Reserved charge in a gift deed limits estate duty inclusion to the diminished value of the gifted property.

A gift deed transferring immovable properties subject to a reserved monthly charge in favour of the donor was construed as a transfer of only the interest actually parted with, not an absolute gift of the whole property. Applying section 10 of the Estate Duty Act, 1953, the retained benefit was treated as a qualification attached to the gift itself, rather than a later-arranged benefit. Accordingly, only the value of the gifted properties as diminished by the reserved charge was includible in the estate on the donor's death, and the capitalised value of the charge, not the full market value of the properties, was assessable.

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Issues: Whether, on a proper construction of the deed of gift and section 10 of the Estate Duty Act, 1953, the entire value of the gifted immovable properties passed on the donor's death, or only the value of the properties to the extent of the reserved charge for the donor's benefit was includible in the estate.

Analysis: The gift deed, read as a whole, showed that the properties were transferred subject to a charge of Rs. 50 per month for the donor's benefit. The donee did not receive the properties absolutely and in their entirety, but subject to a reservation or qualification in favour of the donor. The benefit retained by the donor was referable to the rights of which the gifted property was shorn, so the transaction fell within the principle that only the interest actually parted with, and not the retained benefit, is relevant for section 10. The case was distinguished from transactions where a full and unconditional gift is followed by a later arrangement creating benefit to the donor.

Conclusion: Only the subject-matter of the gift as diminished by the reserved charge was liable to be included in the estate. The capitalised value of the charge, and not the full market value of the gifted properties, was includible under section 10, in favour of the assessee.

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