1970 (2) TMI 21 - HC - Income Tax

Estate Duty Act, 1953 - gift of property to wife before death - whether liable to estate duty - yes

Issues Involved:
1. Inclusion of Afzal Manzil in the estate of the deceased.
2. Inclusion of Khialiganj property in the estate of the deceased.
3. Inclusion of Golaganj property in the estate of the deceased.

Issue-wise Detailed Analysis:

1. Inclusion of Afzal Manzil in the estate of the deceased:

The accountable person contended that Afzal Manzil was gifted by the deceased to his wife, Smt. Umatul Kubra, by means of an oral hiba on August 9, 1952, more than two years before his death. However, it was found that the deceased continued to reside in the house until his death on December 2, 1954. The Central Board of Revenue held that since the deceased resided in the gifted property until his death, the donee did not retain bona fide possession and enjoyment of the property to the exclusion of the donor. Therefore, under section 10 of the Estate Duty Act, the property must be deemed to have passed on the death of the deceased.

The Supreme Court's decision in George Da Costa v. Controller of Estate Duty was pivotal. The Court noted that the donee must assume immediate, exclusive, and bona fide possession and enjoyment of the property, and retain such possession to the entire exclusion of the donor. In this case, the deceased's continued residence in Afzal Manzil indicated that he was not entirely excluded from the property. Consequently, Afzal Manzil was deemed to have passed on the death of the deceased and was liable to be included in the estate for estate duty purposes.

2. Inclusion of Khialiganj property in the estate of the deceased:

The accountable person claimed that the Khialiganj property was purchased by Smt. Wazirunnissa Begum, daughter of the deceased, in 1942 out of her own funds and later gifted to her minor sister, Smt. Nazneen Begum. However, the Assistant Controller found that the property was purchased in the name of Smt. Wazirunnissa when she was a minor, and the property was later mutated in the name of the deceased and subsequently in the name of Smt. Nazneen Begum. The deceased continued to declare the income from this property in his income-tax returns. The Assistant Controller concluded that the property was purchased by the deceased in the name of Smt. Wazirunnissa, who was merely a name-lender, and there was no evidence of the alleged gift to Smt. Nazneen Begum. The Central Board of Revenue upheld this finding.

The Supreme Court in Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax held that an inference that a transaction is benami is a pure question of fact. Applying this principle, the Board's finding that the Khialiganj property was benami and belonged to the deceased was upheld. Therefore, the property was included in the principal value of the estate of the deceased for estate duty purposes.

3. Inclusion of Golaganj property in the estate of the deceased:

The accountable person claimed that the Golaganj property was acquired under an oral gift from the deceased in October 1952. The Assistant Controller disbelieved this claim and held that the property continued to belong to the deceased until his death. Even assuming the property was gifted, it was liable to be included in the estate of the deceased under section 10 of the Act. The Central Board of Revenue maintained this finding.

However, the accountable person's counsel did not argue the case regarding the Golaganj property. Therefore, the court did not return an answer to the question concerning this property.

Conclusion:

The court concluded that the properties Afzal Manzil and Khialiganj were correctly included in the estate of the deceased for the purpose of estate duty. The question was answered in the affirmative and in favor of the revenue for these two properties. No answer was provided for the Golaganj property. The Controller of Estate Duty, U.P., Lucknow, was awarded Rs. 200 as costs of the reference, with counsel's fee assessed at the same figure.

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