1969 (5) TMI 10 - HC - Income Tax

Court rules property exclusion for estate duty under section 10, emphasizing donor exclusion and no benefit.

The court ruled against the inclusion of the property under section 10 for estate duty assessment, rejecting the department's argument. The decision was ... Estate Duty Act, 1953 - one Probodh Chandra Ray executed a deed of trust in which he was referred to as a settlor - After possession and enjoyment had been bona fide assumed by the donee, and retained by him, mere presence or stay of the donor for a few days prior to his death, on the facts and circumstances of this case, without any benefit being given to the donor by contract or otherwise, would not prevent retention of the possession and enjoyment of the property by the donor to the exclusion of the donee Issues:1. Validity of the trust deed executed by the settlor.2. Allegations of benami transaction by the settlor to avoid estate duty.3. Interpretation of section 10 of the Estate Duty Act, 1953.4. Assessment of property under section 10 based on possession and enjoyment.Analysis:The judgment pertains to a reference under section 64(1) of the Estate Duty Act, 1953, involving a trust deed executed by a settlor in 1955. The settlor created a trust for certain beneficiaries, including his wife, son, daughter, and their children, with trustees managing the property. However, subsequent actions of the settlor raised doubts regarding the validity and intentions behind the trust. The settlor later alleged that the trust was a benami transaction to evade estate duty, leading to legal complexities. The court disregarded documents from 1959, where the settlor attempted to cancel the trust, as they were deemed invalid due to family disputes and lack of legal effect.Regarding the application of section 10 of the Estate Duty Act, the Assistant Controller initially held that the property gifted to the son was enjoyed by the deceased until his death, triggering the application of section 10. However, the Appellate Controller ruled in favor of the applicant, and the Tribunal further analyzed the situation. The Tribunal found that the deceased had not been entirely excluded from the possession and enjoyment of the property, as he had briefly stayed there before his death, leading to the inclusion of the property under section 10 for estate duty assessment.The Tribunal's decision was based on the interpretation of section 10, emphasizing the requirement for the donee to assume possession and enjoyment of the gifted property to the exclusion of the donor. The Supreme Court's interpretation of section 10 highlighted the conditions of exclusion of the donor and absence of any benefit to the donor. The court concluded that in this case, the donee had genuinely assumed and retained possession of the property, without conferring any benefit to the donor, thus justifying the application of section 10 for estate duty assessment.In summary, the court rejected the department's contention to apply section 10 based on the overwhelming evidence of possession and enjoyment by the donee, leading to the exclusion of the donor. The court's decision was guided by the specific conditions outlined in section 10 and the Supreme Court's interpretation, ultimately ruling against the inclusion of the property under section 10 for estate duty assessment.