Estate duty on gifted property fails where donor retains no benefit and later partition cannot revive completed gifts.

Gifted property was held outside the principal value of the estate under section 10 of the Estate Duty Act because the donor did not appropriate the income, retain dominion over it, or derive a benefit; the minors' maintenance and education expenses were treated as expenditure for their benefit. The later partition or family arrangement also did not bring the property within section 9 read with Explanation 2 to section 2(15), since the earlier settlements were accepted as valid gifts with complete exclusion of the donor and no reliable material showed a legal basis for treating the same property as passing again. The estate duty additions were therefore rejected on both grounds.

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Issues: (i) Whether the gifted properties were includible in the principal value of the estate under section 10 of the Estate Duty Act for want of bona fide possession and enjoyment by the donees and exclusion of the donor. (ii) Whether the properties covered by the later partition or family arrangement were includible under section 9 read with Explanation 2 to section 2(15) of the Estate Duty Act.

Issue (i): Whether the gifted properties were includible in the principal value of the estate under section 10 of the Estate Duty Act for want of bona fide possession and enjoyment by the donees and exclusion of the donor.

Analysis: The Tribunal's finding, based on the accounts, was that the donor had not appropriated income from the settled properties and had not exercised dominion over such income. The donees were minors, and the expenditure incurred for their maintenance and education was treated as expenditure for their benefit. On those facts, the donor could not be said to have retained a benefit or failed to exclude himself from the gifted properties or their income.

Conclusion: Section 10 of the Estate Duty Act was not attracted, and the inclusion of the amount in the estate was not justified.

Issue (ii): Whether the properties covered by the later partition or family arrangement were includible under section 9 read with Explanation 2 to section 2(15) of the Estate Duty Act.

Analysis: Once the earlier settlement deeds were accepted as valid gifts with complete exclusion of the donor, the gifted properties could not again be treated as the subject of a subsequent partition so as to attract section 9. In the absence of the document itself and any reliable material showing its recitals or legal effect, the contention that the later arrangement brought the properties within the charging provision could not be sustained.

Conclusion: Section 9 read with Explanation 2 to section 2(15) of the Estate Duty Act did not apply to the properties in question.

Final Conclusion: The reference was answered entirely against the Revenue, and the estate duty additions sought on both grounds were rejected.

Ratio Decidendi: Where the evidence shows that the donor did not appropriate income or retain any benefit from the gifted property, and the donees' enjoyment is consistent with the donor acting as natural guardian for minors, section 10 is not attracted; a property already validly gifted cannot be treated again as property passing under a later partition or family arrangement without clear legal foundation.

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