TaxTMI 
TaxTMI 
1979 (11) TMI 6
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....s a son, Gangadas. Gangadas has a son, Ramratan, and three daughters, Rambha, Usha and Kiran. The deceased was partner in the firm, M/s. Shaligram Laxmichand Nathani, doing moneylending business. The other partners in the firm were his two sons, Govindlal and Shankarlal, and an outsider, Purshottamdas. From 3rd October, 1955, Govindlal ceased to be a partner in the firm and in his place his son, Gangadas became a partner. The deceased had an account with the firm. On 13th November, 1947, an amount of rupees one lakh was debited to this account and corresponding credit was given to a new account opened in the books of the firm in the name of Gangadas Nathani Account No. 1. This account of Gangadas continued up to Samvat Year 2009-10 when the amount of rupees one lakh was transferred to another account of Gangadas called Account No. 2. This account was actually started in the year 1949-50. There were credits of interest every year in this account; there were some other credits also. Further, there were debits on account of insurance premium and cash withdrawals and withdrawals for purchase of properties. On 13th November, 1947, another amount of Rs. one lakh was debited to the acc....
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....sp; 25,000 -------- 2,00,000 " -------- The narration in the journal of the firm stated that the amounts were debited to the capital account of the deceased at his instance and the corresponding amounts were credited in the names of the persons mentioned above, for the respective marr....
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....have set out earlier for the opinion of the High Court. Section 10 of the Act was considered by a Full Bench of this court in Balkishan Muchhal v. CED [1974] 94 ITR 243. In adverting to the principles relevant in the application of s. 10, one of us (Singh C.J.) who was a member of the Full Bench in that case, observed as follows (pp. 250, 251): " Section 10 of the Act enacts that ' property taken under any gift, whenever made, shall be deemed to pass on the donor's death to the extent the bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise '. The object of the section is to prevent evasion of duty by colourable gifts and semi-testamentary dispositions and to avoid the inconvenience of inquiry whether a gift is genuine or colourable where the conduct of the parties is prima facie inconsistent with the gift. The prima facie view is made by the legislature conclusive. 'The validity of the transaction is left untouched, for it concerns the parties alone. But they are not to embarrass the public treasury by equivocal acts' : Issacs J. i....
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.... possession as used in, section 143(b) means such a change of ostensible dominion as can be made having regard to the nature of the particular property and that must vary according as the property is corporeal or incorporeal.' Further, the question whether the donor has been completely excluded is also a question depending upon what is truly given under the gift. , If the donor retains and excludes from the gift certain rights and interests, possession and enjoyment by the donor of such rights and interests does not amount to non-exclusion of the donor of what is given under the gift of which possession and enjoyment is assumed by the donee. The distinction is adverted to in a number of cases and was re-stated by Lord Simonds in Clifford John Chick v. Commissioner of Stamp Duties [1959] 37 ITR (ED) 89, 97; 3 EDC 915, 925 (PC), in the following words : `It must often be a matter of fine distinction what is the subject matter of a gift. If as in Munro's case [1934] AC 61 ; 2 EDC 462 (PC), the gift is of a property shorn of certain of the rights which appertain to complete ownership, the donor cannot, merely because he remains in possession and enjoyment of these rights, be said....
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....uld attract the levy of estate duty on the death of the donor according to section 10 of the Act.... The other type of cases are those where the gift is subject to certain rights or the subject-matter of the gift is property shorn of certain rights and the possession or enjoyment of some benefit in that property by the donor can be ascribed to those rights, i.e., rights subject to which the gift is made or rights shorn of which the property is gifted; in such cases the subject-matter of the gift shall not be deemed to pass on the death of the deceased donor. To put it in other words, if the deceased donor delimits the interest he is parting with and possesses and enjoys some benefit in the property not on account of the interest parted with but because of the interest still retained by him, the interest parted with shall not be deemed to be part of the estate of the deceased donor passing on his death for the purpose of section 10 of the Act. The principle is that by retaining something which he has never given, a donor does not bring himself within the mischief of that section, nor would the provisions of the section be attracted because of some benefit accruing to the donor on....