1968 (11) TMI 23 - HC - Income Tax

Estate Duty Act, 1953 - Whether, on the facts and in the circumstances of the case, the estate duty authorities had any material to come to the conclusion that the donees had not immediately assumed possession of the properties and thenceforward retained the same to the entire exclusion of the deceased and that the provision of section 10 were attracted - Held, yes

Summary

Issues:
- Interpretation of section 10 of the Estate Duty Act regarding possession and enjoyment of gifted properties.
- Determination of whether the donees had exclusive possession and enjoyment of the properties gifted to them.
- Analysis of the facts and circumstances to establish if the deceased was entirely excluded from the benefits of the gifted properties.

Analysis:
The High Court of Andhra Pradesh was presented with a question regarding the interpretation of section 10 of the Estate Duty Act, specifically focusing on whether the estate duty authorities had sufficient material to conclude that the donees did not immediately assume possession of the properties gifted to them, thereby retaining them to the exclusion of the deceased. The case involved a deceased individual who had purportedly gifted house properties to his children through an oral gift known as hiba under Mohammadan law. The Assistant Controller of Estate Duty initially included these properties in the deceased's estate, citing lack of delivery of possession and absence of exclusive enjoyment by the donees. However, on appeal, the Central Board of Direct Taxes acknowledged the validity of the gift but concluded that the donees did not entirely exclude the deceased from the properties, invoking section 10 of the Act.

The central issue revolved around whether the donor continued to possess and enjoy the gifted properties, thereby negating the exclusion required under section 10 for the properties not to be included in the deceased's estate. The court emphasized that this determination is factual and must be based on the circumstances of each case. The court examined statements from the donor's son, who initially indicated that rental income from the properties was used for family expenses, including the deceased's, but later retracted this statement, asserting that the deceased's expenses were covered by his pension and not the rental income. The court highlighted that for properties to be excluded from the estate, the donees must enjoy them entirely to the exclusion of the donor, as per section 10.

Moreover, the court noted that despite the alleged gifting of properties years before the deceased's death, no formal transfer of ownership occurred, with the properties still registered in the deceased's name. The court found that the donor lived in the same house and the rental income was utilized for family expenses, indicating a lack of exclusive enjoyment by the donees. Citing precedents, the court held that since the donees did not immediately assume possession and enjoyment of the properties, the gifted properties should be deemed part of the deceased's estate. Ultimately, the court answered the question in the affirmative, ruling against the assessee and awarding costs to the opposing party.