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Issues:
1. Interpretation of section 10 of the Estate Duty Act, 1953 regarding inclusion of gifted property in deceased's estate. 2. Application of legal principles to determine if possession and enjoyment of gifted property were retained to the exclusion of the donor. 3. Analysis of relevant case law and Supreme Court decisions on the applicability of section 10 in cases involving gifted property in a partnership. Analysis: The judgment by the High Court of Karnataka revolves around the interpretation of section 10 of the Estate Duty Act, 1953, specifically regarding the inclusion of gifted property in the estate of the deceased. The case involved a reference made under section 64(1) of the Act to determine if the value of the Eliza Estate gifted by the deceased to his sons should be included in his estate. The Tribunal initially held that the property should be included, leading to multiple appeals and a final decision by the Tribunal in favor of including the gifted property in the deceased's estate under section 10. The crux of the issue lies in whether the possession and enjoyment of the gifted property were retained to the exclusion of the donor, as required by section 10 of the Act. The accountable person argued that since the gift was complete before the formation of a partnership where the property was invested, section 10 should not apply. However, the Revenue contended that the absolute transfer of property without any reservation justified the inclusion of the gifted property in the deceased's estate. The High Court extensively analyzed relevant case law, including a Supreme Court decision in CED v. Kamlavati, to determine the applicability of section 10 in cases involving gifted property in a partnership. The Court emphasized that for section 10 to apply, the possession, enjoyment, or benefit of the donor in the property must be clearly referable to the gift itself. In this case, the Court found that the possession and enjoyment of the gifted property were not retained to the exclusion of the donor, as the property was subsequently put into a partnership where the donor was a partner. Based on the Supreme Court's precedent and the specific circumstances of the case, the High Court concluded that the possession assumed by the donees was not retained to the exclusion of the donor. The Court held that the donor's participation in the partnership and the benefits derived from it were not directly related to the gift but were separate from it. Therefore, the High Court ruled in favor of the accountable person, stating that section 10 of the Act should not be applied in this scenario, and the gifted property should not be included in the deceased's estate. In conclusion, the judgment provides a detailed analysis of the legal principles surrounding the inclusion of gifted property in a deceased's estate under section 10 of the Estate Duty Act, emphasizing the importance of the donor's retention of possession and enjoyment to determine applicability.
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