TMI Blog1995 (2) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... e Estate Duty Act in respect of the gifts made by the deceased on April 4, 1963, prior to the insertion of clause (o) to section 33(1) of the Estate Duty Act with effect from April 1, 1965, by the Finance Act, 1965, the deceased having died on October 5, 1974 ?" The gift, it is alleged, was made on April 4, 1963, by Kunchithapatham to his son, Govindarajulu. Kunchithapatham died on October 5, 1974. The Assistant Controller, who assessed the duty, held that Kunchithapatham continued to be in possession and enjoyment of the land gifted and thus the property passed on his death under the said gift. He, accordingly, invoked section 10 of the Act and brought to tax the value of the said property. Before the Appellate Controller, there was some dispute about the extent of the land covered by the gift, but the main contention was that in case section 10 of the Act was attracted, since it was a gift by the father to his son, section 33(1)(o) of the Act was applicable. The Appellate Controller found that even though there was a formal transfer of the land as early as April, 1963, Kunchithapatham continued to be in possession and enjoyment of the property right up to the date of his death ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyond a period of five years before his death has to be applied to the cases of gifts beyond a period of five years before the death of the deceased. Section 2(16) of the Act contains the definition of "property passing on the death" to include property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation. Section 5 of the Act speaks of the levy of estate duty in the case of every person dying after the commencement of the Act save as expressly provided elsewhere in the Act, levied and paid upon the principal value of all property settled or not settled, including agricultural land specified in the First Schedule to the Act, which passes on the death of such person. Section 8 of the Act says, "property taken as a gift made in contemplation of death shall be deemed to pass on the donor's death". Section 9 speaks of a property taken under a disposition made by the deceased purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust, settlement upon persons in succession, or otherwise, and says that such disposition which shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased or in the case of gifts made for public charitable purposes, six months or more as contemplated under sections 8 and 9 of the Act, if the gift is shown to have been acted upon and the donee is found to have assumed possession and retained the same to the entire exclusion of the donor or of any benefit to him by contract or otherwise. The first proviso has a major role in the determination of the extent of the bona fide possession and enjoyment of the property gifted and it must guide the scrutiny of evidence that the donee or the accountable person may produce to show that the deceased had completely parted with the possession and enjoyment of the property. The second proviso to section 10 is clear, in that, it speaks of the gift of a house or part thereof, to the spouse, son, daughter, brother or sister. Those who constitute a family and live together are expected to live in a house together and if there is a gift of such a house or part thereof to the spouse, son, daughter, brother or sister, it is indeed difficult to find or imagine the extent of the bona fide possession and enjoyment of the donee vis-a-vis that of the donor if the donee is the spouse, son, daughter, brot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to gift-tax under the Gift-tax Act, 1958, or is not chargeable under section 5 of that Act, for any assessment year commencing after the 31st day of March, 1964, to hold that section 10 has only assured that in the case of a gift of a property if it is found 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 and it is not a house property or a part thereof gifted to the spouse, son, daughter, brother or sister, it has to be held that such property passed on the donor's death only but if it is a property taken under a gift by the deceased to the spouse, son, daughter, brother or sister beyond a period of five years before his death, no estate duty shall be payable for it. The Tribunal, in our opinion, has taken the correct view of the law in this behalf. The second question, however, hinges upon the application of the proviso to a property taken under any gift made by the deceased to the spouse, son, daughter, brother or sister, beyond a period of five years before his death. The words in the proviso are "provided that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obvious. While a gift to a son, daughter, brother or sister was chargeable to gift-tax during the period from April 1, 1964, to April 1, 1987, a gift to the spouse to a maximum of fifty thousand rupees in value in the aggregate in one or more previous years, was not chargeable to the said tax under section 5(1)(viii) for any assessment year commencing after March 1, 1964, until the repeal of the said provision under section 5(1)(viii) by the Finance Act, 1986, with effect from April 1, 1987. The proviso has been introduced to take care of the situation that no one could say, in the case of the gift to the spouse, that it was not chargeable to gift-tax and, therefore, the estate duty should be realised. Learned counsel for the Revenue has drawn our attention to the proviso to section 4(1)(a) of the Wealth-tax Act in which the clause "for any assessment year commencing after March 31, 1964, but before April 1, 1972" occurs. He has submitted on the said basis that as held by the Supreme Court in CWT v. Hashmatunnisa Begum [1989] 176 ITR 98 and this court in T. C. No. 1189 of 1981, judgment dated November 10, 1994 (K. V. Iyer v. CIT [1995] 215 ITR 461), we should hold that the exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary conclusion but, having regard to the provisions of the Gift-tax Act, 1958, and having regard to the purposes for which the proviso came into effect, we are of the opinion that the proviso really exempted transfer of assets which were chargeable for any assessment year commencing after the 31st day of March, 1964, or where the transfer was not chargeable under section 5 of the Act for any assessment year commencing after the 31st day of March, 1964. This construction is in consonance with the later amendment made, though that is not a relevant factor." In T. C. No. 1189 of 1981 (K. V. Iyer's case [1995] 215 ITR 461 (Mad)), we, constituting the Bench of the court, have recorded, "we prefer this approach". That, however, does not in any manner lead us to any different view than the one we have already taken in respect of section 33(1)(o) of the Act. We are unable to fix the assessment year commencing after the 31st day of March, 1964, to the execution of the gift for this will postpone by five years the exemption contemplated under section 33(1)(o) after the 31st day of March, 1964. Exemption in such a situation can be claimed only if the death takes place after March 31, 1969, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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