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Issues Involved:
1. Whether the unlet portion of the gifted property in which the deceased donor continued to reside with the donee passed on his death. 2. Whether the part of the gifted property which had been let out passed on the death of the deceased, and if so, to what extent. Detailed Analysis: Issue 1: Unlet Portion of the Gifted Property The first issue concerns whether the unlet portion of the gifted property, where the deceased donor continued to reside with the donee, passed on his death. The court noted that this matter is governed by the decision of the Supreme Court in CED v. Umesh Radra [1979] 117 ITR 579. In that case, it was held that Section 10 of the Estate Duty Act, 1953, does not apply when the donor gifts a residential house to his wife and continues to reside with her in the house. The rationale is that the wife retains possession and enjoyment of the house to the exclusion of the donor, even if the donor continues to reside there as her husband. This interpretation avoids subverting family life and social order. Consequently, the court concluded that the unlet portion of the gifted property did not pass on the donor's death. Therefore, Question No. 1 was answered in the negative, in favor of the accountable person. Issue 2: Let Out Portion of the Gifted Property The second issue pertains to whether the let out portion of the gifted property passed on the death of the deceased donor and to what extent. This issue revolves around the interpretation of Section 10 of the Estate Duty Act, 1953. The court referred to the Supreme Court's analysis in George Da Costa v. CED [1967] 63 ITR 497, which clarified that Section 10 has two cumulative conditions: (1) the donee must assume bona fide possession and enjoyment of the property to the exclusion of the donor immediately upon the gift, and (2) the donee must retain such possession and enjoyment to the entire exclusion of the donor or any benefit to him by contract or otherwise. The court observed that the rents from the let out portion were credited to a joint account in the names of the donee and the donor, and the donor had withdrawn amounts from this account. There was no evidence that the withdrawn amounts were used for the donee's benefit. The burden of proof lay on the accountable person to show that the donee retained possession and enjoyment of the property to the exclusion of the donor. The accountable person failed to discharge this burden, leading to the conclusion that the provisions of Section 10 were attracted. Mr. Dastur argued that only a proportionate part of the value of the let out portion should be included in the estate, based on the amount withdrawn by the donor relative to the total rental income. However, the court rejected this argument, noting that there was no evidence indicating that only a particular portion of the rental income was withdrawn by the donor. Therefore, the entire value of the let out portion was included in the estate of the deceased donor. Thus, Question No. 2 was answered in the affirmative, clarifying that the value of the entire let out portion of the gifted property passed on the death of the deceased. Conclusion: 1. Question No. 1: Answered in the negative. 2. Question No. 2: Answered in the affirmative, with the clarification that the value of the entire let out portion of the gifted property passed on the death of the deceased. In view of the facts and circumstances of the case, there was no order as to costs of this reference.
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