Estate duty on gifted property turns on factual exclusion of the donor, with later amendments operating prospectively only.

Section 10 of the Estate Duty Act, 1953 applies where the donee does not assume and retain bona fide possession and enjoyment of gifted property to the entire exclusion of the donor. A donor's continued residence and actual enjoyment of the house meant the gift did not escape estate duty, even though the donor lacked a legally enforceable right to remain. The words "by contract or otherwise" were confined to the second limb of section 10 and did not dilute the requirement of complete factual exclusion in the first limb. The 1965 amendment was held to operate prospectively only. On the facts, the entire house was includible in the deceased's estate because the wife was treated as a name-lender.

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Issues: (i) Whether property gifted by the deceased was liable to estate duty under section 10 of the Estate Duty Act, 1953, where the donor continued to reside in and enjoy the house till death; (ii) whether the words "by contract or otherwise" in section 10 controlled the first limb requiring entire exclusion of the donor; (iii) whether the 1965 amendment to section 10 could be treated as retrospective; and (iv) whether the house was wholly includible in the deceased's estate despite standing in the joint names of the deceased and his wife.

Issue (i): Whether property gifted by the deceased was liable to estate duty under section 10 of the Estate Duty Act, 1953, where the donor continued to reside in and enjoy the house till death.

Analysis: Section 10 applies unless the donee immediately assumes bona fide possession and enjoyment of the gifted property and thereafter retains it to the entire exclusion of the donor. The donor's continued residence in the house and participation in its enjoyment showed that he had not been entirely excluded from possession and enjoyment. The absence of a legally enforceable right in the donor did not prevent section 10 from operating, because the relevant enquiry is whether the donor was in fact excluded from the subject-matter of the gift.

Conclusion: The house was rightly treated as property deemed to pass on the donor's death and was liable to estate duty.

Issue (ii): Whether the words "by contract or otherwise" in section 10 controlled the first limb requiring entire exclusion of the donor.

Analysis: The expression "by contract or otherwise" was construed ejusdem generis to refer to a legal obligation or enforceable arrangement in the second limb dealing with benefit to the donor. Those words did not qualify the first limb, which separately requires the donor's entire exclusion from possession and enjoyment. The donor's continued occupation, even if permitted by filial affection rather than enforceable right, was sufficient to attract the charge.

Conclusion: The donor's exclusion had to be complete in fact, and the appellant's construction was rejected.

Issue (iii): Whether the 1965 amendment to section 10 could be treated as retrospective.

Analysis: The additional proviso inserted by the Finance Act, 1965, operated only from 1 April 1965. It could not be used to construe the unamended provision for an earlier death. The later legislative change did not amount to a retrospective interpretation of the original section.

Conclusion: The amendment was not retrospective and did not assist the appellant.

Issue (iv): Whether the house was wholly includible in the deceased's estate despite standing in the joint names of the deceased and his wife.

Analysis: The finding of the Board was that the property had been purchased entirely out of the deceased's funds, was treated by him as his own for income-tax purposes, and the income was assessed exclusively in his hands. On those facts, the wife was only a name-lender and the entire property belonged to the deceased.

Conclusion: The entire house was rightly included in the estate and no part was excluded on the basis of co-ownership.

Final Conclusion: The transfer did not escape estate duty, the later amendment afforded no retrospective relief, and the whole property was correctly brought into the taxable estate.

Ratio Decidendi: For section 10 of the Estate Duty Act, 1953, actual non-exclusion of the donor from possession and enjoyment of gifted property is sufficient to attract estate duty, even if the donor has no legally enforceable right to remain in occupation; later amendments are not retrospective unless expressly so provided.

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