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Issues: Whether a sum gifted by the deceased to his minor sons and later brought in as capital of a partnership firm in which the deceased was also a partner was includible in the estate under section 10 of the Estate Duty Act, 1953, on the footing that the donees did not retain the gifted property to the entire exclusion of the donor.
Analysis: Section 10 applies where gifted property is not immediately assumed in bona fide possession and enjoyment by the donee and thereafter retained to the entire exclusion of the donor. Once the gifted amount was introduced as capital of the firm, it became a partnership asset governed by the incidents of partnership, and the donor, as a partner, acquired an interest and dominion over that asset. The property was therefore not retained by the donees to the exclusion of the donor. The distinction drawn in the authorities depended on the precise subject-matter of the gift: where the gift is of the full interest and that property is later used as partnership capital, the donor is not excluded; where the gift is only of a limited interest shorn of partnership rights, section 10 may not apply. On the facts here, the gift was of the entire monetary interest, and its investment as firm capital brought the donor back into possession and enjoyment through the partnership.
Conclusion: Section 10 of the Estate Duty Act, 1953 applies, and the gifted amount is deemed to pass on the donor's death and is includible in the estate.
Ratio Decidendi: Where property gifted by a donor is subsequently contributed as capital to a partnership in which the donor is a partner, the donee does not retain that property to the entire exclusion of the donor for the purposes of section 10 of the Estate Duty Act, 1953.
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