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TMI Blog1978 (12) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... quently the deceased on the one hand and the aforesaid Kannayya Chettiar and his younger brother Govindaswamy Chettiar divided the properties which had been acquired with the income derived from the business under a partition deed dt. 29th Feb., 1948. The properties set out in schedule A thereto were allotted to the share of Doraiswami Chettiar. The properties set out in schedule-B and schedule-c thereto were allotted to the shares of Kannayya Chettiar and Govindaswamy Chettiar respectively. Thus the aforesaid properties belonged to the deceased as his separate and exclusive properties. On 3rd May,, 1941 the deceased executed a settlement deed by and under which he gifted a property, namely the house bearing door No. 74, Charappan Street, George Town, Madras, then valued at Rs. 6,300 to Smt. R. Rukmani Ammal, the natural daughter of his natural brother T.M. Krishnaswamy Chettiar. On 4th June, 1956 he executed another settlement deed in favour of the aforesaid Rukmani Ammal by and under which he settled on her 5 acres and 29 cents of wet lands bearing survey No. 781 in Thazhayatham village and also a house in the said village to be enjoyed by her without powers of alienation for lif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56, Rs. 40,000 being the value of the house No. 74 Acharappan St., Madras, gifted to the aforesaid Rukmani Ammal under deed dt. 3rd May,, 1941 and Rs. 15,260 being the value of the houses bearing door Nos. 218 and 219 in Thazhayatham gifted to Jayalakshmi Ammal under deed dt. 4th June, 1956. He also held that the amounts due to Jayalakshmi and Rukmani Ammal, namely Rs. 1,023 and Rs. 4,191 aggregating to Rs. 5,214 could not be allowed under s. 46(1) of the ED Act. Similarly he held that Rs. 9,936 and Rs. 276 being the amounts paid to the aforesaid two ladies within two years prior to the death, should also be disallowed under s. 46(2) of the ED Act. He determined the principal value of the entire estate as Rs.6,17,374 and the value of the half share of the deceased therein after giving exemption for Rs. 5,000 being the value of his half share of the residential house and Rs. 1,000 for funeral expenses determined as Rs. 3,02,687. He added the value of the share of the lineal descendant, namely Rs. 3,08,687 and determined the principal value of the estate as Rs. 6,11,374 and levied duty of Rs. 51,932-90 and also interest of Rs. 978-10. In so determining the principal value of the esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lineal descendant's share should not have been included. 4. Not being satisfied with the order of the Appellate Controller the Accountable person preferred the present appeal. The first contention urged before us is that the lower authorities had erred in holding that the gifted properties should be deemed to have passed on the death of the deceased under s. 10 of the ED Act. It was sought to be contended that the decreased had been completely excluded from such properties and hence there was no scope for the application of s. 10. It was urged that the donees had merely deposited the income from the gifted properties with the deceased and the account which they had with the deceased was in the nature of current account. Reliance was placed upon the decisions of the Madras High Court in the case of CED vs. Mrs. Kamala Pandalai(2), and of the Andhra Pradesh High Court in the case of Suggala Veera Raghaviah and others vs. CED, AP(3) and in the CED AP vs. Estate of Late Sait Bansilal(4). It was also contended that since the gifts had been made by the deceased when he owned the properties exclusively as his separate properties and since later the deceased had impressed the remaining p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in George Da Costa vs. CED, Mysore(6) squarely applies to this case. The contrary contention taken on behalf of the accountable person cannot be accepted. 6(b) As already stated the assessee's learned counsel has replied on the decisions of the Madras High Court in CED vs. Mrs. Kamala Pandalai(2) and that of Andhra Pradesh High Court in the case of CED, AP vs. Estate of late Sait Bansilal(4), In those cases the gift by the deceased was in favour of his wife. In the former case the income from the properties gifted had been credited to the joint account of the deceased and his wife wherein the moneys of the deceased had also been credited. But it was found that the deposit by the deceased of his own moneys had exceeded the amounts withdrawn by him. It was therefore held that the deceased could not be said to have enjoyed the income from the said properties. In the latter case the deceased had gifted two rice mills to his wife. But he was collecting the rents due from the said mills under a lease deed executed earlier to the execution of the gift deed. It was held that s. 10 did not apply. It is to be noticed that in both the cases the donee was the wife and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to have passed under s. 7 of the ED Act. But then this does not in our opinion make any difference in the matter of application of s. 10. It may, be in a manner of speaking that the HUF of which the deceased was the Kartha was in possession of the gifted lands as lessee and was also in enjoyment of the rental income from the other gifted properties. But then there can be no doubt that the deceased as the Kartha of the said family was equally in possession of such properties and such income. What is contemplated in s. 10 is the physical possession and not the character or the capacity in which the deceased donor had such possession. If that be the true possession, the fact that the HUF, of which the deceased was the Kartha, was in possession of the gifted lands and in enjoyment of the rental income from the other gifted properties can make no difference in the situation. For the above reasons we hold that the lower authorities were justified in concluding that the gifted properties should be deemed to have passed on the death of the deceased under s. 10 and including the value thereof. 8(a) As already stated the Appellate Controller had substituted the value of Rs. 19,20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the Asstt. Controller has included the value of the properties passing under s. 10 as forming part of the value of the estate of the HUF. This is incorrect. The gifted properties ceased to belong to the deceased since it is nobody's case that the gifts were sham. They are, however, deemed to have passed on the death of the deceased because of the provisions of s. 10 of the ED Act. In such circumstances such properties could not be considered as having formed part of the estate of the HUF of which the deceased was the Kartha and therefore has to be dealt with separately. 10. The next contention is as regards abatement of Rs. 5,124 under s. 46(1) and Rs. 10,212 under s. 46(2). The contention taken before us is that the proviso to s. 16(1) of the ED Act would apply. Reference was also made to the decision of the Madras High Court in Mrs. Ratnakumari Kumbhat vs. CED, Madras(8). No material was placed before us to show that the proviso to s. 16 would be attracted and consequently no abatement could have been made under s. 46(1) and 46(2). We, therefore, confirm the view taken by the lower authorities in respect of the above point. 11. The next contention urged is as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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