1987 (2) TMI 58 - SC - Indian Laws

Whether, on the facts and in the circumstances of the case, only half share of the properties included in the estate duty assessment of the deceased should have been included as property passing or deemed to pass on his death under section 7 of the Act ? Whether, on the facts and in the circumstances of the case, the amount of ₹ 80,000 standing in the names of the grandchildren of the deceased was correctly included in his estate ? Held that - In view of the position as decided in CIT v. Dr. R. S. Gupta 1987 (2) TMI 1 - SUPREME Court allow this appeal. The judgment and order of the High Court on this aspect are set aside.

Summary

Issues:
1. Interpretation of provisions under the Estate Duty Act, 1953 regarding property passing on death.
2. Validity of a gift made by book entries without physical transfer of possession.

Analysis:
The Supreme Court heard an appeal against the judgment of the High Court of Allahabad concerning the estate duty assessment of a deceased individual. The Central Board of Direct Taxes had referred two questions under section 64(1) of the Estate Duty Act, 1953, to the High Court. The first question was whether only half share of the properties included in the estate duty assessment should have been considered as property passing on the deceased's death. The second question related to the inclusion of an amount of Rs. 80,000 standing in the names of the deceased's grandchildren in his estate. The deceased's eldest son had filed the estate duty return, but the Assistant Controller of Estate Duty valued the estate higher and included the mentioned amount in the estate. The deceased was alleged to have gifted this amount to his grandchildren through book entries, without physical transfer of possession. The Assistant Controller found the gift invalid due to lack of a registered instrument or delivery of possession. The High Court observed that valid gifts could be made through book entries if sufficient funds were available in the donor's account, citing a previous decision.

The High Court limited the appeal to the question of whether a valid gift could exist in a scenario where there was no sufficient cash balance for physical gifting. The Supreme Court, in a related judgment delivered the same day, clarified this issue. Relying on their decision in that case, the Supreme Court allowed the present appeal, setting aside the High Court's judgment. The Court held that in the absence of physical transfer of possession and sufficient cash balance for gifting, the alleged gift of Rs. 80,000 to the grandchildren was invalid. Consequently, the appeal was allowed, and the respondent was directed to bear the costs of the appeal.