Estate duty exclusion turns on genuine donee possession and enjoyment of gifted property, not donor-managed rent collection

Section 10 of the Estate Duty Act applies only when the donee takes bona fide possession and enjoyment of gifted property immediately and retains it to the exclusion of the donor. On the facts, the lease for collection of rents had been executed before the gift, there was no post-gift appropriation of rent by the donor, and the wife returned the income in her own tax returns. The donor's collection of rents and related accounting entries were treated as management on her behalf, which did not negate her possession and enjoyment in the context of an ordinary Hindu family. Section 10 was therefore not attracted and the estate duty addition was deleted.

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Issues: Whether the value of the two rice mills gifted by the deceased to his wife was liable to be included in the principal value of the estate under section 10 of the Estate Duty Act.

Analysis: Section 10 applies only where the donee bona fide assumes possession and enjoyment of the gifted property immediately upon the gift and retains such possession and enjoyment to the entire exclusion of the donor or of any benefit to him by contract or otherwise. On the facts, the lease for collection of rents had been executed before the gift, no post-gift appropriation of the rent by the donor was shown, and the income was returned by the wife in her own income-tax returns. The donor's collection of rents and making of accounting entries were held to be management on behalf of the wife, which in the context of an ordinary Hindu family did not destroy her possession and enjoyment of the property.

Conclusion: Section 10 was not attracted and the addition of Rs. 2,25,000 was correctly deleted.

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