1966 (10) TMI 44 - SC - Indian Laws

Whether, on the facts and in the circumstances of the case, the property at No. 34, Mahatma Gandhi Road, Bangalore, was correctly included in the estate of the deceased as property passing or deemed to pass on his death under section 10 of the Act? Held that - The insertion of the second proviso to the section must be taken to have been made deliberately by Parliament to be effective from the date of the amendment. We, therefore, see no reason for holding that the earlier provision in section 10 should be interpreted with reference to the language of the amendment brought about by the Finance Act of 1965. We accordingly reject the argument of Mr. Srinivasan on this point. The question was examined by the Board which found that the property was purchased entirely out of the funds of, the deceased, that for the purpose of income-tax the deceased had declared the entire property as his own, and that the income therefrom was exclusively assessed in his hands. On these facts, the Board held that, though the property stood in the joint names of the deceased and his wife, she was merely a name-lender and the entire property belonged to. the deceased and was rightly included in his estate for the purpose of estate duty. In view of this finding of fact it is not possible to accept the argument of the appellant that only half the share of the property should be taken for the purpose of estate duty assessment. Appeal dismissed.

Issues Involved:
1. Whether the property at No. 34, Mahatma Gandhi Road, Bangalore, was correctly included in the estate of the deceased as property passing or deemed to pass on his death under section 10 of the Estate Duty Act, 1953.
2. Whether the entire property should be included in the estate of the deceased or only half the share, considering it was jointly owned by the deceased and his wife.

Issue-wise Detailed Analysis:

1. Inclusion of Property Under Section 10 of the Estate Duty Act, 1953:
The primary issue was whether the property at No. 34, Mahatma Gandhi Road, Bangalore, was correctly included in the estate of the deceased under section 10 of the Estate Duty Act, 1953. Section 10 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 were not immediately assumed by the donee and retained to the entire exclusion of the donor. The court found that although the deceased had gifted the house to his children four years before his death, he continued to stay in the house as the head of the family and managed its affairs. The court emphasized that the donee must have assumed possession and enjoyment of the property immediately upon the gift and retained it to the entire exclusion of the donor. Since the deceased continued to reside in the house, the court held that the property was liable to estate duty under section 10.

2. Interpretation of "Entire Exclusion" and "By Contract or Otherwise":
The court examined the interpretation of the phrase "entire exclusion of the donor" and "by contract or otherwise" in section 10. It was argued that the donor must be excluded from possession and enjoyment of the property by some legal obligation or arrangement. However, the court held that the first limb of the section, which requires the donor to be entirely excluded from possession and enjoyment, is not controlled by the second limb. Even if the donor continued to reside in the house relying on filial affection, it would still mean that the donor was not entirely excluded. Thus, the property would be deemed to pass on the donor's death and be subject to estate duty.

3. Reference to Precedent Cases:
The court referred to various precedent cases, including Attorney-General v. Seccombe, Chick v. Commissioner of Stamp Duties of New South Wales, and Commissioner of Stamp Duties of New South Wales v. Owens. These cases supported the view that the first limb of section 10 could be infringed if the donor occupied or enjoyed the property even without a legally enforceable right. The court concluded that the presence of the donor in the property, even as a guest, would attract estate duty.

4. Impact of the Finance Act, 1965 Amendment:
The appellant argued that the amendment to section 10 by the Finance Act, 1965, which introduced a proviso excluding certain family residences from estate duty, should be considered as a legislative interpretation of the section as it stood before the amendment. The court rejected this argument, stating that the amendment was not retrospective and was effective only from April 1, 1965. Therefore, the earlier provision in section 10 should not be interpreted with reference to the amendment.

5. Ownership of the Property:
The appellant contended that the property was jointly owned by the deceased and his wife, and only half the share should be included in the estate. The Board found that the property was purchased entirely out of the deceased's funds, declared as his own for income-tax purposes, and the income was assessed in his hands. The court upheld the Board's finding that the wife was merely a name-lender, and the entire property belonged to the deceased, justifying its inclusion in the estate for duty purposes.

Conclusion:
The Supreme Court upheld the High Court's decision, affirming that the property at No. 34, Mahatma Gandhi Road, Bangalore, was correctly included in the estate of the deceased under section 10 of the Estate Duty Act, 1953. The entire property was subject to estate duty, and the appeal was dismissed with costs.

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