, the expression 'periodical payment' means a payment by way of dividend or interest, a payment by way of remuneration not being a single lump sum payment, and any other payment being one of a series of payments, whether inter-connected or not, whether of the same or of varying amounts, and whether payable at regular intervals or otherwise." *


The departmental view of r. 5(2) has always been that practically all payments must be treated as periodical payment, the only exception being "a single lamp sum payment", as an exception expressly excluded from the definition. In their order under reference, the Tribunal would seem to have fallen in with the departmental understanding of the scope of this rule. For, without going into any other question, the Tribunal straightaway entered upon the task of finding out whether the deceased's withdrawals could be regarded as a single lump sum payment. The record shows that the deceased's current account with the company wag opened on November 16, 1966, and remained right through till his death on August 23, 1972. The total of the credits in the account during this period amounted to Rs. 5, 76, 369 and all but Rs. 1, 574 had been withdrawn therefrom by the time the deceased died, the withdrawals were many and various, and at different times. The Tribunal nevertheless addressed itself seriously to the question whether what wag involved in this case was a "single lump sum payment". Their view was that notwithstanding the multiplicity of withdrawals, they all amounted only to a single lump sum paymentThe relevant part of the Tribunal's order containing their reasoning is extracted below


"Where a sum of Rs. 1, 00, 000 is advanced to the company, it is every one rupee comprised in the sum of Rs. 1, 00, 000 which constituted property transferred to the company. When this sum of Rs. 1, 00, 000 is not returned at a time but is returned even over a period of time in several instalments each one rupee comprised in the instalment would be the return of a particular one rupee transferred to the company in the same coin. That is, it is a lump sum return. Prima facie, therefore, return of a loan advanced in cash to a company by the deceased cannot constitute a periodical payment." *


While arguing the departmental case before us, Mr Jayaraman, learned standing counsel, did not have to argue for long about the error-of the Tribunal's reasoning. Even Mr. Subramaniam, learned counsel appearing for the accountable person, did not support the reasoning of the Tribunal. The cardinal error of the Tribunal lay in disregarding the inexorable fact that the withdrawal by the deceased was not, at, one single stroke, of the entirety of the amounts standing to his credit in the current account, but were made at several points of time in several driblets of money. The expression used in r. 5(2) is not merely "a lump sum" but "a single lump sum" which cannot fit in at all with the facts in the present case where the amount to the credit of the deceased in the current account were subject to a multiplicity of withdrawals


Even though we disagree with the Tribunal's interpretation of r. 5(2), that does not mean the end of the discussion in this reference. For, the main subject of controversy between the accountable person and the Estate Duty Officer is whether the deceased's withdrawals, such as they were, could be regarded as "benefits" or as "periodical payments" within the meaning of r. 5 of the Controlled Companies Rules. Both the standing counsel for the Department and the learned counsel for the accountable person agree that the Tribunal had apparently understood the language of r. 5(2) wider than it has been used by the framers of the Rules. Quite plainly, the Central Board which framed these Rules did not intend to rope in any and every payment within the expression it periodical payment

". If the Central Board had so intended, nothing would have been easier than to say that all payments shall be deemed to be periodical payments excepting a single lump sum payment. What actually has been set out in r. 52) as a rule of interpretation is that the payment, in order to be a periodical payment, must be one of a "series" of payments. The question in every case, therefore, is not whether there has been a payment, but whether the payment, such as it is, can be regarded as being one of a "series" of payments. There can be no doubt that the expression "series" has been put in advisedly and with a purpose. Therefore, the word must carry some significance. It cannot be overlooked in interpretation. The expression "series" is meant to denote a number, or set, of material things of one kind ranged in a line, either continuously or at more or less regular intervals. In other words, there must be some inherent quality of "series" ness. If there is no observable or discernible series, the mere fact that over a period of time there have been a number of payments, all from a single account, is not enough to lead to the conclusion that every one of such payments, even considered in the gross, is comprised in a "series" of paymentsRule 5(2), while insisting on the payment being one of a series of payments, has, however, provided for relaxations in certain respects from the literal meaning of the expression "series". For instance, it is not necessary that the payment in a supposed series should be inter-connected or that they should be of identical amounts or that the interval between one payment and another should be regular or constant. To whatever extent the relaxations found in the latter part of r. 5(2) might water down the conception of a "series", it cannot be gainsaid that a payment, in order to be regarded as a periodical payment, must necessarily be one of a series. While the rule treats with indifference the periodicity of payments, or the regularity of intervals, or the inter-connection between payments as matters of indifference, the rule, however, does not say that the payments can be anything other than payments in a series. The expression "series" has to be understood as an appellation which is only applied to payments which are of the same sort or nature, falling within particular set, or range


The learned counsel on both sides said that on this aspect of interpretation there is dearth of case law. It would seem that these provisions in the estate duty law are a bugbear to courts of interpretation as well as textbook writers. Acknowledged writers on this branch of the law have desisted from assigning any fixed connotation or meaning to the expression "series of payments". Understandably enough, Dymond had rest content only with referring to a departmental practice prevailing in the United Kingdom under which the authorities do not consider fewer than two payments as forming a "series" of payments within the meaning of this phrase. While referring to the departmental view, Dymond has merely added the comment that the expression "series" is not defined by the statute. Hanson alone, among the text book writers, has something tangible to say on the subject. In Hanson's Death Duties, 9th Edn., at p. 408, the matter is dealt with as follows" *


A series may, according to the sub-section include payments which are of different amounts, paid at irregular intervals, and not inter-connected, though it is difficult to imagine a series composed of payments having all these characteristics. . It is apprehended that to form a series, the payments must have some characteristic in common.

"This line of observation in Hanson is in tune with the dictionary meaning of the expression "series" wherein it has been defined as a number, or set, of material things of one kind, ranged in a line, either contiguously or at more or less regular intervals. It seems to us that for any given payment to be one of a series of payments we must be in a position to say even about the very first payment that it is the beginning of series. If we examine the aspect of the first payment, without regard for any other payment and find that the first is not the beginning of a series, we cannot come to the conclusion that the first and the last and those in between constitute a series of payments. If the first payment is not th first of a series, the rest will also be nowhere in the series. Neither that payment nor the subsequent payments can be regarded as forming together any series of payments


In this case, what apparently the E.D. authorities have taken note of is that all the withdrawals effected by the deceased relate to money in 19831 C. L. D. V. A. C. DESIKACHARI deposit or credit in one single current account and the withdrawals have tended to exhaust almost the entire credit balance in that current account. These facts only show that there has been a multiplicity of withdrawals of varying amounts from time to time from the same credit account. From the mere fact that the source of payment is a single account, it cannot be said that all these payments must be regarded as part and parcel of series of payments within the meaning of r. 5(2) of the Controlled Companies Rules. If r. 5(2) does not apply, r. 5(1)(a) cannot be applied either, so as to regard any of the payments as benefits within the meaning of s. 17 of the E.D. Act. Hence, even on the footing that the opening, the maintenance and the operation of the deceased's current account amounts to a transfer by the deceased of his property in favour of a controlled company, s. 17 cannot be applied so as to foist on the companys' assets any estate duty under s. 17, since the withdrawals by the deceased from the current account cannot in any view be regarded as "benefits" or as periodical payments" *


So far in the discussion we have confined ourselves strictly to the issues of statutory construction between the Department and the accountable person. We must now refer to certain figures in order to enable the Tribunal to pass follow-up orders on the basis of our opinion in I this reference. We earlier mentioned that under s. 17 of the Act, the liability to estate duty on a controlled company is to be determined by following what is familiarly known as "slice principle". Under this formula, we have first to take note of the assets of the controlled company, because these are the assets which are in greater or lesser measure liable for estate duty under s. 17. In this case, the Asst. Controller has determined the principal value of the net assets of the controlled company in the sum of Rs. 4, 11, 319. How much of the value of the company's net assets is to be charged to estate duty under s. 17 would depend upon the proportion which the benefit that had accrued to the deceased bears to the total income of the controlled company ascertained on the basis of a three year period immediately preceding the deceased's death. According to the calculations of the Asst. Controller, the total net assets of the controlled company for the three years period amounted to Rs. 6, 12, 020. The various withdrawals which the deceased effected from his current account with the company over this three year period immediately prior to his death amounted in all to Rs. 3, 92, 066. The slice under s. 17 of the Act was, therefore, worked out by the Asst. Controller in the, following fashion


3, 92, 066/ 6, 12, 020 X 4, 11, 319= Rs. 2, 63, 495


This

sum of Rs. 2, 63, 495 arrived at on the above "slice principle" was included as part of the dutiable estate on which estate duty was charged on the company's assets. This amount was, however, subject to certain limitations, with which we are not concerned in this reference. The effect of the Tribunal's decision as well as of our conclusion is the same although on different reasonings. The effect is that Rs. 2, 63, 495 cannot be included as part of the dutiable estateThe question of law which has been framed by the Tribunal and sent to us for our opinion, however, does not pinpoint the problem in the case, either in statutory terms or in terms of figures in the way we have dealt with it in the foregoing paragraphs. The question of law referred to us is in the following terms "Whether, on the facts and in the circumstances of the case, portion of the sum of Rs. 1, 65, 686 not covered by the benefit by way of interest, remuneration and dividend could be included in the value of the asset passing under section 17 of the Estate Duty Act ? Since, this question of law does not reflect the real controversy with sufficient clarity, we reframe the question of law in the following terms" Whether, on the facts and in the circumstances of the case, Rs. 2, 63, 495 was properly excluded by the Tribunal from the dutiable estate as not being liable to be charged to estate duty under section 17 of the Estate Duty Act, read with rule 5 of the Estate Duty (Controlled Companies) Rules, 1953 ? " To the question as reframed above, our answer is in the affirmative and in favour of the accountable person. Since the Department has lost this reference, it shall pay the costs of the accountable person. Counsel fee Rs. 500.