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TMI Blog1966 (10) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... as Rs. 93,750 excluding the value of the house No. 34, Mahatma Gandhi Road, Bangalore. The Assistant Controller of Estate Duty however included the sum of Rs. 1,50,000 as the value thereof and determined the aggregate value of the estate at Rs. 2,57,249 and assessed the estate duty payable at Rs. 15,751.54 by his order dated November 30, 1959. The appellant thereupon preferred an appeal to the Central Board of Revenue (hereinafter referred to as the " Board ") which dismissed the appeal and affirmed the view taken by the Assistant Controller of Estate Duty. At the instance of the appellant, the Board referred the following question of law for the determination of the High Court : " Whether, on the facts and in the circumstances of the case, the property at No. 34, Mahatma Gandhi Road, Bangalore, was correctly included in the estate of the deceased as property passing or deemed to pass on his death under section 10 of the Act? " The High Court answered the question in the affirmative, holding that the appellant was liable to pay estate duty with regard to the house. Under section 5 of the Estate Duty Act, 1953 (34 of 1953) (hereinafter called " the Act "), estate duty is paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission, counsel for the appellant relied upon the decision of Hamilton J. in Attorney-Geneyal v. Seccombe. The question involved in this appeal depends upon the proper interpretation of section 10 of the Act. The intention of the legislature in enacting section 10 of the Act was to exclude from liability to estate duty certain categories of gifts. A gift of immovable property under section 10 will, however, be dutiable unless the donee assumes immediately exclusive and bona fide possession and enjoyment of the subject-matter of the gift, and there is no beneficial interest reserved to the donor by contract or otherwise. The section must be grammatically construed as follows : " Property taken under any gift, whenever made, of which property bona fide possession and enjoyment shall not have been assumed by the donee immediately upon the gift, and of which property bona fide possession and enjoyment shall not have been thenceforward retained by the donee to the entire exclusion of the donor from such possession and enjoyment, or of any benefit to him, by contract or otherwise." The crux of the section lies in two parts : (1) the donee must bona fide have assumed possession and enjo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the section will not control the words " to the entire exclusion of the donor" in the first limb. In other words, in order to attract the section, it is not necessary that the possession of the donor of the gift must be referable to some contractual or other arrangement enforceable in law or in equity. Even if the donor is content to rely upon the mere filial affection of his sons with a view to enable him to continue to reside in the house, it cannot be said that he was " entirely excluded from possession and enjoyment " within the meaning of the first limb of the section, and, therefore, the property will be deemed to have passed on the death of the donor and will be subject to levy of estate duty. On behalf of the appellant, strong reliance was placed upon the decision of the Court of Appeal in Attorney-General v. Seccombe, which has already been referred to. In that case, the deceased made an absolute gift of a house and furniture to a relative, without any stipulation, but continued to live there as the donee's guest until his death more than five years later. Upon the death of the donor, the Crown claimed estate duty upon the value of the property upon the ground that bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions, so that the son could have farmed it independently; in fact they farmed it and shared the profits equally for some eleven years up to the date of death. The Australian court found that " there was a gift of an estate in fee simple, carrying the fullest right known to the law of exclusive possession and enjoyment "; but that the farming and profit-sharing were inconsistent with the deceased's "exclusion", and that duty was therefore chargeable. In an earlier case---O'Connor v. Commissioner of Stamp Duties (South Australia)--- which was a decision under a South Australian enactment couched in a similar language, the deceased was given a power of attorney by the donee and continued to farm the donated lands and was not in fact required to account for the profits, though he could evidently have been required to do so. But it was again held that duty was chargeable on the donated lands. It appears from all these cases that the first limb of the section may be infringed if the donor occupies or enjoys the property or its income, even though he has no right to do so which he could legally enforce against the donee. " Where the question is whether the donor has been entirely e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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