1970 (2) TMI 5 - HC - Income Tax

Estate Duty Act, 1953 - Whether, on the facts and in the circumstances of the case, the amount of Rs. 10,000 gifted to Sushila Devi in April, 1959, was not includible in the estate of the deceased for the purpose of the Estate Duty Act - yes

Summary

Issues:
1. Inclusion of a gifted amount in the deceased's estate for Estate Duty Act purposes.

Analysis:
The case involved a dispute regarding the inclusion of a gifted amount of Rs. 10,000 in the estate of the deceased for the purpose of the Estate Duty Act. Mam Chand had gifted this amount to Sushila Devi in two parts in April 1959. The Tribunal had to determine whether the donee, Sushila Devi, had possessed and enjoyed the gifted amount to the entire exclusion of the donor for at least two years before the donor's death, as per the provisions of section 10 of the Estate Duty Act.

The Tribunal held that the donee had indeed enjoyed the gifted amount to the exclusion of the donor, even though the money was invested in a partnership where the deceased was a partner. The Tribunal emphasized that the donee had full enjoyment of the interest derived from the deposit, and the mere fact that the firm became a debtor to the donee did not bring the gift under the purview of section 10. The Tribunal concluded that the provisions of section 10 did not apply to the gift, and thus, the amount should be excluded from estate duty.

The Controller of Estate Duty challenged the Tribunal's decision, arguing that it contradicted previous legal precedents. However, Sushila Devi's counsel contended that the Tribunal's decision was correct based on the specific circumstances of the case. The counsel highlighted that the donee had control over the gifted amount and reinvested it through the partnership, asserting that the donee's actions did not violate the provisions of section 10.

The High Court referred to previous judgments, including the decisions of the Supreme Court and the Privy Council, to interpret the application of section 10. The court emphasized that the crucial factor was whether the donee had assumed immediate control of the gifted property and retained it to the entire exclusion of the donor. In this case, the court agreed with the Tribunal's assessment that the donor was not entirely excluded from the property, especially considering the interest earned on the amount deposited in the partnership where the deceased was a partner.

Ultimately, the High Court upheld the Controller of Estate Duty's contention, ruling that the amount of Rs. 10,000 should be considered part of the deceased's estate. The court disagreed with the Tribunal's interpretation and held that the Tribunal had erred in excluding the amount from estate duty. Both judges concurred with this decision, and the question was answered in the affirmative.