Estate duty exemption turns on whether a donor's partnership benefit flows from the gift itself, not merely from partner status.

Section 10 of the Estate Duty Act, 1953 is not attracted where a gifted amount invested in a partnership firm does not leave the donor with a benefit referable to the gift itself. The governing principle is that mere enjoyment arising from the donor's separate status as a partner is insufficient; the donor's benefit must flow from a retention or reservation attached to the gift. On that footing, the gifted sum was held not includible in the principal value of the estate, and the reference was answered against the Revenue.

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Issues: Whether the gifted amount of Rs. 90,000 was includible in the principal value of the estate under section 10 of the Estate Duty Act, 1953 on the ground that the donor had not been entirely excluded from possession and enjoyment of the gifted sums when they were invested in the partnership firm in which he was a partner.

Analysis: The decisive question was whether the donor's benefit from the amounts, after they were gifted and subsequently invested with the firm, was clearly referable to the gift itself, or whether any benefit derived by him arose only from his independent position as a partner. The governing principle, as clarified by the Supreme Court, is that mere sharing of enjoyment or benefit by a partner does not attract section 10 unless the donor's benefit is shown to flow from the gift and from a parting with enjoyment by the donee. Where the donee retains possession and enjoyment and the donor's connection with the property is only through the partnership relationship, section 10 is not attracted.

Conclusion: The gifted amount was not includible in the estate under section 10 of the Estate Duty Act, 1953.

Final Conclusion: The reference was answered against the Revenue and the gifted sum could not be brought into the principal value of the estate.

Ratio Decidendi: Section 10 of the Estate Duty Act, 1953 is not attracted where the donor's benefit from the gifted property, kept or invested in a partnership firm, is attributable to the partnership relationship and not to any reservation or retention of benefit flowing from the gift itself.

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