Estate duty inclusion under section 10: reserved benefits and lease-back use prevented complete exclusion of the donor from gifted property.

Section 10 of the Estate Duty Act, 1953 applies where the donee does not take bona fide possession and enjoyment of gifted property to the donor's entire exclusion. A maintenance charge reserved in favour of the donor and his wife over the whole of the gifted properties in annexure A constituted a contractual benefit to the donor, so the exclusion requirement was not met and the properties were treated as passing on death. The nursing home building in annexure B also remained chargeable because the donor continued to use it under a lease-back arrangement and was not entirely excluded from benefit. The reference was answered against the accountable person and in favour of Revenue.

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Issues: (i) Whether the properties comprised in annexure A, gifted to the deceased's children subject to maintenance charges in favour of the donor and his wife, were deemed to pass on the donor's death under section 10 of the Estate Duty Act, 1953; (ii) Whether the nursing home building comprised in annexure B, gifted to the deceased's son but thereafter leased back and used in the nursing business, was deemed to pass on the donor's death under section 10 of the Estate Duty Act, 1953.

Issue (i): Whether the properties comprised in annexure A, gifted to the deceased's children subject to maintenance charges in favour of the donor and his wife, were deemed to pass on the donor's death under section 10 of the Estate Duty Act, 1953.

Analysis: Section 10 applies where the donee has not immediately assumed bona fide possession and enjoyment of the gifted property to the entire exclusion of the donor or of any benefit to him by contract or otherwise. The maintenance provision in annexure A was a contractual benefit reserved to the donor and his wife over the whole of the gifted properties, so the donor was neither entirely excluded from benefit nor confined to a separable part of the property for the purpose of the statutory phrase "to the extent".

Conclusion: The properties in annexure A were liable to be treated as passing on the donor's death under section 10, in favour of Revenue and against the accountable person.

Issue (ii): Whether the nursing home building comprised in annexure B, gifted to the deceased's son but thereafter leased back and used in the nursing business, was deemed to pass on the donor's death under section 10 of the Estate Duty Act, 1953.

Analysis: The gifted building was not retained by the donee to the entire exclusion of the donor, since the donor continued to use the property under the lease arrangement and derived the statutory sense of benefit contemplated by section 10. On the facts, the gift did not satisfy the exclusion requirement necessary to keep the property outside charge.

Conclusion: The nursing home building in annexure B was also liable to be deemed to pass on the donor's death under section 10, in favour of Revenue and against the accountable person.

Final Conclusion: The reference was answered against the accountable person, and both questions were answered in favour of the department.

Ratio Decidendi: For section 10 of the Estate Duty Act, 1953, a gifted property is chargeable where the donor retains a benefit over the whole property or is not entirely excluded from possession and enjoyment; the words "to the extent" do not assist where the reserved benefit extends over the entire gifted property.

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