1967 (7) TMI 42 - HC - Income Tax

Estate Duty Act, 1953 - Whether, on the facts and in the circumstances of the case, the Board were justified in holding that the provisions of section 10 of the Act were attracted in respect of the stationery business and house properties gifted by the deceased to his sons, Messrs. Mohammed Bhai and Fazal Hussain - Held, yes

Issues Involved:
1. Applicability of Section 10 of the Estate Duty Act to the stationery business and house properties gifted by the deceased to his sons.
2. Applicability of Section 10 of the Estate Duty Act to the house properties and household goods gifted by the deceased to his wife.
3. Proper interpretation of Section 10 regarding the inclusion of gifted properties in the estate of the deceased.

Issue-wise Detailed Analysis:

Issue 1: Applicability of Section 10 to Gifts to Sons
The primary question was whether the provisions of Section 10 of the Estate Duty Act applied to the stationery business and house properties gifted by the deceased to his sons. The deceased had gifted his business and house properties to his sons through registered and unregistered deeds. The donees made regular payments to the deceased, maintained a personal account in his name, and paid a significant amount for the marriage expenses of his daughters. These payments were made based on oral promises made at the time of the gifts.

The Assistant Controller and the Board concluded that the deceased derived benefits from these properties, invoking Section 10. The court held that the benefits enjoyed by the deceased were indeed referable to the gifts, but only to the extent of the property yielding an income of Rs. 200 per month. The court emphasized that the benefit must be confined to the property from which the benefit is derived, excluding other properties from the estate.

Issue 2: Applicability of Section 10 to Gifts to Wife
The second question addressed whether Section 10 applied to the house properties and household goods gifted by the deceased to his wife. The deceased continued to reside in the house gifted to his wife. The court examined whether the possession and enjoyment of the property were bona fide and whether the donor was entirely excluded from the property.

The court referred to Mulla's Mohammedan Law and various precedents, concluding that the mere fact of residing in the house did not invalidate the gift or imply that the donor derived a benefit. The court held that the husband's residence with his wife was a marital duty and did not constitute a benefit under Section 10. Therefore, the house property gifted to the wife was not included in the estate of the deceased.

Issue 3: Interpretation of Section 10
The third question involved the proper interpretation of Section 10 regarding the inclusion of gifted properties in the estate. Section 10 stipulates that property taken under any gift shall be deemed to pass on the donor's death if bona fide possession and enjoyment were not immediately assumed by the donee and retained to the entire exclusion of the donor.

The court reiterated that both conditions under Section 10 are cumulative. The donee must assume bona fide possession and enjoyment of the property immediately and retain it to the exclusion of the donor. The court also clarified that the benefit derived by the donor must be legally enforceable to invoke Section 10.

The court concluded that the value of the stationery business yielding an income of Rs. 200 per month would pass to the estate, but other properties gifted to the sons were excluded. Similarly, the house property gifted to the wife was excluded from the estate as the donor did not derive any enforceable benefit.

Conclusion
The court answered the first question affirmatively, limiting the inclusion to the property yielding an income of Rs. 200 per month. The second and third questions were answered negatively, excluding the house property gifted to the wife and other properties gifted to the sons from the estate. The assessee was awarded costs, with an advocate's fee of Rs. 250.

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