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TMI Blog1984 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... rusts. Both the deed, provide as follows: "We, the executors and other trustees and trustee, for the time being Of these presents all of whom are hereinafter called (' the Trustee ') shall stand possessed of the said sum...... (hereinafter called the ' Trust Fund') upon Trust to invest it in any manner as a man of ordinary prudence invests his money...... and in carrying on of the business of any nature and to hold such investments with all accretions thereto upon the trust ........" In assessing the duty on the estate, the Assistant Controller of Estate Duty found that the amounts gifted had remained in the said firm in which the deceased was a partner. Accordingly, he held that the deceased, the donor, was not entirely excluded from the enjoyment and possession of the said amounts and included the same in the principal value of the estate under s. 10 of the E.D. Act. An appeal was preferred by Surajmull Gouti, the accountable person, from the said order of the Assistant Controller. The Appellate Controller found that the amounts of the gifts had first been deposited by the trustees in another business and later brought back to the said firm. He held that, on the facts t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the gifts were absolute and possession of the amounts gifted was immediately assumed by the trustees on behalf of the donees to the entire exclusion of the donor. The amounts no doubt were reinvested in the firm where the donor had an insignificant share. This investment was made by the trustees in the usual course of business with the object of earning interest. The firm and the donor as one of the partners in the firm assumed liability to repay the amount invested. It cannot be held that the donor regained possession of or came to have any particular benefit from or enjoyment of the money so as to attract s. 10 of the E.D. Act. In support of his contentions, learned counsel cited the following decisions. (a) India Cements Ltd. v. CIT [1966] 60 ITR 52 (SC). This decision was cited for the following proposition laid down by the Supreme Court (p. 62): " We are unable to agree that a loan obtained can be treated as an asset or advantage for the enduring benefit of the business of the assessee. A loan is a liability and has to be repaid and, in our opinion, it is erroneous to consider a liability as an asset or an advantage." (b) CED v. Jai Gopal Mehra [1972] 85 ITR 175 (Punj) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retained possession and enjoyment of the property or the amount and that the deceased was not entirely excluded from the possession and enjoyment thereof. (d) CIT CED v. Ramarathnam [1973] 91 ITR 1 (SC). Here, the deceased and his three sons and a daughter constituted a partnership. During his lifetime, the deceased by adjustment entries in the books of the firm transferred amounts to the respective accounts of his daughter and three sons in the books of the firm which remained in the firm till the death of the deceased and were utilised in the firm's business. On these facts, the Supreme Court, following its earlier decision in Ramachandra Gounder's case [1973] 88 ITR 448, held that the said amounts would not be deemed to pass on the death of the deceased under s. 10 of the E.D. Act. (e) CED v. Thanwar Dass [1974] 94 ITR 101 (All) [FB]. In this case, the deceased, a partner in a firm, transferred by way of gifts aggregating to Rs. 40,000 by transfer entries in the books of the firm in favour of his daughter-in-law. The donee withdrew the amount but subsequently deposited back the same in her name. The deposit remained in the firm till the death of the deceased. On these f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said amounts would not be includible in the estate. Learned counsel for the Revenue contended, on the other hand, that the benefit or enjoyment of the subject-matter of the gifts came back to the donor when the amounts were reinvested in the firm. The donor along with his other partners in the firm had the benefit of the, user of the money which the donees ceased to enjoy. Section 10 of the Act was, therefore, attracted in the facts of this case. The following decisions were cited in support of the contentions of the Revenue. (a) CED v. Chandravadan Amratlal Bhatt [1969] 73 ITR 416 (Guj). Here, the deceased had debited his account in a firm where be Was partner, by Rs. 30,000. Each of his three minor sons were credited with Rs. 10,000 in the books of the firm. Subsequently, when the minors attained majority, the deceased debited his account with the firm further by Rs. 24,000 and paid Rs. 12,000 to each of his sons in cash which were subsequently brought into their respective accounts With the firm before the death of the deceased. On a reference the Gujarat High Court held that the subject-matter of the gifts having been made available to and placed at the disposal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the deceased which was subsequently converted into a partnership constituted by the deceased and his sons. Subsequently, further gifts by the deceased of Rs. 15,000 to each of his sons were invested back by the donees in the firm. The Patna High Court held that as the amounts of the gift had been ploughed back by the donees into the firm, it could not be said that they had retained the possession of the property gifted to the entire exclusion of the donor. (f) CED v. B. V. Kapadia [1977] 108 ITR 1008 (Cal). In this case, the deceased, a partner in a firm before his death, made a gift of Rs. 1 lakh to his daughter by way of entries in the books of the firm. On the same day, the donee became a partner in the firm by contributing Rs. 75,000 out of the amount so gifted. It was held by a Division Bench of this court that the said amount contributed to the firm ceased to be the exclusive property of donee and the donor retained some interest in the said amount as a partner of the firm and the same had to be included in the estate for computation of estate duty. We have taken note of a subsequent decision of the Supreme Court on the same question which has come up repeatedly befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship ...... The partnership firm is not a legal entity in the sense of having a legal personality of its own different from that of the partners. But no partner can claim a share in the partnership property according to his share in the partnership. A creditor of the partnership is entitled to get back the whole of his property on dissolution of the firm or otherwise, while a partner is entitled to get a share in the net assets of the property realised on the winding up of the partnership ...... But we want to emphasise that the principles of law laid down by this court in several decisions which we have reviewed in this judgment with some further clarification and elucidation should be carefully and broadly applied to the facts of each case without doing too much of dichotomy and hair splitting of facts so as not to easily apply or not to apply the provision of law contained in s. 10 of the Act. " It appears to us that the facts of the case before us are in all material respects similar to the facts in Kamlavati [1979] 120 ITR 456 (SC) as noted above. Law on the question stands settled by the said decision following Which we answer the question referred in the negative and in fa ..... 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