1968 (11) TMI 13 - HC - Income Tax

Summary

Issues:
1. Whether the property in Avinasi Road, Coimbatore, and a sum of Rs. 1 lakh passed at the death of an individual are dutiable under the Estate Duty Act, 1953.
2. Whether the sum of Rs. 1 lakh gifted to the deceased's sons is liable to estate duty.
3. Whether the inclusion of Rs. 81,356 in the estate of the deceased was justified.

Analysis:

First Issue:
The main question in the first reference was whether the property in Avinasi Road, Coimbatore, and a sum of Rs. 1 lakh passed at the death of the deceased are dutiable under the Estate Duty Act, 1953. The deceased had settled the property on his sons, and the firm continued to occupy the premises, crediting rents to the sons' accounts. The Tribunal held that the property and the sum did not pass on the death of the deceased. The High Court agreed, stating that the donor was completely excluded from the property, and the second limb of section 10 of the Act did not apply. The property was deemed not liable to estate duty.

Second Issue:
Regarding the sum of Rs. 1 lakh gifted to the deceased's sons, the Tribunal held that the firm, not the donor, benefited from the money. The High Court disagreed with this reasoning, stating that the subject matter of the gift was an actionable claim, not the money itself. The donor directed the firm to transfer the amount to his sons, creating an actionable claim in their favor. As the donor was completely excluded from this actionable claim, the High Court held that the sum was not liable to estate duty.

Third Issue:
The other reference questioned the inclusion of Rs. 81,356 in the estate of the deceased. The Tribunal was not convinced that the amount was gifted to the deceased's wife based on the facts presented. The High Court agreed, noting that unless facts established a subsequent gift of the money to the wife, it would be deemed to pass on the death of the deceased. The Court found no evidence to support the assertion that the wife and son had control or use of the money, leading to the conclusion that the inclusion of Rs. 81,356 in the estate was justified.

In conclusion, the High Court ruled in favor of the revenue on the first two issues, holding that the property and the sum of Rs. 1 lakh were not liable to estate duty. On the third issue, the Court sided with the revenue, justifying the inclusion of Rs. 81,356 in the deceased's estate.