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TMI Blog1971 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... eemed to pass on the death of Kanhaiyalall as Rs. 1,72,670. After considering the material produced before him, the Assistant Controller determined the principal value of the estate passing or deemed to pass on the death of Kanhaiyalall as Rs. 3,00,141 and calculated the duty payable thereon. In computing the principal value of the estate passing on the death of Kanhaiyalall, the Assistant Controller included a sum of Rs. 48,513 being the credit balance standing in the account of Smt. Bridhika Devi (wife of the deceased) in the books of the firm, Messrs. Sheo Prasad Kanhaiyalall, Bahraich, in which the deceased was a partner. On behalf of the accountable person it was claimed that this sum of Rs. 48,513 came out of a sum of Rs. 51,000 gifted by the deceased to his wife on 30th December, 1951, more than two years before his death. This gift was effected by adjustment in the books of the firm in which the deceased was a partner by making debit and credit entries in the account of the deceased and his wife. The Assistant Controller found that there was no evidence to show that the alleged gift was accepted by the wife. He held that in the absence of any evidence transfer of the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal infirmity attaches to the gift. The view taken by the Central Board of Direct Taxes that no valid gift can be effected by making transfer entries in the books of account is clearly not sustainable. In the case of Gopal Raj Swarup v. Commissioner of Wealth-tax a sum of Rs. 50,000 was said to have been gifted by a karta of a Hindu undivided family to his son. This transfer was effected by debiting the donor's personal account in the books of the Hindu undivided family and crediting the same in the personal account of the donee. On the date on which the gift was said to have been made there was a substantial credit balance in the account of the donor exceeding the amount gifted. This court came to the conclusion that a valid gift of the value of Rs. 50,000 had been effected. The statement of the case shows that on 30th of December, 1951, a sum of Rs. 51,000 was transferred from the account of the deceased to that of his wife. The wife operated upon this account and on 1st January, 1954, she withdrew a sum of Rs. 2,487 leaving a balance of Rs. 48,513. This fact clearly indicates that the wife accepted the gift and treated the sum of Rs. 51,000 gifted to her as her own. In the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be liable to be included in the estate of the deceased for purposes of payment of estate duty under section 10 of the Act. So far as the second condition was concerned it was observed that it had two limbs: the deceased must be entirely excluded (1) from the property, and (2) from any benefit by contract or otherwise. The expression "contract or otherwise" is to be construed ejusdem genesis. So construed, the words "or otherwise" must be interpreted to mean some kind of legal obligation though not in the form of a contract. So far as the first limb (part) of the section is concerned, before a gift can be excluded from consideration it has to be found that immediately on the making of the gift the donor must have entirely excluded himself from possession and enjoyment of property. The words "by contract or otherwise" in the second limb (part) of the section do not control the words "to the entire exclusion of the donor" in the first limb (part) of the section. In other words, in order to attract the first part of the section, it is not necessary that possession by the donor of the gifted property must be referable to some contract or other obligation enforceable in law or equity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roller of Estate Duty v. N. R. Ramarathanam. In this case the deceased was a partner in a firm carrying on money-lending business. He transferred by means of book adjustment in the accounts of the firm certain sums of money to his sons and daughter as and by way of gift without physically handing over the same and continued to be a partner in the firm. On his death, the total value of the gift was included in the estate of the deceased for estate duty purposes under section 10 of the Estate Duty Act on the ground that as the deceased continued to be a partner in the firm which had use of the monies, he was not completely excluded from the subject-matter of the gifts but had beneficial enjoyment thereof. The Tribunal relied upon the rase of H. R. Munro v. Commissioner of Stamp Ditties and excluded this amount. On a reference at the instance of the Controller of Estate Duty, the Madras High Court observed as follows: "The nature, extent and manner of enjoyment of the two sums gifted by the father to his sons and daughter were no different in the hands of the donees. At the time of making the gift, having regard to the facts, it has to be taken that the two sums transferred by book e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law as laid down in Munro's case and that in the case of Clifford John Chick. These cases deal with different aspects of the problem. We are in respectful agreement with the observations made by the learned judges of the Madras High Court according to which, while applying the provisions of section 10 of the Estate Duty Act, the precise extent and nature of the property gifted has to be found out. Learned counsel for the revenue relied upon the decision of the Gujarat High Court in the case of Smt. Shantaben S. Kapadia v. Controller of Estate Duty. In this case the deceased was a partner of a firm. On a particular date his account in the firm was debited by a sum of Rs. 60,000 and the same amount was credited to the account of his brother. The credit continued in the account of the firm till the date of the death of the deceased. The transfer of the amount from the account of the deceased to that of his brother was acknowledged to be a gift. The Assistant Controller included this amount in the estate of the deceased for estate duty purposes holding that even if the transfer entries amounted to a valid gift the provisions of section 10 of the Estate Duty Act were attracted. On a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifted was the right to recover the sum of Rs. 51,000 from the firm. After the deceased made this gift he did not remain in control or in possession of the right to recover this amount from the firm which became the exclusive right to be enjoyed by the donee. As the sum of Rs. 51,000 was not gifted in specie it cannot be said that the donor was not excluded from the property gifted merely because the donee did not enforce her claim and the donor continued to run the partnership business as from before. The fact that no interest was paid to the donee on the amount standing to her credit is also of no significance and does not alter the real nature of the property gifted. If the real nature of the property gifted was the claim to receive a sum of Rs. 51,000 from the firm, it is obvious that after making the gift the donor did not exercise any control over that claim and he was completely excluded from the enjoyment or possession of that claim. It is no one's case that after the claim was transferred to the donee the donor acquired any benefit to himself by contract or otherwise in respect of the claim to receive the amount of Rs. 51,000 from the firm. In this view of the matter the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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