1973 (3) TMI 55 - SC - Indian Laws

Whether, on the facts and in the circumstances of the case, the properties settled by the deceased by the six deeds of settlement (two of them dated 26th June, 1951, and four of them dated 30th June, 1951) valued at ₹ 7,38,656 or any part thereof was not liable for inclusion in the estate of the deceased as property deemed to pass on his death ? Held that - The provisions for annual payments and maintenance made in the deeds as seen earlier are not charged on the properties settled. Hence the deceased cannot be said to have retained any interest in the properties settled. Therefore, it cannot be said that he retained any benefit either in the properties settled or in respect of their possession. Hence, in our opinion, the facts of the case do not come within the scope of section 10. We, accordingly, allow the appeal of the assessee and hold that the value of the properties gifted or any part thereof is not able to be included in computing the value of the estate that passed on the death of the deceased. In this view, it is not necessary for us to consider the meaning of the word extent found in section 10

Issues Involved:
1. Whether the properties settled by the deceased through six deeds of settlement were liable for inclusion in the estate of the deceased as property deemed to pass on his death.

Issue-wise Detailed Analysis:

1. Liability of Properties Settled by the Deceased for Inclusion in the Estate:

The primary question referred was whether the properties settled by the deceased through six deeds of settlement, valued at Rs. 7,38,656, were liable for inclusion in the estate of the deceased as property deemed to pass on his death. The High Court answered this question partly in favor of the revenue and partly in favor of the assessee. It held that the value of the property gifted to the wife of the deceased should not be included in the estate, while the properties gifted to the sons, grandsons, and daughter should be partially included based on the annual payments and maintenance rights reserved by the deceased.

Facts:

The deceased, Ratnasabapathy Pillai, settled properties through six deeds dated June 26, 1951, and June 30, 1951, on his wife, sons, grandsons, and daughter. The Deputy Controller of Estate Duty included the value of these properties in the estate of the deceased, stating that the deceased had reserved an interest for life in these properties under section 12 of the Estate Duty Act, 1953.

High Court's Findings:

The High Court held that section 12 was inapplicable to the facts of the case and considered the applicability of section 10. It concluded that only the value of the interest reserved by the deceased should be included in the estate, not the entire value of the properties. The value of the properties settled on the wife was excluded as the expression of a wish that she should support him during his lifetime did not amount to a retention of any benefit in the property settled.

Supreme Court's Analysis:

The Supreme Court agreed with the High Court that section 12 was wholly inapplicable. Section 12(1) applies when an interest in the property for life or any other period determinable by reference to death is reserved to the settlor. In this case, the beneficiaries became entitled to the properties immediately upon the settlement, and no interest was reserved to the deceased.

Section 10 Analysis:

Section 10 requires that the donee must bona fide assume possession and enjoyment of the property immediately after the gift and retain such possession to the entire exclusion of the donor or any benefit to him by contract or otherwise. The Supreme Court noted that the conditions for section 10 are cumulative, and both must be satisfied for the property to be liable to estate duty.

Contentions and Conclusion:

The revenue contended that the entire value of the properties should be included, while the assessee argued that neither section 12 nor section 10 was applicable. The Supreme Court found that the provisions for annual payments and maintenance were not charged on the properties settled, and the deceased did not retain any interest in the properties. Therefore, the facts did not come within the scope of section 10.

Judgment:

The Supreme Court allowed the appeal of the assessee, vacated the High Court's answer, and held that the value of the properties gifted or any part thereof was not liable to be included in the estate of the deceased. The appeal of the revenue was dismissed, and the revenue was ordered to pay the costs of the assessee.

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