1971 (12) TMI 24 - HC - Income Tax

Estate Duty Act, 1953 Whether the properties (other than the residential house) gifted by the deceased to his children under the gift deed dated April 9, 1956, can be deemed to pass on the death of the deceased by virtue of section 10 of the Estate Duty Act, 1953, and if so, to what extent Whether the nursing home building gifted by the deceased to his son under the deed dated April 9, 1956, can be deemed to pass on the death of the deceased by virtue of section 10 of the Estate Duty Act, 1953, and if so, to what extent

Issues Involved:
1. Whether the properties (other than the residential house) gifted by the deceased to his children under the gift deed dated April 9, 1956, can be deemed to pass on the death of the deceased by virtue of section 10 of the Estate Duty Act, 1953, and if so, to what extent?
2. Whether the nursing home building gifted by the deceased to his son under the deed dated April 9, 1956, can be deemed to pass on the death of the deceased by virtue of section 10 of the Estate Duty Act, 1953, and if so, to what extent?

Detailed Analysis:

Issue 1: Properties Gifted Under Annexure "A"
The deceased had gifted four items of properties to his children, reserving a right of residence in the residential building (Item 1). The gift deed also included a provision for payment of Rs. 125 per month towards maintenance to the deceased and a like amount to his wife, charged on items 1 to 4. The accountable person argued that section 10 of the Estate Duty Act should apply only to the portion of the property sufficient for the stipulated maintenance. However, the Assistant Controller of Estate Duty, the Appellate Controller, and the Income-tax Tribunal rejected this contention, holding that items 2 to 4 should be deemed to pass on the donor's death.

The court referred to section 10 of the Estate Duty Act, which states that property taken under any gift shall be deemed to pass on the donor's death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and retained to the entire exclusion of the donor or any benefit to him. The court cited the Supreme Court's interpretation in George Da Costa v. Controller of Estate Duty, emphasizing that both conditions of exclusion must be cumulatively satisfied.

Counsel for the accountable person contended that the gift was subject to the right of maintenance and hence section 10 should not apply. The court dismissed this argument, stating that the gift deed conveyed all rights of the donor and the maintenance provision was based on a contract within the gift deed, making section 10 applicable.

The accountable person also argued that only the portion of the property sufficient to yield the maintenance should be included for estate duty, citing cases like Rash Mohan Chatterjee v. Controller of Estate Duty and Mohammed Bhai v. Controller of Estate Duty. However, the court found these cases inapplicable due to the specific charge created under the gift deed in question, which affected all properties in annexure "A". The court concluded that the properties were not retained by the donee to the entire exclusion of any benefit to the donor, thus section 10 applied to the entire properties in annexure "A".

Issue 2: Nursing Home Building Gifted Under Annexure "B"
The deceased had gifted the nursing home building to his son and took it on lease for running the nursing home, later forming a partnership with his son. The Assistant Controller included the value of the property in the deceased's estate, applying section 10, a view confirmed by the Appellate Controller and the Income-tax Tribunal.

The court referred to the decision in Chick's case, which concluded that the properties in annexure "B" were subject to section 10 of the Estate Duty Act. The court found that the deceased had not been entirely excluded from possession and benefit of the property, thus making it liable for estate duty.

Conclusion:
The court answered both questions in the affirmative, in favor of the department and against the accountable person, holding that the properties in both annexures "A" and "B" are deemed to pass on the death of the deceased under section 10 of the Estate Duty Act, 1953. No order as to costs was made.

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