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TMI Blog1970 (7) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deceased, would be 3/4th in the said property. It was further declared that the maintenance allowance of Rs. 2,500 for Sri Razzak Mohammad, the deceased, would be a charge on the share of the said property allott ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 and B of this deed which was in my possession with all the rights which I had in the said property and buildings with attached lands, fixture and fittings inside and outside the buildings and without keeping anything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, i.e., a gift, in respect of the said property. If the transaction is regarded as a gift in respect of the said property, it would follow that the condition imposed by the deceased for payment of the sum of Rs.10,000 per ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son 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 property under a derivative title, as successor or legal heir of the donee, is liable as an accountable person for the estate duty but her liability would be limited to the extent of what is inherited by her from her husband, the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment 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 property of a Hindu governed by the Mitakshara, Marumakkattayam or Aliyasantana law. We need not refer to all the sections under which property is deemed to pass. It is relevant to refer to the provisions of sections 9 and 10 of the Act which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely 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 of the property to the entire exclusion of any benefit to the donor. That being the case, the provisions of section 10 are immediately attracted. As the benefit retained by the donor related to the entire property gifted by him it would follow that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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