TaxTMI 
TaxTMI 
1988 (5) TMI 35
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....had an 8 annas share in the firm and each of his four sons had a share of 2 annas in the profits and losses of the firm. It was stated by learned counsel appearing for the accountable person before the Rajasthan High Court that the firm was managed not by Motilal Sanghi, but it was managed by the eldest son, namely, N. K. Sanghi. Motilal Sanghi died on July 21, 1961. A question arose whether the sum of Rs. 1 lakh gifted by him as aforesaid was liable to be included in his estate for the purposes of computation of estate duty under the provisions of the Estate Duty Act. The Assistant Controller of Estate Duty took the view that the sum was liable to be included in the estate of the said deceased in view of the provisions of section 10 of the Estate Duty Act as that amount was not retained by the donees to the entire exclusion of the donor. An appeal preferred by the accountable person to the Appellate Controller of Estate Duty was, allowed by him holding that section 10 was not attracted to the circumstances of the case and an appeal preferred by the Revenue to the Appellate Tribunal was dismissed. A reference was, thereafter, made To the High Court at the instance of the Revenue. A....
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.... Estate Duty Act were attracted. It was, on the other hand, contended by Mr. Sharma, learned counsel for the accountable person, who is the appellant before us, that when the amounts were invested by the donees in the said firm, the interest which the deceased got in the amounts invested by the donees, as a partner of the firm in which the amounts were invested, was in no way related to the gift and hence, merely by reason of that investment, it could not be said that the donees had not retained the said amount to the entire exclusion of the donor for the purposes of section 10 of the Estate Duty Act. It is the correctness of these submissions which has to be examined in the light of the provisions of section 10 and the decided cases. In George da Costa v. CED [1967] 63 ITR 497 (SC), analysing section 10 of the said Act, this court observed as follows (p. 501): "The crux of the section lies in two parts : (1) The donee must bona fide have assumed possession and enjoyment of the property, which is the subject-matter 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 en....
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....e portion of the land gifted to him separately. The partnership was an oral one and about six years after these deeds of gifts were executed, a written partnership agreement was drawn up during the lifetime of the father under which no partner was entitled to withdraw from the partnership. On the death of the father, the land which he had transferred by way of gift to his six children was included in his estate in the assessment of death duties under the Stamp Duties Act (N. S. W.), 1920, which contained provision in pari materia with section 10 of the Estate Duty Act. On appeal, the judicial Committee of the Privy Council held that such inclusion was not justified and laid down the principle which we have set out earlier. The other leading case in this connection decided by the Privy Council is the case of Clifford John Chick v. Commissioner of Stamp Duties [1959] 37 ITR (ED) 89. The same provision, namely, section 102 of the New South Wales Stamp Duties Act, 1920-56, came up for consideration in that case. The facts were that a father transferred, by way of gift, to one of his sons a pastoral property, the gift being made without any reservation or qualification or condition. ....
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....roperty were gifted in Gounder's case. The first type of property gifted was a house which the deceased owned and which was let to the firm in which the deceased was a partner as tenant. He gifted this house to his two sons absolutely. After the execution of the deed of gift, the firm paid the rent not to the deceased but to the donees by crediting the amount in the donees' accounts in equal shares. The second type of property gifted consisted of money. This gift was effected by the deceased by directing the firm in which he was a partner to transfer from his account a sum of Rs. 20,000 to the credit of each of his five sons in the firm's books of account with effect from a particular date. He gave intimation of this transfer to his sons. Pursuant to the directions given by the deceased, a sum of Rs. 20,000 was credited in each of the sons' account with the said firm. The amounts remained invested with the firm for which the firm paid them interest. The deceased continued as a partner of the firm till dissolution. Within one month of its dissolution, the deceased died. The question arose as to whether the value of the house property and the sum of Rs.1 lakh should be included in th....
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....inciple laid down in Chick's case [1958] AC 435. This would appear clear from the decision of this court in CED v. Kamlavati and CED v. jai Gopal Mehra cases [1979] 120 ITR 456. Both these decisions involved the question of applicability of section 10 of the Estate Duty Act. In Kamlavati's appeal, the facts were that one Maharaj Mal, the deceased, was a partner in a firm which carried on business under the firm name and style of M/s. Maharaj Mal Mana Raj. Maharaj Mal had one-half share in the partnership, and the other two partners bad one-fourth share each. Maharaj Mal made a gift of Rs.1 lakh to his son, Lalit Kumar, and of Rs. 50,000 to his wife, Kamlavati. In the books of account of the firm, the sums of Rs. 1 lakh and Rs. 50,000 were debited to the account of Maharaj Mal and credited to the accounts of the son and wife respectively. Almost simultaneously, the son was taken as a partner in the said firm by giving him one-fourth share out of the one-half share of Maharaj Mal. On the death of different partners, the firm was reconstituted and some other partners admitted. On the death of Maharaj Mal, a question arose regarding the applicability of section 10 of the said Act. In t....
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.... ITR 448 (SC), the benefit which the donor was enjoying as a partner in the property gifted was existing at the time of the gift itself and continued to exist even thereafter..." It is important to note that the principle in Munro's case [1934] AC 61 (PC); 2 EDC 462 (PC) was applied in the case of jai Gopal Mehra's case [1979] 120 ITR 456 (SC) although the donees invested the amounts gifted in the firm in which the donor was a partner after the gifts were made. The same Bench which decided Gounder's case [1973] 88 ITR 448 (SC) followed it in the case of CED v. N. R. Ramarathnam [1973] 91 ITR 1 (SC). In this case, the facts in relation to the gifts of money by the donor in favour of his three sons and the daughter were materially similar to those of Gounder's case [1973] 88 ITR 448 (SC), except that the three sons and daughter were also partners in the firm. Yet, applying the ratio in Gounder's case [1973] 88 ITR 448 (SC), it was held that the amounts gifted were not chargeable to estate duty under section 10. In Kamlavati's case [1979] 120 ITR 456, this court referred to the decision of this court in CED v. R. V. Viswanathan [1976] 105 ITR 653 and observed as follows (p. 4....