TaxTMI 
TaxTMI 
1978 (6) TMI 3
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....se, in the event of question No. 1 being answered in the affirmative, the debit of Rs. 4 lakhs to the account of the deceased was liable to be disallowed out of the debts due by the deceased to the firm by virtue of the provisions of section 44(a) of the Estate Duty Act (hereinafter referred to as the Act) ? " The above three questions arise out of the assessment to estate duty consequent upon the death of Gopaldas Poonjabhai which took place on August 28, 1958. Gopaldas and his major sons were partners along with others in the firm called Messrs. Khimji Poonja & Company, carrying on business in cotton, bullion, shares, etc., on extensive scale. The share of Gopaldas in the said firm was 1 1/2 annas in the rupee. Gopaldas had two accounts in the firm-one was a current account and the other an investment account. Whenever he needed moneys, he took the same from the firm by debiting the same to his current account. He personally owned shares worth nearly Rs. 14 lakhs. The same were kept by him in deposit with the firm and they were offered as security by the firm for obtaining overdraft facilities in its business. In the Samvat Year 2011, on November 30, 1954, there was a debit....
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.... property to the persons named by Gopaldas. On November 15, 1954, a sum of Rs. 2,75,000 was paid by Khimji Poonja & Company to the Kapadias. Ultimately, after making an application to the court, with the sanction of the court, this property was purchased in the name of the minors, Krishnaraj and Arunkumar. A sale deed was executed in favour of Krishnaraj and Arunkumar on September 28, 1955. After payment of the purchase price, stamp and other expenses, there was a credit balance in the account of Krishnaraj and Arunkumar on November 14, 1955, to the extent of Rs. 95,865 out of the sum of Rs. 4 lakhs transferred to them. As on January 2, 1956, being the last day of S.Y. 2012, this credit balance dropped to Rs. 3,137.89 and as on October 23, 1957, being the last date of S.Y. 2013, the small credit balance was wiped out and the account stood in debit to the extent of Rs. 39,795.03. There is no controversy in these assessment proceedings that Kurva Castle, purchased in the names of Krishnaraj and Arunkumar, belongs to them. On the demise of Gopaldas, a question arose as to whether the sum of Rs. 4 lakhs gifted to the minors, Krishnaraj and Arunkumar, on November 30, 1954, was liable....
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....no transfer of an actionable claim in this case, as there was no actionable claim when there was no balance due to or from a partner in a running firm. On the question of applicability of s. 10, the Tribunal held that the possession and enjoyment in this case has been assumed by the donees to the entire exclusion of the donor and that the retention of the amount in the books of the firm in which the deceased was a partner could not justify the application of s. 10. It was also pointed out that the contention on the application of s. 10 would be applicable only to the extent of the credit balance in favour of the minors within the period of two years preceding the death and not to the whole of Rs. 4 lakhs as considerable portion thereof had been withdrawn even in 1955. According to the Controller, the sum so outstanding two years prior to his death was Rs. 80,865. But according to the accountable person, the amount actually outstanding against the donees up to August 28, 1958, the date preceding two years prior to the death of Gopaldas, was Rs. 38,987-1-6, if the debits and credits were taken together in the two accounts relating to them, viz., Kurva Castle account and the joint ....
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....Rs. 4 lakhs. Apart from that, on the facts of the present case, Mr. Dastoor stated that there was a valid and effective gift in the sum of Rs. 4 lakhs, if the principle laid down by this court in the case of CIT v. Popatlal Mulji [1977] 108 ITR 4 was applied. In this case, the Division Bench, to which my learned brother was a party, had taken the view that there can be a valid gift effectuated by making entries in the books of account, if there was evidence to show that the gift was made by the donor and accepted by the donee and was acted upon by both of them. In that case, in the books of account of the separate business of a father, a certain amount was credited to his sons as the son's share of the capital for his being taken in as a partner in the business. The Tribunal found that the amount so credited to the son in the books was solely operated upon by the son. This court hold that there was a valid gift, in favour of the son, of the sum credited to his account. Thus, having regard to the facts of this case, applying the ratio of this decision, so far as question No. 1 is concerned that controversy does not remain and it has been answered in the affirmative in favour of t....
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....the sum of Rs. 1 lakh could be included in the principal value of the estate of the deceased as property deemed to pass under s. 10 of the E.D. Act, 1953. The Supreme Court took the view that neither the house property nor the sum of Rs. 1 lakh could be deemed to pass under s. 10. The first two conditions of the section were satisfied because there was an unequivocal transfer of the property by a settlement dead and of the sum of Rs. 1 lakh by crediting the amount in each of the sons accounts with the firm which thenceforward became liable to the sons for payment of that amount and the interest thereon: the possession that the donor could give was the legal possession which the circumstances and the nature of the property would admit and this the donor had given. The benefit the donor had as a member of the partnership was not benefit referable in any way to the gift but was unconnected therewith. The ratio of this decision is directly applicable to the facts of this case and there was an unequivocal transfer of the sum of Rs. 4 lakhs to the two minors by crediting the same in their accounts. In fact, that sum was treated as belonging to the minors and was partially utilised lat....
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...., period and thereafter gifted the same by making a credit entry, it may be said that the debt was incurred by the deceased wholly for his own use and benefit. As, however, in the present case, there was a simultaneous making of the debit entry in his name in the books of the firm and credit entry of the same amount in favour of the minors in the said books, the debt cannot be regarded as having been incurred wholly for the deceased's own use and benefit. This contention, in our opinion, is concluded by more than one decision of the English courts, where there is identical provision so far as the estate duty is concerned. Reference may be made to the decision of the House of Lords in the case of Attorney-General v. Duke of Richmond and Gordon [1909] AC 466 ; I EDC 527. In that case, the provisions of s. 7(1)(a) of the Finance Act, 1894, came to be considered by the House of Lords, which are identical with the provisions of s. 44 of the Act, with which we are concerned. The question, when the debts and incumbrances are incurred and created can be said to be wholly for the deceased's own use and benefit, had been considered. At page 472, Lord Macnaghten observed (see also I EDC at....
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.... credit the deceased's current account with pounds 80,000 but opened " No. 2 account " on which she was entitled to a temporary overdraft up to the required amount. On the day the transactions were to be completed, a representative of her bank, a representative of an assurance society, the deceased's solicitor and her attorney met at the deceased's bank. The attorney draw a cheque on the No. 2 account for pounds 80,000 in favour of the assurance society. The representative of the society thereupon presented the cheque which was credited to the bank's draft account and received, in turn, a banker's draft for pounds 80,000. Thereupon, he issued receipts and the policies commenced. The deceased died on the following day. Her executors claimed that the sum of pounds 80,000 owing by her estate in respect of the debit balance in the No. 2 account was deductible from her estate for estate duty purposes by virtue of s. 7(1)(a) of the Finance Act, IS 94, on the ground that it had been incurred for " full consideration in money's worth wholly for the deceased's own use and benefit ". The executors' claim was rejected by Walton J., holding that the requirements of s. 7(1)(a) of the Finance Ac....