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1971 (7) TMI 31 - HC - Income TaxWhether, on the facts and in the circumstances of the case, the balance of Rs. 48,513 remaining at the date of death of the deceased out of the amount credited to the wife s account by debiting the account of the deceased in the books of Messrs. Sheo Prasad Kanhaiyalall, Bahraich, in which the deceased was a partner, was correctly included in the estate of the deceased as property passing or deemed to pass on his death? - HC observed that we find ourselves unable to concur in the view expressed by the Gujarat High Court in the cases of Smt. Shantaben S. Kapadia v. Controller of Estate Duty, and Controller of Estate Duty v. Chandravadan Amratlal Bhatt. For the same reason we respectfully disagree with the view of the Punjab and Haryana High Court in the case of Controller of Estate Duty v. Ronaq Ram Bakshi Ram Gupta. In the result we answer the question referred to us in the negative and in favour of the assessee. The assessee is entitled to his costs which we assess at Rs. 200. Counsel s fee is also assessed at the same figure.
Issues Involved:
1. Validity of the gift made by the deceased to his wife through book entries. 2. Applicability of Section 10 of the Estate Duty Act to the gifted amount. Issue-wise Detailed Analysis: 1. Validity of the Gift: The primary issue was whether the gift of Rs. 51,000 made by the deceased to his wife through book entries in the firm's account was valid. The Assistant Controller initially found no evidence of the wife's acceptance of the gift and held that mere book entries could not constitute a valid gift. However, the court noted that the wife had operated the account and withdrawn funds, indicating her acceptance of the gift. The court referenced the case of Gopal Raj Swarup v. Commissioner of Wealth-tax, where a similar gift through book entries was deemed valid. Thus, the court concluded that the gift was valid as the wife had accepted and treated the sum as her own. 2. Applicability of Section 10 of the Estate Duty Act: The next issue was whether the amount gifted to the wife would be deemed to pass on the deceased's death under Section 10 of the Estate Duty Act. Section 10 states that property taken under a gift shall be deemed to pass on the donor's death if the donee did not assume bona fide possession and enjoyment to the entire exclusion of the donor. The court examined whether the wife had taken possession and enjoyment of the gifted amount to the exclusion of the deceased. The court referenced the Supreme Court's interpretation in George Da Costa v. Controller of Estate Duty, emphasizing that the donee must assume possession and enjoyment of the property immediately upon the gift and retain it to the exclusion of the donor. The court also considered the decisions in Controller of Estate Duty v. Aswathanarayana Setty and Controller of Estate Duty v. N. R. Ramarathanam, which highlighted the importance of understanding the real nature of the property gifted and the extent of the donee's possession and enjoyment. In this case, the court found that the real nature of the property gifted was the right to recover Rs. 51,000 from the firm, not the cash itself. After the gift, the wife had the exclusive right to this claim, and the deceased did not retain any control or benefit from it. The court disagreed with the Gujarat High Court's decisions in Smt. Shantaben S. Kapadia v. Controller of Estate Duty and Controller of Estate Duty v. Chandravadan Amratlal Bhatt, which had included similar gifts in the estate of the deceased under Section 10. The court concluded that the provisions of Section 10 were not applicable because the wife had assumed possession and enjoyment of the property immediately upon the gift and retained it to the exclusion of the deceased. Therefore, the gifted amount could not be deemed to pass on the deceased's death. Conclusion: The court answered the referred question in the negative, ruling in favor of the accountable person. The gift was valid, and the provisions of Section 10 of the Estate Duty Act did not apply to the gifted amount. The assessee was entitled to costs assessed at Rs. 200, with counsel's fee also assessed at the same figure.
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