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TMI Blog1981 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... hip deed was executed to which the deceased, his son, Imranali, and two of his grandsons, Shri Abdullabhai and Mohammadbhai, were parties. Share of the deceased was to the extent of five annas. On that day, which was a Diwali day, the deceased had Credit balance of Rs. 1,29,147 in his capital account. He gifted a sum of Rs. 88,789 out of the same to his son and grandsons by debit to his capital account and credit to the respective accounts of the donees. These amounts remained in the books of the firm as capital contributed by the respective parties till the time of his death. In addition to the gifts of money mentioned above, the deceased gifted a house property under registered deed in favour of Imranali in 1954. It was in this house that the business of the partnership was being carried and continued to be carried on. No rent was payable by the firm either before or after the gift. The value of this property was taken at Rs. 20,000 in the estate duty assessment. Similarly, there was a gift of a residential house to Shri Abdullabhai under a registered document executed again in the year 1954. The donor and the donee were residing in the said house together and the deceased contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o were partners in the business, were appropriated by them for their own use, and the deceased was entirely excluded from any use thereof. The whole of goodwill under the circumstances set out above could not belong to the deceased only. As regards immovable properties, it was contended that after the transfer, the properties were mutated in the respective names of the donees and even the taxes were paid by them. In the house property gifted to Imranali, partnership business was being carried on much before the gift. Partnership was not paying any consideration to the deceased and this arrangement or licence was continued as before by the donee even after the gift. The deceased occupied the residential house at the instance and with the grace of the donee. We may notice that the findings recorded by the Tribunal are in consonance with the stand taken by the accountable person. These established facts are thus the basis for examining the points of law raised. Before proceeding to deal with the question, it will be appropriate to keep the actual language of s. 10 of the Act before us. It reads thus : " 10. Property taken under any gift, whenever made, shall be deemed to pass on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down the ratio, the Supreme Court held on facts that it was a case of a gift of the house property by the head of the family. He continued to live in the house as head of the family and was looking after the affairs of the house as before even after the gift. It was held on the basis of these established facts that though no benefit was reserved by contract or otherwise, reliance on mere filial affection could not repel attraction of s. 10 under the circumstances. In CED v. Ramachandra Gounder [1973] 88 ITR 448 (SC), the deceased had leased his house to a firm in which he was a partner. He made a gift of the said property to his two sons. A sum of Rs. 1 lakh was transferred from his account to the account of his five sons in the firm. Those sons were partners in the firm. The sons did not withdraw any amount which remained invested with the firm for which they got interest. The deceased continued to be a partner till the firm was dissolved and thereafter he died. The question arose as to whether under the circumstances the value of the house property and the sum of Rs. 1 lakh was includible in the principal value of the estate of the deceased as the property was deemed to have pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view taken by the Privy Council in the oft-quoted leading case, Clifford John Chick v. Commissioner of Stamp Duties [1958] AC 435; [1959] 37 ITR (ED) 89; 3 EDC 915 (PC), in which the principle in another leading case H. R., Munro v. Commissioner of Stamp Duties [1934] AC 61 ; 2 EDC 462 (PC), was considered while interpreting the analogous provisions. The departure lies in the view that the benefit which the donor had as a member of the partnership was not a benefit referable in any way to the gift but was unconnected therewith. Though the factual position in Chick's case [1958] AC 435; [1959] 37 ITR (ED) 89 ; 3 EDC 915 (PC), Munro's case [1934] AC 61 ; 2 EDC 462 (PC) and so also in Ramachandra Gounder's case [1973] 88 ITR 448 (SC), bears fine distinctions, the fact remains that there has been a departure also in laying down a ratio, when it was pointed out that the benefit in the property which the donor was enjoying as partner was not sufficient to bring the case within the ambit of s. 10 irrespective of the question whether that benefit was referable or not to the gift. To put it differently, it is held that if the benefit is referable only to the gift, then the property is cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pation by itself was not sufficient to bring the case within the mischief of the terminology " entire exclusion of the donor ". It was also held that exclusion does not mean physical exclusion in every case. The donor from the date of the gift had placed himself entirely at the mercy of the donee who bona fide assumed and retained possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him by contract or otherwise, but permitted the donor to occupy out of his sweet will. As the physical occupation of the property by the donor was not a benefit referable in any way to the gift but was unconnected therewith, it was held that the property was not includible in the estate of deceased. That is what J. Hamilton observed in the case [Headnote of [1911] 2 KB 688]: " Though the donor was permitted-by the donee to, and did in fact, reside in the house from the date of the deed until his death, there was an entire exclusion of the donor from the possession and enjoyment of the property or of any benefit to him by contract or otherwise, within the meaning of the section, and that therefore, estate duty was not payable. " We may, at this stage, ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herself. The adoption of such a device would itself be the exact antithesis of love and affection and the motivating basis for the gift. The argument that though the donor may not have reserved to himself any right to possession or enjoyment of the property or any part thereof, there is no " entire exclusion " within the meaning of the clause if he has in fact access to the place which is the subject-matter of the gift and enjoys an advantage given by the donee, was repelled as not maintainable. There are a few more cases taking the same view as far as spouses are concerned. Keeping in view these principles and applying them to the present matter, it seems to us that no part of the gifted property attracts s. 10. Business premises were used by the firm in which the donor and the donee were partners. They were used as licensee. This old arrangement was continued by the donee even after gift. Property was mutated and taxes were paid by the donee, subsequently. Possession as was possible under the circumstances was given. Even gifted cash was transferred and dealt with as property of the donees, though it was utilized by the firm in which even the donor was a partner. These situatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as well as other High Courts were dealing with cases of spouses only, when the donor continued to reside with the donee, and it would not be possible to extend those considerations of special relationship between a husband and wife to any other relationship. Having given our serious thought to this aspect, it is not possible for us to accept this submission. If the motivating force behind this view has been the peculiarity of relationship and not the language used in s. 10, we see no reason to arrest the application of these considerations to other relationships, of course, depending upon facts and with the overriding condition that the appropriate authorities charged with the duty of appreciating facts are satisfied that the stand taken is correct and bona fide and is not put up as facade. We may notice here that the donee had successfully put up a case of grant at his volition. He also had placed specific reliance on Seccombe's case [1911] 2 KB 688 ; I EDC 589. In Umesh Rudra's case [1979] 117 ITR 579 (SC), reference has been made to social morality and good sense. Not that relationship between spouse is not special. In Indian society, there are still many who consider other re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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