Estate duty includes post-gift business profits where income accrues from gifted property itself before the donor's death.

Gifted property taken immediately into a continuing business or partnership arrangement may generate income that is treated as accruing from the gifted property itself. Under the Estate Duty Act, property passing under a disposition made within two years of death, together with income accrued on that property up to the date of death, formed part of the estate. On the facts, the post-gift profit arose from the business operated with the gifted stock-in-trade, cash and cheques, rather than from an independent investment made by the donees. The amount was therefore includible in the estate and was not excluded as a separate post-gift gain.

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Issues: Whether the profit of Rs. 31,069 arising after the gift but before the donor's death formed part of the estate deemed to pass on death under the Estate Duty Act.

Analysis: The property originally gifted was not an unrestricted cash gift alone but a transfer of stock-in-trade, cash and cheques followed immediately by a partnership arrangement in which the donees' shares were worked into the continuing business. The statutory scheme treated property taken under a disposition made within two years of death as property deemed to pass on death, and every estate included income accrued on the property comprised therein down to the date of death. On the facts, the disputed amount represented profit generated by the business after the gift and before death, and not a mere subsequent investment return on cash absolutely received and independently dealt with by the donees. The income was therefore treated as accrued from the gifted business itself.

Conclusion: The amount of Rs. 31,069 was rightly included in the estate and the reference was answered against the accountable person.

Ratio Decidendi: Where gifted property is immediately taken into a continuing business or settlement arrangement, income generated from that property before the donor's death is includible in the estate if it accrues from the gifted property itself and not from an independent post-gift investment by the donee.

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