TMI Blog1974 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Appellate Tribunal, Allahabad, has submitted this reference under section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as " the Act "), for the opinion of this court on the following question of law : "Whether, on the facts and in the circumstances of the case, the sum of Rs. 35,000 was liable to estate duty as the property of the deceased under section 10 of the Estate Duty Act, 1953 ? " When this reference came up before a Division Bench of this court, it noticed that there was a conflict between the decisions of two Division Benches of this court in Behari Lal Matanhelia v. Controller of Estate Duty and Controller of Estate Duty v. Ramesh Chand Gutpta . The case was accordingly referred to a Full Bench and that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts of the firm by debiting the amounts to her account and crediting them to the account of the donee Smt. Hira Bai. The Assistant Controller of Estate Duty found that out of the aggregate sum of Rs. 40,000, a sum of Rs. 5,000 was gifted within one year of the donor's death and hence it was liable to be ignored in the computation of the value of the estate of the deceased, as provided in section 9 of ,the Act. As regards the balance of Rs. 35,000, he found that the same was not withdrawn by the donee immediately after the gifts were made. It was, however, withdrawn after a lapse of some time on different occasions between November, 1962, to February, 1963. From a copy of her accounts, which has been annexed to the statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is aggrieved and at his instance this reference has been made. A large number of authorities have been cited on both sides which reveal a clear cleavage of opinion between various High Courts. Some High Courts have taken the view that on the facts like the present, section 10 is not applicable, whereas other High Courts have taken a contrary view. It is, however, not necessary to refer to those authorities because the law has recently been settled by the Supreme Court by its two decisions, namely, Controller of Estate Duty v. C. R. Ramachandra Gounder and Commissioner of Income-tax and Controller of Estate Duty v. N. R. Ramarathnam. In the first case, the deceased, who was a partner in a firm, owned a house property let to the firm as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, so far as the property is concerned, it being in the tenancy of the firm, the owner could transfer the possession only subject to the tenancy. The law did not require that he should get the property vacated and then hand over possession to the donee in order to escape the mischief of section 10. Similarly, there was a complete transfer of possession of the sum of rupees one lakh lofted to the sons. The amounts were credited in the sons' accounts and the firm acknowledged its liability of payment of the aforesaid amount and the interest thereon. The second requirement, namely, that the donor should be excluded from the enjoyment of the gifted property was also fulfilled inasmuch as the benefit which he derived as a partner from the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the business in which he was a partner, the deceased continued to enjoy the benefit of this capital." The Supreme Court negatived all these contentions and held, following its decision in the case of C. R. Ramachandra Gounder that section 10 was not applicable. The reason is not far to seek. The gifted amount was once invested in the firm by the donor as his capital. As soon as it was transferred to the accounts of his sons, it ceased to be a part of his capital and became a debt due to the sons. Thereafter, the firm utilised that loan in carrying on its business, but the benefit which the donor derived as a partner was not referable to the gift but to the agreement of partnership. We may now briefly examine the cases decided, by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rive benefit from the gifted amount and as such section 10 was attracted. In this case the earlier decision of this court in the case of Behari Lai Matanhelia has not been referred to, but, instead, the Bench relied upon another decision of this court in Abdul Alim v. Controller of Estate Duty. In Abdul Alim's case also the position was somewhat similar. The deceased had gifted a sum of Rs. 44,000 to his minor sons by adjustment entries in the books of accounts of a firm in which he was a partner. Subsequently the minors were also admitted to the benefits of the partnership and the gifted amount, remained to their credit in the books of the firm. This court held that inasmuch as the money gifted was utilised by the firm in which the decea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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