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TMI Blog1973 (5) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... al Sanghi but it was managed by Shri N. K. Sanghi, the eldest son of the donor. Shri Motilal Sanghi died on 21st of July, 1961. The Assistant Controller of Estate Duty while assessing the properties of Shri Motilal Sanghi under the provisions of the Act gave a show-cause notice to the accountable person why the amount of Rs. 1 lakh given by the deceased to his 4 sons as gift be not added to the estate of the deceased as that amount was not retained by the donees to the entire exclusion of the donor. The Assistant Controller after hearing the accountable person held that section 10 of the Estate Duty Act applicable in this case and accordingly he added Rs. 1 lakh to the estate of the deceased. An appeal was preferred against this order before the Appellate Controller of Estate Duty, who set aside the order of the Assistant Controller and, relying on a decision of the Assam High Court in Controller of Estate Duty v. Birendra Kumar Sen, held that section 10 was not attracted to the circumstances of the preseat case. This judgment of the Appellate Controller of Estate Duty was also upheld by the Appellate Tribunal. The department, therefore, applied for making a reference to this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ller of Estate Duty v. C. R. Ramachandra Gounder went in appeal to the Supreme Court and it was upheld by the Supreme Court, vide Controller of Estate Duty v. C. R. Ramachandra Gounder. In order to understand the controversy raised by the parties, it will be relevant to look to the provisions of section 10 of the Estate Duty Act. The portion of section 10, which is relevant for our purpose, reads as follows : "10. Property taken under any gift, whenever made, shall be deemed to pass on the donor's death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise. " The scope of section 10 of the Estate Duty Act has been considered by the Supreme Court in George Da Costa v. Controller of Estate Duty . In that case the deceased had made a gift of a house in favour of his son. It was found that even after making the gift the donor continued to reside in the house as the head of the family and he used to look after its affairs till death. The Supreme Court analysing the provisions of section 10 of the Act observed that the crux, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncil in Chick's case as different from the principles laid down in Munro's case . In Chick's case one John Chick made a gift of his pastoral property to his son. This was an absolute gift of property without any reservation. Subsequently, John Chick and his sons entered into an agreement to carry on the business of graziers and stock dealer in partnership. This business was to be carried on on the respective holdings of the partners which were to be used for the purpose of partnership only. The property gifted by John Chick was so used in connection with the partnership business. After the death of John Chick, a question arose whether the value of the property gifted by him was liable to be included in the dutiable estate under section 102(2)(d) of the Stamp Duties Act of New South Wales which provision was analogous to the provisions of section 10 of the Estate Duty Act. The Privy Council held that although the donee assumed bona fide possession and enjoyment of the property immediately on the gift to the entire exclusion of the deceased or of any benefit to him under section 102(2)(d), but since after the partnership agreement, the partners and each of them were in possession and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From these observations it is clear that their Lordships of the Privy Council while considering the nature of the property transferred by means of a gift examined the question as to what type of right was transferred by the gift and by continuing to carry on the partnership business over the land in question whether the partners exercised any possession or dominion over the property gifted, that is, the interest of a licensor or a lessor which interest alone had been gifted by the donor. It was in the light of this type of interest which was transferred that their Lordships of the Privy Council came to the conclusion that the donee retained the interest (property) gifted to him to the entire exclusion of the donor and thus the provisions of section 102(2)(d) were not attracted. The distinction that can be pointed out in the principles laid down in Munro's case and in Chick's case is that in Munro's case the property comprised in a gift consists only of some of the rights from out of the entire bundle of rights in a tangible property, it has to be seen whether the donor has anything to-do with those rights. If it is found that after making the gift the donor had nothing to do with s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership in which every partner gets an interest and the asset ceases to exclusively belong to the person who contributes the same. In the circumstances, it is difficult to say that a person contributing the asset enjoys the right of ownership to the exclusion of other partners of the firm. While examining the scope of the provisions of the Partnership Act vis-a-vis the nature of the capital employed in the partnership business their Lordships of the Supreme Court in Addanki Narayanappa v. Bhaskara Krishnappa referred to various provisions of the Act and after thoroughly discussing the scope of those provisions observed as follows: " From a perusal of these provisions it would be abundantly clear that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business of the partnership, it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing to the partnership from the realisation of this property, and upon dissolution of the partnership to a share in the money representing the value of the property. No doubt, since a firm ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the possession of the donor was on account of the filial relationship between the donor and the donee but since he was living in that property and looking after it as the head of the family, it cannot be said that the donees enjoyed the possession of the gifted property to the entire exclusion of the donor and in that view it was held that the property was liable to estate duty under section 10 of the Act. In that case, the learned judges thoroughly discussed the principles laid down by the Privy Council in Chick's case, and approved that principle. In view of this judgment of the Supreme Court, we feel that we are left with no alternative but to hold that the amount donated by Shri Motilal Sanghi to his sons cannot, in the circumstances of the present case, be deemed to have been possessed and enjoyed by the donees to the entire exclusion of the donor. No useful purpose will be served in dealing individually with the authorities relied upon by Mr. Gupta as the decision in each case is based on the principle laid down by the Privy Council in Munro's case which has been distinguished by the same court while deciding the Chick's case . The decision based on Munro's case will not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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