TMI Blog1979 (9) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and applicability of s. 10 of the Estate Duty Act, 1953, hereinafter called " the Act ". We shall first proceed to state the facts and discuss the law in Civil Appeal No. 2527 of 1972. Even though the respondent, Smt. Kamlavati, was not represented in this appeal, Mr. S. T. Desai, learned counsel for the appellant, assisted the court very ably and fairly. In the other appeal, being Civil Appeal No. 2528 of 1972, Shri Jai Gopal Mehra, the respondent, was represented by Mr. Bhagirath Das. The main judgment of the Full Bench of the High Court is in this civil appeal, and it has followed the ratio of this decision in the other appeal also. We, however, find it convenient to first discuss the question of law with reference to the facts of Civil Appeal No. 2527 of 1972. Maharaj Mal, the deceased, with whose estate we are concerned in this appeal was a partner in a partnership firm styled as M/s. Maharajmal Hansraj. Maharajmal had a half share in the partnership. The other two partners, namely, Jialal and Hansraj, had each 1/4th share. On the 27th March, 1957, Maharaj Mal made a gift of Rs. 1,00,000 to his son, Lalit Kumar, and of Rs. 50,000 to his wife, Kamlavati. In the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this court in many cases wherein several English decisions were reviewed and the law was laid down as precisely as was possible to be done on the facts of each case, in the application of the principles, courts are still faced with difficulty resulting in some cleavage of opinion. We, therefore, think it necessary to review some of those cases over again. In the case of Clifford John Chick [1959] 37 ITR (ED) 89 ; 3 EDC 915 (PC), the question for consideration before the judicial Committee of the Privy Council related to the interpretation and applicability of s. 102 of the New South Wales Stamp Duties Act, which was in pari materia with s. 10 of our Act. In 1934, the father of Clifford John Chick transferred by way of gift to his son the property in question. The gift was made without reservation or qualification or condition. In 1935, the deceased, his son Clifford John Chick, and another son entered into an agreement to carry on in partnership the business of graziers and stock dealers. The agreement provided, inter alia, that the father should be the manager of the business and that his decision should be final and conclusive in connection with all matters relating to its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the gift, to the exclusion of the donor, immediately upon the gift, and (2) the donee 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. As a matter of construction we are of opinion that both these conditions are cumulative. Unless each of these conditions is satisfied, the property would be liable to estate duty under section 10 of the Act. " The learned judge further pointed out that 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 word 'otherwise' to be construed ejusdem generis ". But it would be noticed that in the opinion of the court the case of the revenue rightly rested upon the first limb as the deceased had not been entirely excluded from the possession and enjoyment of the property gifted. The expression, " by contract or otherwise ", occurring in the second limb of the section, did not control the words " to the entire exclusion of the donor " in the first limb. In the the case of CED v. C. R. Ramachandra Gounder [1973] 88 ITR 448 (SC) the don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfied. To get over such an objection, the donee 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. " It should be noticed that, though not explicitly but implicitly, some departure was made from the ratio of the Privy Council in Chick's case [1959] 37 ITR (ED) 89; 3 EDC 915, when the principle of Munro's case [1934] AC 61; 2 EDC 462 (PC) was applied it was on the basis that what was gifted by the donor was the whole of the property minus the rights of the partnership which were shared and enjoyed by the donor also; the donor enjoying the same bundle of rights in the partnership which he was enjoying before the gift did not bring the case within the ambit of s. 10. But the implicit departure from the Chick's case was when it was said that the benefit the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the sons would use it as capital not for any benefit of the deceased donor but for each of them becoming entitled to 1/7th share in the business. In other words, the mere fact that the partnership may make use of the sums of money gifted in which the donor also was a partner did not mean that he was allowed to enjoy or derive any benefit in the money gifted, which could be referable to the gift itself. To avoid the conflict in the application of the ratio of the various Supreme Court cases as seems to have been done by some of the High Courts, we would like to clarify and elucidate some of the aspects and facets of the matter a bit further. When a property is gifted by a donor the possession and enjoyment of which is allowed to a partnership firm in which the donor is a partner, then the mere fact of the donor sharing the enjoyment or the benefit in the property is not sufficient for the application of s. 10 of the Act until and unless such enjoyment or benefit is clearly referable to the gift, i.e , to the parting with such enjoyment or benefit by the donee or permitting the donor to share them out of the bundle of rights gifted in the property. If the possession, enjoy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship. In the enunciation of the principle of law there is no appreciable, as there could not be any, difference between what was said in Gounder's case by this court and what has been said by the learned Chief Justice in the Gujarat case ([1975] 98 ITR 610). But in the application of the principle to the facts of the two aggregate sums of money, it was possible to take a different view. In relation to the gifts of Rs. 1,20,000 it was possible to take a view that it was a part and parcel of the same transaction, namely, the receipt of the money by the donees by gift and their investing the same in the partnership firm. So was it possible in regard to the sum of Rs. 1,99,500. However, a different view was taken by the High Court. But in the instant case it is clear that the ratio of the decisions of this court referred to above is squarely applicable and the Tribunal as well as the High Court was right in holding that no estate duty could be charged in respect of the two sums of money, viz., Rs. 1,00,000 and Rs. 50,000. Similarly in the application of the ratio some difference of opinion will appear to have been expressed by the High Courts in the case of CED v. Chaman Lal Bery [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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