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Issues: (i) Whether the unlet portion of the gifted property in which the deceased donor continued to reside with the donee passed on his death; and (ii) whether the part of the gifted property which had been let out passed on the death of the deceased, and if so to what extent.
Issue (i): Whether the unlet portion of the gifted property in which the deceased donor continued to reside with the donee passed on his death.
Analysis: Section 10 of the Estate Duty Act, 1953 applies only where the donee fails to assume and retain bona fide possession and enjoyment to the entire exclusion of the donor or any benefit to him. On the authority governing gifts of a residential house to a spouse, the donor's continued residence with the donee does not, by itself, show that the donee was not in exclusive possession and enjoyment. The donor's residence with the donee in the unlet portion did not establish a retained benefit sufficient to attract the deeming provision.
Conclusion: The unlet portion did not pass on the donor's death under section 10, and the issue is answered in favour of the accountable person.
Issue (ii): Whether the part of the gifted property which had been let out passed on the death of the deceased, and if so to what extent.
Analysis: For the let-out portion, the rents were deposited in a joint account in the names of the donee and the donor, and the donor withdrew amounts from that account. The burden was on the accountable person to show that the donee retained possession and enjoyment of the gifted property to the entire exclusion of the donor and that the withdrawals were not for the donor's own benefit. That burden was not discharged. In the absence of proof that only a part of the rental income was withdrawn or that the donor derived no benefit, the statutory requirement of entire exclusion was not satisfied. The entire let-out portion was therefore liable to be brought into the estate.
Conclusion: The let-out portion passed on the donor's death, and the value of the entire let-out portion was includible in the dutiable estate.
Final Conclusion: The reference was answered partly in favour of the accountable person and partly in favour of the department, with the unlet residential portion excluded and the entire let-out portion included in the estate.
Ratio Decidendi: Under section 10 of the Estate Duty Act, 1953, property gifted is includible in the estate unless the donee proves bona fide possession and enjoyment to the entire exclusion of the donor, and where the donor derives benefit from the income of the gifted property, the whole of the affected portion is liable unless a lesser extent is proved.
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