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TMI Blog1968 (9) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... dow, who is the applicant in this reference, filed a statement of account in the prescribed form, showing the principal value of the estate passing on the death of the deceased at Rs. 1,39,199. The Assistant Controller determined the principal value of the estate at Rs. 2,14,340 and, in arriving at the principal value, he added, inter alia, a sum of, Rs. 60,000, which had, not been shown in the statement of account furnished by the applicant (hereinafter referred to as the accountable person), and it is in connection with this amount of Rs 60,000 that this reference has been made. The deceased and two other persons related to him were partners of the firm of Shantilal C. Kapadia, Cambay. On 18th October, 1962, in the books of account of the partnership firm, a sum of Rs. 60,000 was debited to the account of the deceased and credited to the account of Subhash Chandra, brother of the deceased. At the time of this transfer no cash was paid to Subhash Chandra but from October 18, 1952, till the date of the death of the deceased the amount stood credited in the books of the firm in the account of Subhash Chandra. The firm did not allow any interest either on the capital invested by each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to a valid gift in the eye of the law ; but we are proceeding on the assumption that there was a valid gift in favour of Subhash Chandra, the brother of the deceased. Under section 10 of the Act, property taken under any gift, whenever made, 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 thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise. It was pointed out by the Supreme Court in George Da Costa v. Controller of Estate Duty, at page 500 : " The intention of the legislature in enacting section 10 of the Act was to exclude from liability to estate duty certain categories of gifts. A gift of immovable property under section 10 will, however, be dutiable unless the donee assumes immediately exclusive and bona fide possession and enjoyment of the subject-matter of the gift, and there is no beneficial interest reserved to the donor by contract or otherwise. The section must be grammatically construed as follows : 'property taken under any gift, whenever made, of which property bona fide possession and enjoyment shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arayanappa v. Bhaskara Krishnappa, the Supreme Court has explained, with reference to the provisions of the Partnership Act, the nature of the interest of a partner in partnership property during the subsistence of the partnership. It has been pointed out that whatever may be the character of the property, which is brought in by the partner when the partnership is formed or which may be acquired in the course of business of the partnership, it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing to the partnership from the realization of this property and upon dissolution of the partnership to a share in the money representing the value of the property. Since the firm has no legal existence, the partnership property will vest in all the partners and in that sense each partner has an interest in the property of the partnership and during the subsistence of the partnership no partner can deal with any portion of the property as his own. Nor can he assign his interest in a specific item of the partnership property to anyone. The Supreme Court further pointed out as follows: "The whole concept of partnership is to embark upon a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsferred by way of gift to one of his sons a pastoral property, the gift being made without reservation or qualification or condition. In 1935, some 17 months after the gift, the father, the donee son and another son entered into an agreement to carry on in partnership the business of graziers and stock dealers. The agreement provided, inter alia, that the father should be the manager of the business and that his decision should be final and conclusive in connection with all matters relating to its conduct ; that the capital of the business should consist of the livestock and plant then owned by the respective partners ; that the business should be conducted on the respective holdings of the partners and such holdings should be used for the purposes of the partnership only ; that all lands held by any of the partners at the date of the agreement should remain the sole property of such partner and should not on any consideration be taken into account as or deemed to be an asset of the partnership, and any such partner should have the sole and free right to deal with it as he might think fit. Each of the three partners owned a property, that of the donee son being that which had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the report: " It appears from all these cases that the first limb of the section may be infringed if the donor occupies or enjoys the property or its income, even though he has no right to do so which he could legally enforce against the donee. " In the case before the Supreme Court, the deceased had purchased a house in the joint names of himself and his wife in 1940. They made a gift of the house to their sons in October, 1954. The document recited that the donees had accepted the gift and that they had been put in possession. The deceased died on September 30, 1959. The Controller included the value of that house in the principal value of the estate that passed on the deceased's death, under section 10 of the Act. The Board found that, though the deceased had gifted the house four years before his death, he still continued to stay in the house till his death as the head of the family and was also looking after the affairs of the house ; and, further, that the property was purchased entirely out of the funds of the deceased, and, though the property stood in the joint names of the deceased and his wife the wife was merely a name-lender and the entire property belonged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport. Reassumption of power under proviso (1) to section 16(1)(c) was explained by the Supreme Court when this decision was taken in appeal against and the decision of the Supreme Court is reported as Commissioner of income-tax v. Jayantilal Amratlal. At page 10 of the report, the Supreme Court observed that the words, " reassume power " indicate the correct meaning of proviso (1) to section 16(1)(c) ; and the latter part of the proviso contemplates that the settlor should be able, by virtue of something contained in the trust deed, to take back the power he had over the assets or income produced through the execution of the trust deed. In the light of this interpretation of the words of proviso (1) to section 16(1)(c), it is clear that the observations relied upon by Mr. Kaji from the judgment of this High Court in Commissioner of Income-tax v. Jayantilal Amratlal were made in order to explain the transaction of a loan in the context of reassumption of power and it was, therefore, pointed out that when a loan was to be advanced by the trustees under the deed of trust, there was no reassumption of power in the sense of reassumption of dominion or control. The wording of the se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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