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TMI Blog1986 (3) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... Roy (briefly called as " S. K. Roy "), who is the accountable person. S. K. Roy invested Rs. 28,000 in fifteen year annuity certificates and Rs. 35,000 in 4 per cent. Postal Treasury Savings Deposit Certificates in his own name. While making the assessment in respect of the estate duty of late D. K. Roy, the Assistant Controller of Estate Duty (hereinafer referred to as the " Assistant Controller ") included the value of the investments in the principal value of the estate as hereunder: Rs. 1. Commuted value as on the date of the death of D. K. Roy relating the 15 year annuity certificates issue price of which came to Rs. 21,000 6,286 2. 4 % Treasury Savings Deposit Certificate 35,000 41,286 These details are available at pages 11 and 12 of the paper book relating to the order of the Assistant Controller. The Assistant Controller found that the interest income accruing on 15 year annuity certificates and treasury savings deposit certificates were deposited in the bank account which was originally in the name of the deceased alone and subsequently was converted into a joint account of the deceased and his son, S. K. Roy. According to the Assistant Controller, the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) and held that the right to receive the interest exclusively belonged to the accountable person and the mere fact that the accountable person sought to put it in a joint account with the deceased would not amount to the deceased deriving any benefit from the gifted property. For this purpose, the Tribunal also relied on the decision in M. Ranganatha Sastri v. CED [1966] 60 ITR 783 (Mad) and the Tribunal also held that the reservation of benefit to the donor should be one enforceable by him. The Tribunal also held that in the instant case, the deceased enjoyed no benefit from the gifted property and had no right to receive the interest. The Tribunal, therefore, held that the provisions of section 10 of the Act were not applicable in 'the case of the accountable person. A copy of the order of the Tribunal has been annexed and marked as annexure C forming part of the statement of the case. The accountable person also suggested certain questions for reference to the Tribunal but the Tribunal held that the questions suggested by the accountable person did not arise out of the order of the Tribunal and so refused to refer those questions and so only the above question has been refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its from the aforesaid certificates. Section 10 of the Act lays down that " 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 contractor otherwise: Provided that the property shall not be deemed to pass by reason only that it was not, as from the date of the gift, exclusively retained as aforesaid, if by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least two years before the death : Provided further that a house or part thereof taken under any gift made to the spouse, son, daughter, brother or sister, shall not be deemed to pass on the donor's death by reason only of the residence therein of the donor except where a right of residence therein is reserved or secured directly or indirectly to the donor under the relevant disposition or under any collateral disposition ". The second proviso to section 10 of the Act was added by the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... donor was residing in the house. These decisions relate to the period before the second proviso to section 10 of the Act was added. Mr. B. P. Rajgarhia, for the Revenue, has also relied on the case of Mahabir Prasad Poddar v. CED [1976] 104 ITR 612 (Pat), which is decision of the Patna High Court. In this case, D, the deceased, was the proprietor of a proprietary firm styled as MPGP. On May 23, 1959, the deceased made cash gifts of Rs. 25,000 to each of his two sons, M and G, and the two donees deposited the gifted amounts in their bank accounts. Thereafter, M and G deposited the said amounts in the proprietary firm of the deceased on May 30, 1959, and May 26, 1959, respectively, and with effect from October, 1959, the proprietary firm was converted into a partnership firm with the deceased and his two sons as partners. Thereafter, the deceased made gifts to each of his two sons of Rs. 5,000 on October 10, 1960, Rs. 5,000 on August 16, 1961, and Rs. 5,000 on October 1, 1962, and these amounts were invested by the donees on the very dates of the gifts in the partnership firm. In those circumstances, it was held that the entire sum of Rs. 80,000 was liable to estate duty as the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was made subject to the condition that the sons would use it as capital not for any benefit to the deceased donor but for each of them becoming entitled to one-seventh share in the business and that no benefit was also conferred under the deed of partnership upon the deceased although some extra benefit was conferred upon two of the major sons in the form of remuneration because of their active and full participation in the business. It was also held in this decision that if the deceased donor delimits the interest he is parting with and possesses and enjoys some benefit in the property not on account of the interest parted with but because of the interest still retained by him, the interest parted with shall not be deemed to be part of the estate of the deceased donor passing on his death for the purpose of section 10 of the Act and that the principle is that by retaining something which he has never given, a donor does not bring himself within the mischief of that section, nor would the provisions of the section be attracted because of some benefit accruing to the donor on account of what was retained by him. Mr. Rameshwar Prasad No.11 has relied on various decisions. He has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firm and they remained being utilised after the gifts. Even in those circumstances, it was held that the sum of Rs. I lakh so given could not be included in the property passing on J's death. Thus, it is evident that if the amount is gifted and the gifted amount is invested in the partnership firm in which the deceased is also a partner, even then section 10 of the Act will not be applicable, as held by their Lordships of the Supreme Court. Mr. Rameshwar Prasad No. 11, for the accountable person, has also relied on the case of CED v. T. N. Kochhar [1973] 89 ITR 216 (All) which is a decision of the Allahabad High Court. In this case, out of the money gifted by the deceased to his wife, a house was built at Kanpur between 1931 and 1937, and was registered in the name of the wife. The deceased resided in that house till his death in 196 1. The Tribunal held that the house could not be included in the estate of the deceased. In those circumstances, it was held by the Allahabad High Court that the Tribunal was right. It was also held that section 10 of the Act would not be applicable as the deceased had made a gift of the cash oat of which the house property was built and the donor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deceased to his wife and children, inasmuch as the securities stood in the name of his wife and minor children and even though the interest on those securities was realised by the deceased and credited to his own bank account, the deceased who was a money-lender and kept detailed books of account, showed in his books the interest as having been duly credited to the respective accounts of the donees and as there was no evidence on record to show that such interest was drawn by the deceased either for private consumption or for investment in his own name, simply because the interest was credited by the deceased in his own bank account but which interest was shown to have remained with the deceased in fact, it cannot be said that the deceased had used such interest for his benefit. It was also held in this decision that a clear finding had been recorded by the Tribunal that not only had the donees assumed bona fide possession and enjoyment of the property but also thenceforward retained it to the entire exclusion of the donor or of any benefit to him by contract or otherwise and, therefore, the Tribunal was right in excluding the value of the Government securities bona fide gifted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposits made by the donee of the income from the settled properties does not show that the donee had not retained possession and enjoyment of the gifted properties to the entire exclusion of the deceased; and (4) the donor to the extent of the amounts deposited in his accounts was either in the nature of a banker to the donee or had a fiduciary capacity with reference to the said amounts and there was no benefit which he had contracted so as to bring it within the second limb of the second part of section 10." In view of these reasonings, the Madras High Court held that the Tribunal was right in its view that the value of the properties gifted and the shares cannot be included in the principal value of the estate of the deceased. It cannot be doubted that in the present case before us, the last two decisions of the Bombay and Madras High Courts are exactly applicable to the facts of the present case before us. In the present case, it is admitted that the deceased, D.K. Roy, gifted Rs. 63,000 to his son, S.K. Roy, the accountable person, and S. K. Roy invested the amount in annuity certificates and postal treasury saving certificates from 1957 to 1963 and he had custody of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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