Partnership capital withdrawn and gifted was held outside the deceased's taxable estate under estate duty principles.

Amounts withdrawn from a partner's capital account and later gifted to another person were held not to form part of the deceased's estate under section 10 of the Estate Duty Act, 1953. The court applied the principle that partnership capital is not the exclusive property of the contributing partner once it becomes a trading asset of the firm, in which all partners have an interest. On that basis, the withdrawn sums were not property passing or deemed to pass on death, and were therefore outside the taxable estate.

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Issues: Whether amounts withdrawn from the capital account of a partnership and gifted to the assessee could be included in the deceased's estate as property passing or deemed to pass on death under section 10 of the Estate Duty Act, 1953.

Analysis: The additional statement showed that the sums withdrawn by the deceased were taken from the capital account of the partnership, and after withdrawal they were gifted to the assessee the next day and credited in her partnership account. On the principle that partnership capital ceases to be the exclusive property of the contributor and becomes a trading asset of the firm in which all partners have an interest, the amounts withdrawn from the partnership capital could not be treated as sums exclusively in the hands of the deceased. Applying the principle in Munro's case, such amounts were not liable to estate duty as property passing or deemed to pass on death.

Conclusion: The question was answered in the negative, and the amounts could not be included in the deceased's estate under section 10 of the Estate Duty Act, 1953.

Final Conclusion: The reference was decided in favour of the assessee by holding that the gifted partnership funds were outside the taxable estate.

Ratio Decidendi: Amounts withdrawn from partnership capital and gifted by a partner are not exclusively owned by the donor and, therefore, are not includible in the donor's estate as property passing or deemed to pass on death under section 10.

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