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Issues: (i) Whether agricultural lands settled by the deceased in favour of his wife, and thereafter by her in favour of her relatives, were includible in the principal value of the estate under section 10 of the Estate Duty Act, 1953. (ii) Whether the properties settled by the deceased in favour of five settlees were includible in the principal value of the estate under sections 5 or 6 of the Estate Duty Act, 1953, or under section 10. (iii) Whether the agricultural lands received by P.S. Srinivasa Iyer under the settlement from the deceased were includible in the principal value of the deceased's estate.
Issue (i): Whether agricultural lands settled by the deceased in favour of his wife, and thereafter by her in favour of her relatives, were includible in the principal value of the estate under section 10 of the Estate Duty Act, 1953.
Analysis: The settlement was only of undivided shares in agricultural lands. To keep such property outside section 10, the donee must have bona fide assumed possession and enjoyment immediately on the gift and retained it to the entire exclusion of the donor or any benefit to him. The record did not establish such exclusive possession by the wife or her settlees. The continued management of the properties through the firms, the receipts and benefits retained by the deceased, and the later partition deed all indicated that the donor was not excluded from possession or benefit. Mere recitals or collateral composition proceedings did not prove the statutory requirements.
Conclusion: The lands settled by the deceased in favour of his wife, including the lands later settled by her in favour of her relatives, were includible in the principal value of the estate. The finding is against the accountable person and in favour of the Revenue.
Issue (ii): Whether the properties settled by the deceased in favour of five settlees were includible in the principal value of the estate under sections 5 or 6 of the Estate Duty Act, 1953, or under section 10.
Analysis: The evidence showed that the deceased continued to be in possession and management of the properties through the firm, later took over the assets and liabilities on dissolution, and received rents from the properties. The properties were thus found to have remained with the deceased on the date of death and were liable to pass under section 6. Even apart from section 6, the deceased had not been excluded from possession and enjoyment, so section 10 would also not assist the accountable person.
Conclusion: The properties settled by the deceased in favour of the five settlees were rightly included in the estate. The finding is against the accountable person and in favour of the Revenue.
Issue (iii): Whether the agricultural lands received by P.S. Srinivasa Iyer under the settlement from the deceased were includible in the principal value of the deceased's estate.
Analysis: Once the settlement in favour of the five settlees was held includible in the deceased's estate, the same lands could not be treated as part of the estate of the subsequent recipient. The value of those lands therefore remained referable to the deceased's estate.
Conclusion: The lands received by P.S. Srinivasa Iyer under the settlement from the deceased were includible in the principal value of the deceased's estate. The finding is in favour of the Revenue.
Final Conclusion: The references were answered so that the challenged settlements did not escape estate duty, and the inclusion made in the deceased's estate was sustained.
Ratio Decidendi: To exclude settled property from estate duty under section 10, the donee must prove immediate bona fide possession and enjoyment to the complete exclusion of the donor and any benefit to the donor; where the donor retains management, benefit, or effective control, the property remains includible in the estate.
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