Estate duty and partnership-linked gifts: section 10 did not apply where donor's control flowed from existing firm rights.

Section 10 of the Estate Duty Act, 1953 applies by reference to the true subject-matter of the gift. Where transfers were made by book entries in an existing partnership business and the amounts remained subject to the rights and arrangement of the firm, the gifts were not unrestricted cash but transfers burdened by those partnership rights. The donor's continued control was attributable to the structure of the gift and the partnership framework, not to any independent reservation of benefit. On that basis, the gifted amounts were not treated as property deemed to pass on death, and no estate duty liability arose on the transferred sums.

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Issues: Whether the transferred sums were liable to estate duty as property deemed to pass on death under section 10 of the Estate Duty Act, 1953, having regard to the nature of the gift, the donor's continued control as a partner, and the donor's alleged benefit from the transferred amounts.

Analysis: The decisive question was what constituted the subject-matter of the gift. The transfers were made by book entries in the context of an existing partnership business, and the amounts were available for continued use in that business subject to the partnership arrangement. On that footing, the gifts were not of unrestricted cash free from incident but of amounts transferred subject to the rights of the firm. The donor's continuing control arose from the structure of the gift itself and the partnership rights attached to it, not from any independent reservation of benefit. Applying the principle that section 10 operates by reference to the actual subject-matter of the gift, the donees were treated as having assumed possession and enjoyment of what was given, to the extent the gift itself permitted, with the donor excluded from the gifted subject-matter.

Conclusion: The amounts were not liable to estate duty under section 10 of the Estate Duty Act, 1953, and the answer to the reference was against the revenue.

Ratio Decidendi: For the purpose of section 10 of the Estate Duty Act, 1953, liability depends on the true subject-matter of the gift; where a gift is made subject to pre-existing partnership rights, the donor's continued control referable to those rights does not amount to a taxable reservation of benefit.

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