1967 (7) TMI 44 - HC - Income Tax

Whether the properties covered by the deed of gift have been rightly included in the estate of the deceased as property passing on his death under s. 5 or alternatively, as property deemed to pass on his death u/s 10 of Estate Duty Act, 1953 - question referred to this court is answered in the affirmative and against the assessee

Summary

Issues:
Interpretation of a deed of gift made by deceased in favor of his son, validity of the gift, inclusion of gifted properties in deceased's estate under Estate Duty Act.

Analysis:
The judgment involves a reference under section 64(1) of the Estate Duty Act concerning the interpretation of a deed of gift executed by the deceased in favor of his son. The deceased passed away intestate, and the value of the properties covered by the deed of gift was included in the principal value of the estate. The issue revolved around whether the properties should be considered as passing on the deceased's death under sections 5 and 10 of the Estate Duty Act.

The deed of gift contained conditions that the possession and enjoyment of the gifted properties would remain with the donor until his death. The donee was granted limited rights to possess the property occasionally with the donor's permission. The deed explicitly stated that complete possession and right in the gifted property would vest in the donee only after the donor's demise. The court analyzed the intention behind the gift and concluded that there was no immediate transfer of possession or beneficial interest to the donee during the donor's lifetime.

The court emphasized that the donor retained control over the properties and reserved the right to enjoy the usufruct, indicating a lack of exclusion of possession or enjoyment by the donee. As a result, the court held that the gifted properties did not fall outside the scope of section 10 of the Estate Duty Act. Therefore, the properties were deemed to pass on the deceased's death under both section 5 and section 10 of the Act, leading to their inclusion in the estate for estate duty purposes.

The judgment highlighted the importance of immediate and exclusive assumption of possession and enjoyment by the donee to avoid liability under section 10 of the Act. The court's interpretation of the deed of gift focused on the donor's continued control and lack of beneficial interest transfer to the donee during the donor's lifetime. Ultimately, the court ruled in favor of including the gifted properties in the deceased's estate, affirming the decision of the revenue authorities.

In conclusion, the court answered the reference question in the affirmative, holding that the properties covered by the deed of gift were rightly included in the deceased's estate for estate duty assessment purposes. The judgment underscores the significance of legal interpretation in determining the tax implications of gifts and the conditions necessary for the exclusion of properties from estate duty assessment.