1988 (2) TMI 50 - HC - Income Tax

Issues Involved:
1. Inclusion of Rs. 6,62,400 under section 10 of the Estate Duty Act.
2. Applicability of section 10 of the Estate Duty Act to properties covered by settlement deeds dated December 11, 1953, and December 10, 1954.
3. Inclusion of the entire value of properties given under the partition deed in the principal value of the estate under section 9 read with Explanation 2 to section 2(15) of the Estate Duty Act.
4. Applicability of section 9 read with Explanation 2 to section 2(15) of the Estate Duty Act to the assessee's case.

Detailed Analysis:

Issue 1: Inclusion of Rs. 6,62,400 under section 10 of the Estate Duty Act
The Tribunal concluded that the deceased had not appropriated any income from the settled properties and did not benefit from the income accrued. The Tribunal found that the deceased became indebted due to the expenditure on the maintenance and education of the settlees, which exceeded the income from the settled properties. The Tribunal determined that the settlor did not exercise dominion over the income from the settled properties. Consequently, section 10 was not attracted, and the sum of Rs. 6,62,400 was not includible in the principal value of the estate.

Issue 2: Applicability of section 10 of the Estate Duty Act to properties covered by settlement deeds dated December 11, 1953, and December 10, 1954
The Tribunal found that the deceased did not retain any benefit from the settled properties and that the income was used for the benefit of the settlees. The Tribunal held that the properties were managed by the natural guardian for the benefit of the minors, and there was no proof of the settlor exercising dominion over the income. Therefore, section 10 of the Act was not applicable to the properties covered by the settlement deeds dated December 11, 1953, and December 10, 1954.

Issue 3: Inclusion of the entire value of properties given under the partition deed in the principal value of the estate under section 9 read with Explanation 2 to section 2(15) of the Estate Duty Act
The Tribunal rejected the Revenue's contention that the partition deed dated January 20, 1964, should be treated as a disposition for the purpose of section 9 of the Act. The Tribunal noted that the properties had already been gifted by the documents dated December 11, 1953, and December 10, 1954, and title had vested in the donees. Consequently, the properties could not be regifted or become the subject-matter of partition. The Tribunal found no basis for including the properties under section 9 read with Explanation 2 to section 2(15) of the Act.

Issue 4: Applicability of section 9 read with Explanation 2 to section 2(15) of the Estate Duty Act to the assessee's case
The Tribunal held that the properties settled by the documents dated December 11, 1953, and December 10, 1954, were valid gifts from which the donor was completely excluded. The Tribunal rejected the Revenue's contention that the properties were includible by virtue of the provisions of section 9 read with Explanation 2 to section 2(15) of the Act. The Tribunal found no evidence to support the Revenue's claim and concluded that section 9 was not applicable to the assessee's case.

Conclusion:
All four questions were answered in the affirmative and against the Revenue. The Revenue was ordered to pay the costs of the references, with counsel's fee set at Rs. 1,000.

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