1971 (12) TMI 28 - HC - Income Tax

Estate Duty Act, 1953 - Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding that section 10 of the Estate Duty Act is not attracted in respect of the shares of the sons of the deceased ? - Whether, on the facts and in the circumstances of the case, the. Tribunal had sufficient material to hold that the value of the arecanut plantation has to be deleted from the principal value of the estate ?

Issues Involved:
1. Applicability of Section 10 of the Estate Duty Act to the shares of the sons of the deceased.
2. Whether the value of the arecanut plantation should be deleted from the principal value of the estate.

Issue-wise Detailed Analysis:

1. Applicability of Section 10 of the Estate Duty Act to the shares of the sons of the deceased:

The primary question referred was whether Section 10 of the Estate Duty Act is applicable to the shares of the sons of the deceased. The deceased, A.W. Leslie, had gifted 1/10th share in two tea estates to each of his eight sons, retaining 2/10ths share for himself. The shares were not divided by metes and bounds, and the properties were to be enjoyed as tenants-in-common.

Section 10 of the Estate Duty Act, 1953, states that property taken under any gift shall be deemed to pass on the donor's death if bona fide possession and enjoyment of it was not immediately assumed by the donee and retained to the entire exclusion of the donor. The court examined whether:
- The transfer of property to the donee was duly complete.
- Bona fide possession and enjoyment of the property gifted were assumed by the donee immediately after the gift.
- Bona fide possession and enjoyment were retained by the donee to the entire exclusion of the donor.

The court noted that the subject matter of the gift was the two estates after carving out 2/10ths undivided share in favor of the donor, with a right of enjoyment along with his sons as tenants-in-common. The Tribunal had found that the donees assumed bona fide possession and enjoyment of the gifted property and retained such possession to the entire exclusion of the deceased. The court agreed with the Tribunal, citing the decision in Controller of Estate Duty v. Estate of Janab S. Ibrahim Rowther, which held that the section applies only to the subject matter of the gift and not to the entire property.

The court also referred to cases like George Da Costa v. Controller of Estate Duty, Commissioner for Stamp Duties of New South Wales v. Perpetual Trustee Co. Ltd., and St. Aubyn v. Attorney-General, which supported the view that the donor's retention of a beneficial interest in property not included in the gift does not attract Section 10.

Regarding the partnership formed between the deceased and his sons, the court held that the deceased being the managing partner did not constitute a benefit within the meaning of Section 10, as no remuneration was provided to him. Thus, the court concluded that Section 10 was not attracted in respect of the shares of the sons.

2. Whether the value of the arecanut plantation should be deleted from the principal value of the estate:

The Income-tax Appellate Tribunal had refused to refer this question, considering it not a question of law. The revenue filed a petition (C.M.P. No. 10381 of 1971) requesting the court to raise this question as it involved a question of law.

The court examined whether the Controller of Estate Duty's remedy was under Section 64(3) of the Estate Duty Act, which allows the applicant to apply to the High Court if the Tribunal refuses to state a case. The court referred to decisions in N. V. Khandvala v. Commissioner of Income-tax and Lakshmiratan Cotton Mills Co. Ltd. v. Commissioner of Income-tax, which suggested that a civil miscellaneous petition could be sufficient.

However, the court also considered the Supreme Court's decision in Kamlapat Motilal v. Commissioner of Income-tax, which held that sub-section (4) of Section 66 cannot substitute for sub-section (2). The proper remedy for the Controller of Estate Duty was to move the High Court under Section 64(3) within the prescribed time. Since this procedure was not followed, the court dismissed the civil miscellaneous petition.

Conclusion:

The court answered the primary question in the affirmative, holding that Section 10 of the Estate Duty Act is not attracted in respect of the shares of the sons of the deceased. The civil miscellaneous petition regarding the arecanut plantation was dismissed. The judgment was in favor of the accountable person and against the department, with no order as to costs.

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