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TMI Blog1974 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... 953 ? " 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 how it has now come up before us : Under section 5 of the Act, a tax called estate duty is levied upon the estate of a deceased, which passes on his death. Section 10 of that Act creates a fiction, as a result of which property gifted by the deceased before his death is "deemed to pass" on his death in certain circumstances. That provision, as it stood at the material time, provided: "10. property tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 As regards the balance of Rs. 35,000, he found that the same was not withdrawn by the donee immediately after the gifts were made. It was, however, withdrawn after a lapse of some time on different occasions between November, 1962, to February, 1963.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 of the case as annexure " C ", it appears that in the year 1962-63, she transferred in her account with the firm a, sum of Rs. 33,680.78 from another concern called N. P. Oil Industries and deposited a sum of Rs. 5,000 in cash. Thus, a sum of Rs. 35,000 which she had withdrawn earlier was once again brought back in the partnership firm as deposits in her name. Those deposits remained with the firm until the do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause 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 tenant-at-will Before his death, he executed a deed of settlement under which he transferred this property to his two sons absolutely and irrevocably and thereafter the firm paid the rent to the donees by crediting the amount in their accounts in equal shares. The deceased further directed the firm 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. The sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 firm which retained the house in its tenancy and the sum of Rs. one lakh as a loan arose from the agreement of partnership and not from any agreement with the donor. In other words, in the opinion of the Supreme Court, the benefit derived by the donor as a partner was not referable to the gift for which proposition the Supreme Court relied upon the following observations of Lord Tomlin : "The benefit which the donor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 court. In Behari Lal Matanhelia v. Controller of Estate Duty , one Kanhaiya Lal Matanhelia made a gift of Rs. 51,000 to his wife by adjustment entries in the books of accounts of a firm in which he was a partner. At the time of his death a sum of Rs. 48,513 was still standing to her credit in the books of the firm. A question arose as to whether this amount was liable to be included in the estate of the deceased under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustment 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 deceased was also a partner before his death, section 10 was applicable. In this case the case of Behari Lal Matatihelia has been distinguished. We are, however, unable to find any material distinction. The question involved in all the three cases was the same, namely, where a person makes a gift of money either by cash or by adjustment entries in the books of accounts of a firm in which he is a partner and the money so gifted i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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