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TMI Blog1968 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... of the deceased under section 10 of the Estate Duty Act ? " Kannampilly Lonappan Lonakunju died on December 14, 1962. On January 2, 1957, he deposited a sum of Rs. 25,000 in the Catholic Syrian Bank Ltd., in the name of his minor son, K. L. Baby. The deceased was the guardian; and in that capacity, he drew the interest from the bank. He did not maintain any accounts regarding the amount so withdrawn. On December 14, 1956, he executed a deed of gift in respect of some immovable properties in favour of his seven sons, of whom there were three minors. He took power of attorneys from the major sons, and he was managing these properties till his death as attorney of the major sons and guardian of the minors. On September 2, 1962, he executed his last will, which stated, among other things, that the income of the gifted properties was utilised by him to the extent of Rs. 49,000, and that the said sum can be recovered by the donees from his estate. The Appellate Tribunal and the subordinate authorities held that the afforesaid sum of Rs. 25,000 and the properties gifted by the deceased to his sons would be deemed to be properties passing on the death of the donor by virtue of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no valid gift cannot be sustained. The amount was admittedly deposited in the name of his minor son. The deceased drew the interest accrued thereon only in his capacity as guardian. Possession of the deposit receipt and dealing with the deposited amount as guardian amount to acceptance of the gift. This constitutes under law a valid gift of the amount in favour of the son. Still the question arises whether, by virtue of section 10 of the Act, this amount would be deemed property passing on the death of the donor. The learned counsel for the assessee submitted that the donor was drawing the interest on the deposit only as guardian, that he was liable to account for all amounts of the minor which came into his hands, that, if the guardian used the amount for his own purposes, it would be misappropriation, and that it would not affect the character of the gift. The learned counsel may be right in the above submission; but the question is whether section 10 of the Act would be attracted, as the donor was having control of the donated property as guardian of the donee, and he was drawing the interest thereon and using it for his own purposes, without keeping it separate from h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove aspect was considered; he quoted the following passage from the Statement of Objects and Reasons, which would show the legislative intent of the above departure from the English statute : " This clause brings under charge property given in gift, but in which the donor retains some interest by contract or otherwise, where the donor retains such interests in a part of the property only, estate duty is payable on that part only ........" In support of the contention that the fact the donor acted as guardian of the donee and drew the interest accrued thereon and made use of it, without keeping it separate, was sufficient to bring the case under section 10 of the Act, the learned counsel for the revenue cited the decision of the Privy Council in Commissioner of Stamp Duties of New South Wales v. Permanent Trustee Co. of New South Wales. In that case the testator created a trust over certain fund in favour of his minor daughter and transferred the same to the trustees. Several years after that, when the daughter attained majority, she opened an account in a bank as instructed by her father, to which the trustees transferred the income from the trust fund as directed by the daugh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect the trustee how her money should be disposed of and on the other to deal with it when it reached the bank, placed him in a position of unchallengeable control, unless and until it was revoked. And it was not revoked. In these circumstances, the conclusion is irresistible that the daughter, who at material times was the sole beneficiary under the settlement, did not retain bona fide possession and enjoyment of the trust property to the entire exclusion of the father or of any benefit to him. Here it does not seem that any nice question arises whether it was from the subject-matter of the gift that the donor (the testator) was excluded or, alternatively, from any benefit, nor whether it is necessary that the benefit taken by the donor should impair the possession and enjoyment by the donee of the subject-matter of the gift. For here the design and the result of the arrangement were that the daughter's possession and enjoyment were reduced and impaired precisely by the measure of the testator's use and enjoyment of her income." The above decision was quoted with approval by the Privy Council in Clifford John Chick v. Commissioner of Stamp Duties. Dealing with an argument, that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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