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Issues Involved:
1. Inclusion of insurance policy amounts in the estate of the deceased. 2. Applicability of Section 10 of the Estate Duty Act, 1953, to the sum gifted by the deceased to his grandchildren. Issue-wise Detailed Analysis: 1. Inclusion of Insurance Policy Amounts in the Estate of the Deceased: When the case reached hearing, the applicant's advocate stated that the applicant did not desire the court to give any answer to this question. Consequently, the court refrained from expressing any opinion on this issue. 2. Applicability of Section 10 of the Estate Duty Act, 1953, to the Sum Gifted by the Deceased to His Grandchildren: Material Facts: The deceased gifted two sums of Rs. 75,000 each to his minor grandchildren on May 11, 1955, and July 23, 1956. These amounts were deposited in the firm where the deceased was a partner. The deceased retired from the firm on November 12, 1958, and died on March 25, 1960. The Assistant Controller of Estate Duty (CED) included these sums in the estate of the deceased under Section 10 of the Estate Duty Act, which was upheld by the Appellate CED and the Tribunal. Legal Provisions: Section 10 of the Estate Duty Act states that property taken under any gift shall be deemed to pass on the donor's death if bona fide possession and enjoyment of it was not immediately assumed by the donee and retained to the entire exclusion of the donor or any benefit to him by contract or otherwise. Supreme Court Precedents: - George Da Costa v. CED [1967] 63 ITR 497 (SC): The crux of Section 10 lies in two parts: (1) The donee must bona fide assume 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. - CED v. C. R. Ramachandra Gounder [1973] 88 ITR 448 (SC): The Supreme Court held that neither the house property nor the sum of Rs. 1,00,000 gifted could be deemed to pass under Section 10. The benefit the donor had as a member of the partnership was not referable to the gift but was unconnected therewith. - CED v. N. R. Ramarathnam [1973] 91 ITR 1 (SC): The Supreme Court held that amounts gifted by making adjustment entries in the firm's books were not liable to be included in the estate of the deceased. Privy Council Precedents: - H. R. Munro v. Commissioner of Stamp Duties [1934] AC 61: Held that property transferred by gift was excluded from being dutiable because the donees had assumed and retained possession, and any benefit remaining in the donor was referable to the partnership agreement entered into earlier than the gifts. - Clifford John Chick v. Commissioner of Stamp Duties [1958] AC 435: Held that the value of the land gifted to the son was to be included in computing the value of the father's estate for death duty because the donor was not entirely excluded from the property. High Court Decisions: - CED v. Thanwar Dass [1974] 94 ITR 101 (Allahabad High Court): Held that there was no material distinction between gifts of cash made to a donee and subsequently invested in the firm and gifts made by making transfer entries in the firm's books. - Sakarlal Chunilal v. CED [1975] 98 ITR 610 (Gujarat High Court): Drew a distinction between gifts made by making entries in the firm's books and gifts of money deposited in the firm, holding that the latter were exigible to estate duty. Supreme Court Clarification: - CED v. Smt. Kamlavati and CED v. Jai Gopal Mehra [1979] 120 ITR 456 (SC): Clarified that the mere fact of the donor sharing the enjoyment or benefit in the property with the partnership firm does not attract Section 10 unless such enjoyment is clearly referable to the gift. The Supreme Court emphasized that the principles laid down in its previous decisions should be broadly applied without excessive dichotomy and hair-splitting of facts. Conclusion: The court found no material difference between the facts of the present case and those in Jai Gopal Mehra's case, which was decided in favor of the accountable person. Consequently, the court answered the second question in the negative, in favor of the accountable person and against the department. The respondent was ordered to pay the costs of the reference fixed at Rs. 600.
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