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TMI Blog1973 (5) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... e are, in a nutshell, as follows: Shri Motilal Sanghi made a gift of Rs. 1 lakh on 1st of September, 1955, in favour of his four sons, each one to get Rs. 25,000. This amount was invested by the sons in a firm known as Sanghi Brothers of which Motilal Sanghi was a partner to the extent of 8 annas and each donee had a share to the extent of annas 2 in the firm. We are told by learned counsel appearing on behalf of the accountable person, Shri N. K. Sanghi, that the said firm was managed not by Shri Motilal Sanghi but it was managed by Shri N. K. Sanghi, the eldest son of the donor. Shri Motilal Sanghi died on 21st of July, 1961. The Assistant Controller of Estate Duty while assessing the properties of Shri Motilal Sanghi under the provisions of the Act gave a show-cause notice to the accountable person why the amount of Rs. 1 lakh given by the deceased to his 4 sons as gift be not added to the estate of the deceased as that amount was not retained by the donees to the entire exclusion of the donor. The Assistant Controller after hearing the accountable person held that section 10 of the Estate Duty Act applicable in this case and accordingly he added Rs. 1 lakh to the estate of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the present case and, therefore, the decision given by the Appellate Tribunal is a right decision. In support of this contention he placed reliance on Controller of Estate Duty v. S. Aswathanarayana Setty, Controller of Estate Duty v. N. R. Ramarathnant, Controller of Estate Duty v. Birendra Kumar Sen, Controller of Estate Duty v. C. R. Ramachandra Gounder, Controller of Estate Duty v. Estate of Janab S. Ibrahim Rowther, and Suggala Veeraraghaviah v. Controller of Estate Duty. The case of Controller of Estate Duty v. C. R. Ramachandra Gounder went in appeal to the Supreme Court and it was upheld by the Supreme Court, vide Controller of Estate Duty v. C. R. Ramachandra Gounder. In order to understand the controversy raised by the parties, it will be relevant to look to the provisions of section 10 of the Estate Duty Act. The portion of section 10, which is relevant for our purpose, reads as follows : "10. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f estate duty. While arriving at the aforesaid conclusion their Lordships of the Supreme Court thoroughly considered, the principles laid down by the Privy Council in Chick's case as well as in Munro's case. The principles as enunciated by the Privy Council in Chick's case have been approved by the learned judges of the Supreme Court in the aforesaid authority. In order to resolve the controversy raised by the parties in the present case, it will be worthwhile to examine the principles laid down by the Privy Council in Chick's case as different from the principles laid down in Munro's case . In Chick's case one John Chick made a gift of his pastoral property to his son. This was an absolute gift of property without any reservation. Subsequently, John Chick and his sons entered into an agreement to carry on the business of graziers and stock dealer in partnership. This business was to be carried on on the respective holdings of the partners which were to be used for the purpose of partnership only. The property gifted by John Chick was so used in connection with the partnership business. After the death of John Chick, a question arose whether the value of the property gifted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de possession and enjoyment of the gift immediately upon the gift and thence forward retained it to the exclusion of the donor. Further, the benefit which the donor had as a member of the partnership in the right to which the gift was subject was not, in their Lordships' opinion a benefit referable in any way to the gift. It was referable to the agreement of 1909 and nothing else, and was not, therefore, such a benefit as is contemplated by section 102, sub-section (2)(d) of the Stamp Duties Act of New South Wales." From these observations it is clear that their Lordships of the Privy Council while considering the nature of the property transferred by means of a gift examined the question as to what type of right was transferred by the gift and by continuing to carry on the partnership business over the land in question whether the partners exercised any possession or dominion over the property gifted, that is, the interest of a licensor or a lessor which interest alone had been gifted by the donor. It was in the light of this type of interest which was transferred that their Lordships of the Privy Council came to the conclusion that the donee retained the interest (property) gif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 one who brings it in. The property had become a trading asset of the partnership in which all the partners acquired interest in proportion to their shares in joint venture in the business of partnership. A partner 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 who contributes the same. In the circumstances, it is difficult to say that a person contributing the asset enjoys the right of ownership to the exclusion of other partners of the firm. While examining the scope of the provisions of the Partnership Act vis-a-vis the nature of the capital employed in the partnership business their Lordships of the Supreme Court in Addanki Narayanappa v. Bhaskara Krishnappa referred to various provisions of the Act and after thoroughly discussing the scope of those provisions observed as follows: " From a perusal of these prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussing all the cases cited before that court, held that the property gifted, if brought in as the capital of a firm in which the donor was also a partner, the donor had similar possession and control over that money as any other partner had over any other asset of the firm. In George Da Costa v. Controller of Estate Duty, the donor had gifted his house to his children, but he continued to stay in that house as the head of the family and looked after the affairs of that house. Their Lordships of the Supreme Court held that the possession of the donor was on account of the filial relationship between the donor and the donee but since he was living in that property and looking after it as the head of the family, it cannot be said that the donees enjoyed the possession of the gifted property to the entire exclusion of the donor and in that view it was held that the property was liable to estate duty under section 10 of the Act. In that case, the learned judges thoroughly discussed the principles laid down by the Privy Council in Chick's case, and approved that principle. In view of this judgment of the Supreme Court, we feel that we are left with no alternative but to hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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