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1972 (2) TMI 4 - HC - Income TaxWhether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the amount of Rs, 3 lakhs transferred by the deceased to his grand-nephews was includible in the estate of the deceased that passed on his death ? - As already stated, in our opinion, the subject-matter of the gift was an actionable claim. If the subject-matter was an actionable claim, the gift in favour of the donees was, complete and the donor was completely excluded from it, Therefore, section 10 is not applicable. We respectfully follow the decisions of this court in Controller of Estate Duty v. C. R. Ramachandra Gounder and Controller of Estate Duty v. N. R. Ramarathanam in preference to the view expressed by the Delhi High Court in Controller of Estate, Duty v. Prahlad Rai B.
Issues Involved:
1. Validity of the transfer of Rs. 3 lakhs as an actionable claim. 2. Applicability of Section 10 of the Estate Duty Act, 1953. Detailed Analysis: 1. Validity of the transfer of Rs. 3 lakhs as an actionable claim: The primary issue was whether the transfer of Rs. 3 lakhs by the deceased to his grand-nephews was valid and includible in the estate of the deceased that passed on his death. The deceased, a partner in a firm, transferred Rs. 1 lakh each to the three minor grandsons of his deceased brother through a cheque. The Tribunal presumed that the transfer was based on oral instructions given by the deceased to the firm. The Deputy Controller of Estate Duty and the Appellate Controller of Estate Duty held that the transfer was ineffective under Section 130 of the Transfer of Property Act, which requires an instrument in writing for the transfer of an actionable claim. The Tribunal also held that the cheque did not authorize the transfer to the minors, and oral instructions could not replace the written instrument required by Section 130. The accountable person's counsel argued that the transaction was a mere gift of money and not an actionable claim, relying on the decision in Mohammed Kassim v. Controller of Estate Duty, which stated that a partner is not a creditor of the firm in respect of the amount standing to his credit. However, the court held that the transaction involved a transfer of an actionable claim. The court referred to various provisions of the Partnership Act and precedents, concluding that a partner could claim repayment of money advanced to the firm and enforce such a claim in a court of law. The court distinguished the present case from others by noting that the transfer was effected by issuing a cheque in favor of the firm for the benefit of the minors. Thus, the firm was treated as a trustee or agent holding the money for the minors, and Section 130 of the Transfer of Property Act was not applicable due to Section 137. Therefore, the court concluded that there was a valid gift of an actionable claim of Rs. 3 lakhs. 2. Applicability of Section 10 of the Estate Duty Act, 1953: The next issue was whether Section 10 of the Estate Duty Act applied to the facts of the case. The court considered whether the donee assumed bona fide possession and enjoyment of the property to the exclusion of the donor. The court referred to several precedents, including Chick v. Commissioner of Stamp Duties and George Da Costa v. Controller of Estate Duty, which emphasized that both conditions of Section 10 must be satisfied for the property to be liable to estate duty. The court held that the subject matter of the gift was an actionable claim and referred to similar cases, such as Controller of Estate Duty v. C. R. Ramachandra Gounder and Controller of Estate Duty v. N. R. Ramarathanam, where it was held that the donor's continued possession of the property did not imply non-exclusion if the gift was subject to the partnership's rights. The court distinguished the present case from decisions of the Gujarat High Court and the Delhi High Court, which did not consider whether the subject matter was an actionable claim. The court concluded that the gift was complete, and the donor was completely excluded from it, making Section 10 inapplicable. Conclusion: For the foregoing reasons, the court answered the reference in the negative and in favor of the assessee, with costs. The question was answered in the negative.
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