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TMI Blog1971 (9) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... e Duty Act at the instance of the accountable person, Sri Abdul Alim. The Central Board of Direct Taxes has referred the following question for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the sum of Rs. 44,000 gifted by the deceased to his minor sons on April 15, 1954, was correctly included in the estate of the deceased as property deemed to pass on his death under section 10 of the Estate Duty Act, 1953?" The estate duty assessment concerned the estate of late Shri Hajee Abdul Haq who died on 15th of October, 1957. The accountable person filed a statement of account declaring the net principal value of the estate, passing or deemed to pass on the death of the deceased. While determining the total value of the estate left by the deceased, the Assistant Controller, Estate Duty, included a sum of Rs. 44,000 which the deceased had gifted to his minor sons on 15th of April, 1954. He held that the deceased held the money gifted to the minor sons as a trustee with effect from 15th of April, 1954, till the date of his death. Section 22 of the Estate Duty Act, therefore, became applicable and this amount also is deemed to pass on death of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest in property originally brought into the stock of the firm becomes, subject to a contract between the parties, property of the firm. Whole concept of a partnership is to embark upon a joint venture and for that purpose to bring in as capital, money or other property, including immovable property. Once this is done, whatever is brought in ceases to be the exclusive property of the person who brings it in. The property becomes trading asset of the partnership in Which all the partners acquired an interest in proportion to their share in joint venture of the business of partnership. The person who brings in the asset cannot claim to exercise any exclusive right over such property. Capital contribution becomes an asset of the partnership in which every partner gets an interest and the asset ceases to exclusively belong to the person contributing the same. In the circumstances, it cannot be said that the person contributing the asset enjoys the same to the exclusion of the other partners of the firm. In this case we find that the amount gifted to the two minors was brought in as capital asset of the firm in which the donor himself was a partner. This was done in consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and each of them were in possession and enjoyment of the property so long as the partnership subsisted, the son did not retain the possession and enjoyment of the property to the entire exclusion of the deceased, its value was liable to be included in the dutiable estate. Learned counsel for the accountable person relied upon another case of the Privy Council in H. R. Munro v. Commissioner of Stamp Duties. In this case the deceased had four sons and two daughters. He possessed three holdings, total area being 33,501 acres. After one of his sons attained majority, the father and his six children entered into a partnership agreement (verbal) in the year 1909. According to this agreement the partnership was to carry on the business of graziers on the aforesaid land. Subsequently, the father transferred, by way of gift, to each of his four sons all his rights, title and interest in a part of the land comprised in the three holdings. Some more land was transferred for being held in trust for his two daughters. Thereafter the father and his children executed a formal partnership deed incorporating the oral agreement under which the partnership business was already being run. After t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. In case the property comprised in a gift consists only of some of the rights from out of the entire bundle of rights in a tangible property, it has to be seen whether the donor had anything to do with those rights. In case it is found that after making the gift the donor had nothing to do with those rights, it will be considered that the property gifted was retained to the entire exclusion of the donor, irrespective of the fact that the donee exercised some control over the tangible property by virtue of the bundle of rights which did not form part of the gift. In Chick's case, as in the case before us, the position is different. In these cases the donors made a gift of their entire interest in the property. Thereafter, the property was brought in as an asset of the partnership business in which the donor was himself a partner. As soon as the property was brought in as partnership asset, the donor as a partner acquired dominion over the property (interest) gifted, and it could not be said that the same was retained by the donee to the entire exclusion of the donor. While dealing with Chiek's case their Lordships considered their earlier decision in Munro's case and brought ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s son dividing the profit and loss of the partnership equally. The deed gave a right to each partner to take part in the conduct of the partnership business. On the death of the deceased, more than two years after the date of the gift, a question arose whether section 10 of the Estate Duty Act, 1953, applied on the ground that the deceased was not entirely excluded from possession and enjoyment of the subject-matter of the gift. The Assam High Court held that in the circumstances of the case the Tribunal was justified in holding that the donor was entirely excluded from possession and enjoyment of the subject-matter of the gift, viz., a half share of the partnership business and accordingly the provisions of section 10 of the Estate Duty Act were not attracted. Learned judges of the Assam High Court considered the decision of the Privy Council in Clifford John Chick's case as also in Munro's case. They also analysed the ratio of the two decisions in the manner as mentioned by us above. At page 11, after noting the findings of the Tribunal, they observed as follows: "On this finding the principles laid down in Munro's case are attracted and not Chick's case. As we have already poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Privy Council in Munro's case and is of no help to the accountable person. Learned counsel for the accountable person then urged that the facts of the present case are similar to a case where the donor who is a partner in a firm makes a gift by directing his account in the firm to be debited and getting corresponding credit entry being made in the accounts of the donee, maintained with that firm. In the case of Behari Lal Matanhelia v. Controller of Estate Duty, E.D.R. No. 136 of 1966 decided on 28-7-1971, this court took the view that where a gift has been effected by making transfer entries, the deceased did not retain any control or possession over the gifted property. He urges that on the same principle, even in the present case, it cannot be held that the deceased retained any control or possession over the gifted property and, therefore, the provisions of section 10 of the Estate Duty Act did not become applicable. We are unable to agree with this submission. In the case pointed out by the learned counsel, the property gifted was an actionable claim and after making the gift the donor did not retain any control over that claim. The amount under that claim was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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