1978 (3) TMI 28 - HC - Income Tax

Issues Involved:
1. Inclusion of the value of 46.21 acres of wet lands settled by the deceased on his daughter in the estate duty assessment under section 10 of the Estate Duty Act.
2. Inclusion of the value of 46.93 acres of wet lands gifted by the deceased to his wife in the estate duty assessment under section 10 of the Estate Duty Act.
3. Inclusion of the value of the house bearing door No. 4, Singara Mudali Street, T. Nagar, Madras, purchased by the deceased in the name of his wife and subsequently gifted by her to her daughter in the estate duty assessment under section 10 of the Estate Duty Act.

Detailed Analysis:

Issue 1: Inclusion of the value of 46.21 acres of wet lands settled by the deceased on his daughter
The Tribunal initially found that the deceased's interest in the properties ended with the execution of the settlement deeds, and possession could not be handed over due to a subsisting lease. However, the Tribunal's reasoning was found to be flawed because the rent received by the donor was not handed over to the daughter but credited to his own bank account. The daughter, who was married and had attained majority, did not assume bona fide possession and enjoyment of the lands immediately and entirely to the exclusion of the donor. Thus, the value of the lands gifted to the daughter is includible in the principal value of the estate under section 10 of the Estate Duty Act.

Issue 2: Inclusion of the value of 46.93 acres of wet lands gifted by the deceased to his wife
The Tribunal held that the rent due to the wife was perhaps utilized by the husband, indicating that the donor was not entirely excluded from the enjoyment of the amounts gifted to her. The Estate Duty Officer found that the deceased had not been entirely excluded from the enjoyment of the properties settled on the wife, and thus, the value of the settled properties was includible in the principal value of the estate. The Tribunal's decision was upheld, and the value of the lands gifted to the wife was deemed includible in the estate duty assessment under section 10 of the Estate Duty Act.

Issue 3: Inclusion of the value of the house purchased by the deceased in the name of his wife and subsequently gifted by her to her daughter
The Tribunal found that the intention of the deceased to live in the house purchased in the name of his wife indicated that he had not been entirely excluded from the property. The will executed by the deceased showed that he retained an enforceable right to live in the property until his death. Therefore, the value of the house property is includible in the principal value of the estate under section 10 of the Estate Duty Act. The second proviso to section 10 and the decision in M. Ranganatha Sastri v. CED did not apply, as the donor was living in the house by virtue of an enforceable right, not merely due to his relationship with the donee.

Conclusion:
The court answered questions 1 and 3 in the negative, in favor of the revenue, and against the accountable persons. Question 2 was answered in the affirmative, also in favor of the revenue, and against the accountable persons. The accountable persons were ordered to pay the costs of the revenue, with an advocate's fee of Rs. 500. A copy of the judgment was directed to be forwarded to the Income-tax Appellate Tribunal, Madras.

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