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TMI Blog1973 (2) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... acts set out in the statement of the case which are : one Ramaiah Gounder was a partner in the firm called N. Desai Gounder & Co., Coimbatore. He owned property which the firm was occupying as tenant-at-will. In August, 1953, he executed a deed of settlement under which he transferred the property leased out to the firm to his two sons, Lingiah and Krishnan, absolutely and irrevocably. After this transfer, the firm continued to be in occupation of the premises paying rent thereof at Rs. 300 p.m. to the two donees by crediting each of their accounts in the account books of the firm in equal shares. It may be mentioned that Ramaiah, the father, continued to be a partner of the firm even after the transfer till April 13, 1957, when the firm was dissolved. He had also an account with the firm, Desai Gounder & Co., and on March 30, 1953, be requested the firm by a letter to transfer from his account five sums of Rs. 20,000 each with effect from April 1, 1953, to the credit of his five sons in the firm's books. He also wrote to the five sons informing them of the transfer. Though the sons did not withdraw any amount from their accounts in the firm, the amounts continued to be invested in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned that Ramaiah, the father, continued to be a partner of the firm even after the transfer till April 13, 1957, when the firm was dissolved. He had also an account with the firm, Desai Gounder & Co., and on March 30, 1953, he requested the firm by a letter to transfer from his account five sums of Rs. 20,000 each with effect from April 1, 1953, to the credit of his five sons in the firm's books. He also wrote to the five sons informing them of the transfer. Though the sons did not withdraw any amount from their accounts in the firm, the amounts continued to be invested in the firm for which interest at 7 1/2% per annum was paid to them. On the death of Ramaiah Gounder on May 5, 1957, the Assistant Controller of Estate Duty, included in the estate of the deceased, the property leased out to the firm which was transferred to his two sons. According to him possession and enjoyment of the subject-matter of the gift had not been assumed by the donees nor had they retained possession thereof to the entire exclusion of the donor, inasmuch as the partnership in which the donor was a partner with other parties, continued to be in possession and enjoyment of the gifted property as tenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract or otherwise : Provided that the property shall not be deemed to pass by reason only that it was not, as from the date of the gift, exclusively retained as aforesaid, if, by Means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least two years before the death : ......" The crux of the above section as pointed out by this court in George da Costa v Controller of Estate Duty lies in two parts : (1) the donees must bona fide have assumed possession and enjoyment of the property which is the subject-matter of the gift to the exclusion of the donor, immediately upon the gift ; and (2) the donees must have retained such possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him by contract or otherwise. Both these conditions are cumulative. Unless each of these conditions is satisfied, the property would be liable to estate duty undersection 10 of the Act. The second part of the section has two limbs : the deceased must be entirely excluded (i) from the property, and (ii) from any benefit by contract or otherwise. The words " by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate the gift for the purpose of section 10 of the Act by getting the firm to vacate the premises and handing over possession of the same to the donees leaving the donees thereafter to lease it out to the firm. Even then the objection of the learned advocate that since the donor was a partner in the firm which had taken the property on lease, he derived benefit therefrom and was, therefore, not entirely excluded from the possession and enjoyment thereof, will nevertheless remain unsatisfied. To get over such an objection, the donees will have to lease out the property after getting possession from the firm to some other person totally unconnected with the donor. Such an unreasonable requirement the law does not postulate. The possession which the donor can give is the legal possession which the circumstances and the nature of the property would admit. This he has given. The benefit the donor had as a member of the partnership was not a benefit referable in any way to the gift but is unconnected therewith. The Privy Council in Munro v. Commissioner of Stamp Duties was dealing with a case of a similar nature. The donor in that case by six registered transfers in the form prescribed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comprised in the gift as the nature of the gift and the circumstances permitted. Did he assume it, and thenceforth retain it to the entire exclusion of the donor ? The answer, their Lordships think, must be in the affirmative, and for two reasons : namely, (1) the settlor had no enjoyment and possession such as is contemplated by the section; and (2) such possession and enjoyment as he had from the fact that the legal ownership of the shares vested in him and his co-trustees as joint tenants, was had by him solely on behalf of the donee. In his capacity as donor he was entirely excluded from possession and enjoyment of what he had given to his son. Did the donee retain possession and enjoy meat to the entire exclusion of any benefit to the settlor of whatsoever kind or in any way whatsoever ? Clearly yes. " The views expressed by the Privy Council are in complete accord with our views already expressed. This was also the view held in Controller of Estate Duty v. Aswathanarayana Setty , where a Bench of the Mysore High Court considered both the case of Clifford John Chick and of Munro above referred to. In that case, on June 30, 1954, the deceased transferred to his two sons Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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