TMI Blog1970 (7) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ammad (hereinafter referred to as " the deceased "), who died on July 26, 1956. Before his death the deceased had executed a deed of transfer in respect of the said property conveying the same to his son, Sri Sultan Mohammad, by a registered instrument dated September 11, 1936. By this deed he transferred the whole of the said property to Sri Sultan Mohammad, his son, " in consideration of his services, obedience and love and affection and in further consideration of a sum of Rs. 10,000 per year till my lifetime. " Sultan Mohammad died issueless in the year 1948, leaving behind him his widow, Smt. Sarvari Kahtoon, referred to hereinafter as " the applicant". After the death of Sultan Mohammad there was litigation between the applicant and the deceased for partition and separate possession of their respective shares in the property of the late Sri Sultan Mohammad. There was a preliminary decree of the civil court in the partition suit of September 1, 1950, a copy of which appears in the paper book as annexure " C ". By this decree the claim of the applicant for one-fourth share in the said property was decreed and it was also declared that the share of Sri Razzak Mohammad, the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot amount to a gift and therefore the provisions of section 10 of the Act were not attracted. On the other hand, learned standing counsel, Dr.Misra, objected that the applicant should not be permitted to raise this question as it was never raised either before the Assistant Controller, Estate Duty, or before the Board of Revenue in appeal. The objection of Dr. Misra, cannot, however, be accepted. The question before us, as referred by the Board, is whether the applicant's share in the said property should be "deemed to pass on the death of the deceased." Evidently, the question would depend on whether the transaction of 1936 was a gift or a transfer for consideration. There is no estoppel on a question of law and, even though this point had not been raised specifically before the Assistant Controller or the Board, the applicant cannot be debarred from pressing the same in this reference. The relevant portion of the deed dated September 11, 1936, executed by Razzak Mohammad, which is annexure " F " in this case, reads as follows : " Whereas, I, with all my senses and with clear mind and heart without any influence and with my own wish transfer the whole property as per lists A a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative" to mean, among other persons, "children" of the deceased Again clause (iii) of sub-section (7) defines: " 'Annuity' includes any series of payments, whether interconnected or not, whether of the same or of varying amounts, and whether payable at regular intervals or otherwise,........ if the payments are liable to cease an the death, or the amounts thereof are liable to be reduced on the death, .........." Having regard to the special provisions of section 27 of the Act it must be held that where a father transfers a property to his son or to his children in consideration of an annuity payable by the latter to the former, the transaction would not amount to a transfer for consideration under the special provisions of section 27 of the Act. In such a case it would be a transfer without consideration or in other words it is a case of gift for the special purposes of the levy of estate duty. In the present case, therefore, although the deceased has reserved to himself a substantial annuity for himself, the payment of which was made a consideration for the transfer, the transaction evidenced by the deed of 1936 cannot be regarded as a sale or transfer without consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have received." (The remainder of the section is not relevant to our case.) The applicant is evidently a person vested in possession by virtue of alienation made by the donor though not directly to her. In any event she is a person vested in possession by virtue of a derivative title, namely, by reason of succession from the donee. Section 53(1)(c) therefore makes the applicant accountable for the whole of the estate duty on the dutiable assets. Her liability to duty has been limited to the extent of the assets she has actually received, i.e., to 1/4th share of the said property. Under the English law the position is very much the same. Dymond has observed in his Treatise on Death Duties as regards the effect of section 38(7) of the Finance Act of 1957 as follows at page 249: " If the donee predeceases the donor, sub-sections (1) to (6) above, are to apply as if he had not died, and as if the acts of his personal representatives were his acts, and property taken under his testamentary disposition, intestacy or partial intestacy, were taken under a gift made by him at the time of his death." It is clear, therefore, that the applicant who has got 1/4th share in the said prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended to cover cases of properties which do not actually change hands on the death of the deceased but which the deceased was competent to dispose of at the time of his death. For instance, where the deceased was entitled to a power of appointment in respect of a given property he had disposing capacity in the same because he could appoint in his own favour. Thus, where the deceased was a trustee in respect of a property for the term of his life and under the terms of the deed of trust it was provided that on the death of the deceased the property would devolve on such person as the trustee might appoint and in default of appointment it would devolve on, say A, in such a case a trustee had a general power of appointment given to him by the trust deed and even if he did not exercise the power of appointment and the property goes to B the property would be deemed to pass to A on the death of the trustee. Section 7 lays down that property in which the deceased had an interest ceasing on his death shall be deemed to pass on his death to the extent to which a benefit accrues or arises by the cesser of such interest including, in particular, a coparcenary interest in the joint family pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he property as well as from any benefit therein by contract or otherwise. (2) That the donee must have assumed possession and enjoyment of the property, which is the subject-matter of the gift, bona fide and to the exclusion of the donor immediately upon the gift, and the donee must have retained such possession and enjoyment of the property thereafter. Both these conditions are cumulative and unless each of these conditions is satisfied the property would be liable to estate duty. The property will be deemed to pass on the death of the donor and will be subject to levy of estate duty. Applying the principles laid down by the Supreme Court in the above case to the facts of the case before us, we find that in the deed of 1936, the deceased was not entirely excluded from any benefit to him by contract or otherwise. As already stated, under the deed of 1936, the deceased was entitled to get an annuity of Rs. 10,000 per annum from the donee, namely, his son Sultan Mohammad. The deceased thus retained to himself the benefit under the agreement and it cannot be said that the donee had assumed possession and enjoyment of the property gifted and retained such possession and enjoyment o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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