TaxTMI 
TaxTMI 
1972 (2) TMI 4
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.... was debited with the sum of Rs. 3 lakhs and on the same day simultaneously the three accounts with the said firm of the minor donees were credited with a sum of Rs. 1 lakh each. The Tribunal had presumed that the transfer was effected in the name of the minor donees as a result of the oral instructions given by the deceased to the firm. The sum of Rs. 3 lakhs thus transferred to the grandsons continued to stand in their names in the accounts of M/s. Dayaram Surajmal till the date of dissolution of the firm on July 4, 1960. Thereafter, some of the assets were allotted to the grandsons in lieu of the amounts standing to their credit. Bankatlal Lahoti died on December 21, 1956. His widow, as the accountable person, filed an account of the deceased's estate declaring the value thereof at Rs. 2,60,702. This did not include the amount of Rs. 3 lakhs transferred by the deceased to the three minors on October 4, 1952. The Deputy Controller of Estate Duty held that, since the transaction was a transfer of an actionable claim, the transfer could be effected only under an instrument in writing signed by the transferor as contemplated under section 130 of the Transfer of Property Act an....
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....troller of Estate Duty. Section 3 of the Transfer of Property Act defines an "actionable claim" to mean a claim to any debt, which the civil courts recognise as affording the grounds for relief, whether such debt be existent, accruing, conditional or contingent. Therefore, the question is whether, in respect of the amount standing to the credit of a partner, he has any claim to recover the money which the civil Courts recognise as affording the ground for relief. In Mohamad Kassim v. Controller of Estate Duty, the donor, who was a partner in a partnership firm consisting of himself and his three sons, gifted to his three sons a total sum of Rs. 2,25,000 by debiting his account with the partnership and crediting the accounts of his three sons in the same partnership. It was held in that case on those facts that there was no transfer of an actionable claim. Relying on certain passages of Lindley on Partnership, the learned judges observed that : "A partner, however, is not a debtor to or creditor of his firm in any legal sense of that term." In support of their view, in particular, they relied on the following passage in Lindley on Partnership : "Accountants are quite rig....
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.... of money, a Division Bench of this court held as follows : "It may be taken generally that if the account sought is in respect of a matter which though arising out of the partnership business or connected with it, does not involve the taking of general accounts the court will as a rule give the relief asked for, and will now-a-days refuse to interfere only in those cases in which a partial account would work injustice to the other partner." Thus, unless great injustice will be caused to the defendant-partner, courts will not refuse to recognise a claim for payment of the amount advanced by a partner to the firm. Even if no partial accounting could be ordered, the creditor-partner could file a suit for dissolution and general accounting and claim to be paid before the division of the assets as provided under section 48 of the Partnership Act. Thus, in either case, a partner has a right of action. The passage from Lindley on Partnership extracted in Mo hammed Kassim v. Controller of Estate Duly, is only a historical general statement of the law. In another place in Lindley on Partnership (12th edition, page 306), we find the following passage : "Again, there appears to be n....
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....laim, whether with or without consideration, shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorised agent and shall be complete and effectual upon execution of such an instrument. The learned counsel for the accountable person, relying on the decisions in Chimanbhai Lalbhai v. Commissioner of Income-tax, Commissioner of Income-tax v. New Digvijaysinhji Tin Factory, E. S. Hajee Abdul Kareem & Son v. Commissioner of Income-tax, Abdul Rahaman Rowther & Co v. Commissioner of Income-tax and R. M. Chidambayam Pillai v. Commissioner of Income-tax, contended that there was a valid transfer of the actionable claim. In all these cases the question for consideration was whether the entries in the account books evidenced a gift of money. In none of these cases it was argued or considered whether the transfer was a transfer of money or an actionable claim and whether as an actionable claim the transfer was complete and valid. On the other hand, the learned counsel for the revenue contended, relying on the decision in Paliram Mathuradas v. Commissioner of Income-tax, that mere entries in the account books were not sufficient to constit....
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....pertain to complete ownership and that, therefore, the donor cannot, merely because he remains in possession and enjoyment of those rights, be said within the meaning of the section not to be excluded from possession and enjoyment of that which he has given. In George Da Costa v. Controller of Estate Duty, the Supreme Court held that : "The crux of section 10 lies in two parts-(1) the donee must bona fide have assumed possession and enjoyment of the property, which is the subjec-tmatter of the gift, to the exclusion of the donor, immediately upon the gift, and (2) the donee must have retained such possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him, by contract or otherwise. As a matter of construction, we are-of opinion that both these conditions are cumulative. Unless each of these conditions is satisfied, the property would be liable to estate duty under section 10 of the Act." We have already held that the subject-matter of the gift was an actionable claim. In almost an identical case, in Controller of Estate Duty v. C. R. Ramachandra Gounder, a Division Bench of this court held that, when an actionable claim was gifte....
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.... should be deemed to have been made only subject to the rights of the partnership to utilise those funds. The gift in such a case was shorn of those rights which belonged to the partnership. It, therefore, follows that section 10 of the Estate Duty Act has no application to the present case. The learned counsel for the revenue strongly relied on two decisions of the Gujarat High Court-Smt. Shantaben S. Kapadia v. Controller of Estate Duty and Controller of Estate Duty v. Chandravadan Amratlal Bhatt and a recent Full Bench decision of the Delhi High Court in Controller of Estate Duty v. Prahlad Rai. In Shantaben S. Kapadia v. Controller of Estate Duty the Gujarat High Court did not consider the question as to whether the subject-matter of the gift was an actionable claim or a gift of money. It proceeded to decide the issue on the basis that the gift was of a sum of money by a partner to a third party and, when the amount was kept as a deposit with the partnership firm in the name of the third party, it was held that section 10 could be applicable on the ground that the deceased who was a partner shall be deemed to be in possession and enjoyment of the property gifted. The decisio....