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Determining inclusion of gifted amounts in dutiable estate under Estate Duty Act, 1953. Valuation of goodwill of business run by partnership in estate of deceased partner. Analysis: The case involved a reference under section 64(1) of the Estate Duty Act, 1953, addressing two key questions. Firstly, whether a sum of Rs. 2,82,000 gifted by the deceased to his son and grandson was includible in the dutiable estate. Secondly, whether the value of goodwill of the business run by partnership, amounting to Rs. 58,000, should be included in the principal value of the deceased partner's estate. The deceased had transferred amounts to his son and grandson as gifts before converting his proprietary business into a partnership. The Asst. Controller included the gifted amount and the value of goodwill in the estate, applying section 10 of the Estate Duty Act. The Appellate Controller upheld this decision, leading to an appeal to the Tribunal. The Tribunal, citing a decision of the Punjab and Haryana High Court, ruled in favor of the accountable person. It held that the deceased's interest in the gifted property did not pass to the donees, as the requisite two-year period had elapsed since the gifts were made. The Tribunal emphasized that the deceased's continued partnership did not imply interest in the gifted property. The Controller contended that the deceased still benefited from the gifted amounts due to the donees' capital contributions to the partnership. However, the court rejected this argument based on prior judgments. In one case, it was established that the donor's enjoyment of property in a partnership does not necessarily indicate retention of possession by the donor. Referring to another case, the court clarified that the deceased's continued enjoyment of his partnership share did not constitute benefit from the gifted property. Ultimately, the court decided in favor of the accountable person based on these precedents. Therefore, the court answered both questions against the Controller, ruling that the gifted amounts and the value of goodwill should not be included in the deceased's estate. The Controller was directed to bear the costs of the reference.
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