Contemplation of death exemption and assessment in a deceased person's name were both held to be legally fatal.

Movable gifts were exempt from gift-tax because the donor, on the evidence, made them under a bona fide subjective apprehension of imminent death; treatment for diabetes and heart trouble, worsening condition and confinement to bed supported the inference of gifts in contemplation of death. The assessment was also held void because the demand notice and assessment stood in the name of a deceased person, and the legal heir's participation did not cure that defect.

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Issues: (i) Whether the movable gifts were made in contemplation of death and therefore exempt from gift-tax; (ii) Whether the assessment was void because it was completed in the name of a dead person.

Issue (i): Whether the movable gifts were made in contemplation of death and therefore exempt from gift-tax.

Analysis: The expression "gifts made in contemplation of death" was applied with reference to section 191 of the Indian Succession Act, 1925, as incorporated by the Explanation to section 5(3) of the Gift-tax Act, 1958. The relevant test was the donor's subjective apprehension of death at the time of making the gifts. On the evidence, the donor had been under treatment for diabetes and heart trouble, his condition worsened in July 1970, he remained confined to bed thereafter, and all the disputed gifts were made after that point. In the absence of material showing a contrary inference, the inference was that the donor did apprehend death when the gifts were made.

Conclusion: The movable gifts were made in contemplation of death and were exempt from gift-tax, in favour of the assessee.

Issue (ii): Whether the assessment was void because it was completed in the name of a dead person.

Analysis: The assessment order and the consequential demand notice described the assessee as a deceased person, although the legal heir had filed the return and participated in the proceedings. The demand notice was treated as the operative legal basis for recovery, and its issue in the name of a dead person was held to be fatal. The participation of the legal heir did not cure the defect.

Conclusion: The assessment was void as it stood in the name of a dead person, in favour of the assessee.

Final Conclusion: The movable gifts were held exempt from gift-tax and the assessment was also held invalid for being made against a deceased person, so the appeal succeeded to that extent.

Ratio Decidendi: Gifts fall within the contemplation-of-death exemption when the evidence shows that, at the time of making them, the donor had a bona fide subjective apprehension of imminent death; an assessment and demand notice issued in the name of a deceased person is void despite participation by the legal heir.

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